The Midlands Engine: Powering a New Energy Future

A few weeks ago UK Power Reserve (UKPR) released our report assessing the economic impact of the energy sector in the Midlands. We found that 1-in-3 jobs in the sector are based in the Midlands and that it contributes £5.0 billion per annum to the regional economy. The report also examined the challenges that the sector face over the next 20 to 30 years which include squaring energy generation with storage and distribution, increasing demand for flexibility within the system and changes to the regulatory environment.

Having had some time to reflect on the findings and implications of recent policy developments, I have set out my own thoughts on how the Midlands region is leading innovation and delivering change in the energy sector. Rather than thinking about the challenges as separate issues, I see them as part of a wider transformation crisis affecting power generation, distribution and use, which require a co-ordinated approach from government and players (both large and small) in the sector.

The Industrial Strategy to effect change
Clean growth is one of the Industrial Strategy grand challenges which the government believes will be at the forefront of our industrial future. The Industrial Strategy acknowledges that the sector needs to remodel itself to deliver affordable energy from a range of clean sources, while also developing new technologies to store energy and manage demand.

Changes to energy generation are already driving change in the market. The National Grid recently acknowledged that the current model of centralised, large-scale production will be replaced by a wide range of smaller providers and innovators. This is a real transformation, but this shift needs to be framed within a regulatory framework that promotes transparency and encourages a balance of large and small-scale providers, including local community groups, to participate.

The energy sector in the Midlands is well-placed to respond and already punches above its weight.

A mix of large-scale and smaller-scale agile providers
The Midlands has energy generation capacity of up to 12.2 GW ie just under a quarter of the UK total. This capacity is primarily managed by the larger suppliers like Centrica, E.ON UK and EDF Energy. Yet, there are an increasing number of smaller providers such as UK Power Reserve which run 40 thermal power plants with capacity for 693 MW, and community benefit groups such as Southern Staffordshire Community Energy (SSCE).
Funding has become an issue for small-scale organisations. For instance, SSCE delivered two community-owned solar installations in Whittington to help local community organisations lower their carbon emissions. Despite both installations generating higher-than-expected output, feed-in tariff (FIT) payment reductions have halted further similar investments.

A bright, innovative future
The Midlands is also home to several projects delivering innovations in the energy sector. At the forefront is the Energy Research Accelerator (ERA), a collaboration between the British Geological Survey and six universities: Aston University; University of Birmingham; the University of Nottingham; University of Leicester; Loughborough University and the University of Warwick. The ERA seeks to develop new technologies, bring operating costs down and support productivity improvements.

Separately, universities are also delivering their own innovation programmes. The European Bioenergy Research Institute (EBRI) at Aston University is running an ERDF-backed project (Business Investment in Research project) to help businesses turn waste into energy, and use of advanced control systems to optimise heating, cooling and electricity consumption.

In January 2017, Sir Mark Walport was asked to review the case for a new research institution working on battery technology, energy storage and grid technology. The initial findings recommended a focus on the low carbon energy storage needs of the automotive industry which has led to the Faraday Challenge.

The Midlands is very well placed to play a key role in the development of battery technology. In October 2017, the University of Warwick became part of a new £65 million national battery research initiative. And, plans have also recently been developed for a National Battery Prototype Centre by the Warwick Manufacturing Group and the Coventry and Warwickshire LEP which, if successful, could support around 10,000 new jobs.

Supply chain strengths
The Midlands supply chain is particularly strong and benefits greatly from innovations taking place across the region. Our study estimates that the energy sector supports an additional ~80k jobs indirectly through its supply chain, which in turn generate around £6 billion pa in additional economic output.

Although scope for offshore wind is somewhat limited in the Midlands, RenewableUK lists over 100 relevant suppliers located in the region. This includes several Tier 1 operators (eg ABB Ltd, Alstom, Balfour Beatty, E.ON Climate and LM Wind Power) and many businesses supplying different parts of the economy.

Conclusion

The Industrial Strategy highlighted the relationship between clean and affordable energy and their link to productivity and higher value jobs. The clean growth grand challenge should encourage government and the regions to develop smart systems which better link energy supply, storage, distribution and use in order to secure economic efficiencies and improve people’s lives.

The Midlands region is home to an agile set of large and small-scale energy producers which can draw on an established supply chain and a strong R&D base which in turn can influence the development of the energy sector nationally. Based on this I believe that the future of the energy sector in the Midlands looks bright. There are however several challenges which need to be overcome, the biggest of which remains an uncertain policy framework at the national level. Commentators have previously referred to the regulatory framework as a ‘series of siloes’ tackling each problem separately. It is here that the Midlands region can play its biggest role yet by remaining at the forefront of innovation and showing leadership on how a new energy future can be achieved.

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