The first is the wind/solar balance. The Royal Society analysis suggests that, simply in terms of seasonal supply and demand, an 80/20 split in favour of wind is likely to minimise the need for expensive storage. However the biggest driver of storage need with renewables is likely to prove to be inter annual variations in renewables output.
A bigger headache in policy terms may prove to be the incentive that households receive in terms of a reduction to their energy bills. The immediate saving to an individual household will exceed the actual cost saving for the power system as a whole. This is good for the individual consumer in the short term, but the fixed costs of the distribution network still have to be covered somehow.
If they continue to be averaged out over all kWh consumed then eventually households without the ability to instal solar will be subsidising those that do. In many cases this will mean the poor cross-subsidising the wealthy.
There is a further and related problem if we want a substantial number of households to substitute heat pumps for gas boilers. Current pricing structures are a strong disincentive and tend to make running costs for a heat pump much less attractive than continuing with gas.
There are answers to this conundrum, but they involve a new approach to recovering fixed network costs. One of the simplest ways to achieve this is through the traditional approach in the water industry, and to the collection of revenues to local authority services – linking a fixed charge component to property value.
This is a simple policy to state, but it will take a lot of work to implement. However, its necessity will become increasingly apparent.
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