Can We Move The Equilibrium Point Of The Energy Market?
Equilibrium In Systems
As a Control Engineer, I believe that most systems eventually end up in a state of equilibrium.
How many football batches have you watched between two evenly-matched teams that have ended, where the statistics are even and the match has ended in a nil-nil draw or a win by one goal.
Now suppose one manager makes an inspired substitution, one important player gets injured or one player gets sent off.
One team will have an advantage, the statistics will no longer be even and one team will probably win.
The equilibrium point will have been shifted.
Zopa’s Stable Peer-to-Peer Lending System
I used Zopa’s peer-to-peer lending system for several years and found it a very stable system, that over the years paid a steady return of between four and five percent before tax.
I even developed a method to maximise my savings income, which I wrote about in The Concept Of Hybrid Banking.
It was a sad day for me, when Zopa closed its ground-breaking peer-to-peer lending system.
As a Control Engineer, I believe that Zopa’s strength was a well-written computerised algorithm, that matched lenders and borrowers and spread the risk.
- There was no bias in the system, introduced by personal prejudices.
- The algorithm was agnostic and judged all borrowers on their profiles and credit ratings alone.
- Money was allocated under fair rules for borrowers.
- I never borrowed from Zopa, but from my experience of owning half of a finance company, their terms were the most customer-friendly I’ve ever seen.
Someone will go back to the basics of peer-to-peer lending and it can’t be soon enough for both savers and borrowers.
Zopa In Troubled Times
Over the years that I invested in Zopa, my returns stayed very much the same, as the algorithm seemed to be able to maintain sufficient difference between lenders’ returns and borrowers’ rates. I also suspect the dynamics of savvy lenders and borrowers helped to stabilise both the system and the difference between rates.
It even worked through the Banking Crisis of 2008 and other mini-hiccups along the way.
My Conclusion About Zopa
As someone, who knows computing well, I would rate Zopa, one of the best computer systems, I’ve ever seen.
But it showed how a large transactional system can work well.
One of the keys to its success and smooth operation was that the computer was totally in control and it took all transaction decisions without direct human intervention.
The Energy Market
The energy market is a network of energy providers and users.
It is controlled by complicated rules and it has settled into an equilibrium, which involves.
- Importation of energy, which I suspect is not at a low price
- Some high priced energy generators, based on gas, which has a high-price, due to Putin’s war.
- Waste of wind energy due to lack of energy storage.
- The intermittency of renewable sources.
- A lack of gas storage, means that we probably get the wrong end of fluctuations in the gas price.
This results in a high price to consumers.
Can We Move The Equilibrium Point Of The Energy Market?
And we also need to move it quickly to a more favourable place, which benefits everybody!
As a Control Engineer, I believe that there are five ways to move the equilibrium point.
- Stop Putin’s war.
- Increase gas storage.
- Generate more low-cost electricity.
- Increase electricity storage.
- Improve the control algorithm.
I will now look at each in more detail.
Stopping Putin’s War
Giving in to Putin’s ambitions, would be an easy way to solve our energy crisis. But at what cost?
My parents generation, watched as Nazi Germany took over Austria and Czechoslovakia, whilst the world did nothing.
- We mustn’t repeat that mistake.
- We must not flinch in our support of the Ukraine.
- We must be ready to support Moldova, Finland and the Baltic States if Putin expands his ambitions.
I do wonder, if Boris will turn up with Churchillian-style anti-Putin rhetoric all over Eastern Europe.
Increasing Gas Storage
The major gas storage facility is Rough, which is handily close to the Easington gas terminal.
The facility needs maintenance and this paragraph from the Wikipedia entry gives the current status.
In May 2022, the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, began talks with the site’s owners with a view to reopening the site to help ease the ongoing cost-of-living crisis in the United Kingdom. In June 2022, owners Centrica submitted an application to the North Sea Transition Authority (NSTA), the licencing authority for the UK Government, to reopen the facility. Approval was granted in July. Subsequently, Centrica indicated that they are working hard to restore storage operations at Rough which would depend on securing subsidies from the British government. Centrica was aiming to have some capacity available for the winter of 2022/23 against an overall plan to increase storage capacity gradually over time.
Note.
- Rough can store around 2832 million cubic metres of gas.
- This article on Energy Live News is entitled Reopening Of Rough Storage Gets The All-Clear.
Less well-known is SSE and Equinor’s Aldborough Gas Storage.
These three paragraphs from SSE web site, describe the gas storage.
The Aldbrough Gas Storage facility, in East Yorkshire, officially opened in June 2011. The last of the nine caverns entered commercial operation in November 2012.
The facility, which is a joint venture between SSE Thermal (66%) and Equinor, has the capacity to store around 330 million cubic metres (mcm) of gas.
SSE Thermal and Equinor have consent to increase the storage capacity at the Aldbrough site (Aldbrough Phase 2) and during the last couple of years have been working to involve the local community where appropriate to refine aspects of this project, which has not been progressed to date due to market conditions.
Future plans for the facility, may include converting it to one of the world’s largest hydrogen stores.
In the grand scheme of things, Rough and Aldborough, when you consider that the UK uses 211 million cubic metres of gas every day, will only keep us going for a few days.
But it should be noted, that the Easington gas terminal is connected to the Norwegian gas fields, by the Langeled pipeline.
So Yorkshire and Humberside will be alright.
Generating More Low-Cost Electricity
The only low-cost electricity of any size to come on stream will be wind-power.
This article on Renewables Now is entitled UK Hits 25.5 GW Of Wind Power Capacity.
These wind farms seem to be coming on stream soon or have been commissioned recently.
- Dogger Bank A – 1200 MW – Commissioning 2023 expected
- Dogger Bank B – 1200 MW – Commissioning 2024/25 expected
- Dogger Bank C – 1200 MW – Commissioning 2024/25 expected
- Hornsea Two – 1386 MW – Commissioned 2022
- Moray East – 950 MW – Commissioning 2022 expected
- Neart Na Gaoithe – 450 MW – Commissioning 2024 expected
- Seagreen – 1075 MW – Commissioning 2023 expected
- Triton Knoll – 857 MW – Commissioning 2022 expected
That is expected to be over 5 GW of offshore wind by the end of 2023.
In case there is some double counting, I’ll only say that wind power capacity could be near to 30 GW by December 2023, with perhaps another 3 GW by December 2024.
Other large wind farms in the future include.
- Berwick Bank – 4100 MW – Commissioning 2028 expected
- East Anglia Two – 900 MW – Commissioning 2026 expected
- East Anglia Three – 1400 MW – Commissioning 2027 expected
- Inch Cape Phase 1 – 1080 MW – Commissioning 2027 expected
- Hornsea Three – 2800 MW – Commissioning 2027 expected
- Moray West – 294 MW – Commissioning 2027 expected
- Morgan and Mona – 3000 MW – Commissioning for 2028 expected
- Morven – 2900 MW – Commissioning for 2028 expected
- Norfolk Boreas – 1400 MW – Commissioning 2027 expected
- Norfolk Vanguard – 1400 MW – Construction start planned for 2023
- Sofia – 1400 MW – Commissioning 2026 expected
That is over 14 GW of wind power.
I should also take note of solar and onshore wind power detailed in this document from the Department of Business, Industry and Industrial Strategy that lists all the Contracts for Difference Allocation Round 4 results for the supply of zero-carbon electricity.
It gives these figures and dates.
- Solar – 251 MW – Commissioning 2023/24 expected
- Solar – 1958 MW – Commissioning 2024/25 expected
- Onshore Wind – 888 MW – Commissioning 2024/25 expected
I can now build a yearly table of renewables likely to be commissioned in each year.
- 2022 – 3193 MW
- 2023 – 2275 MW
- 2024 – 701 MW
- 2025 – 5246 MW
- 2026 – 2300 MW
- 2027 – 6974 MW
- 2028 – 11400 MW
Note.
- Where a double date has been given, I’m taking the latter date.
- I have assumed that Norfolk Vanguard will be commissioned in 2028.
- I have ignored Hinckley Point C, which should add 3.26 GW in mid-2027.
- I have only taken into account one of the Scotwind wind farms in Scotland, some of which could be commissioned by 2028.
- I have assumed that BP’s Mona, Morgan and Morven will all be commissioned by 2028.
This is a total of 32 GW or an average of nearly 5 GW per year.
Increasing Electricity Storage
Big schemes like the 1.5 GW/ 30 GWh Coire Glas and 600 MW Cruachan 2 will help, but with 32 GW of renewable energy to be installed before 2028 and energy prices rocketing, we need substantial energy storage in the next couple of years.
One feasible plan that has been put forward is that of Highview Power’s CEO; Rupert Pearce,, that I wrote about in Highview Power’s Plan To Add Energy Storage To The UK Power Network.
The plan is to build twenty of Highview Power’s CRYOBatteries around the country.
- Each CRYOBattery will be able to store 30 GWh.
- Each CRYOBattery will be one of the largest batteries in the world.
- They will have three times the storage of the pumped storage hydroelectric power station at Dinorwig.
- They will be able to supply 2.5 GW for twelve hours, which is more output than Sizewell B nuclear power station.
Note.
- The first 30 GWh CRYOBattery is planned to be operational by late 2024.
- 600 GWh distributed around the country would probably be sufficient.
I believe that as these batteries are made from standard proven components, they could be built fairly quickly.
Paying For The Energy Storage
This press release from Highview Power is entitled New Analysis Reveals Extent Of UK Renewable Energy Waste, which makes these three bullet points.
- Enough renewable energy to power 500,000 homes a day wasted since the energy crisis began.
- 8 out of 10 Britons want more investment in boosting Britain’s energy resilience.
- UK spent £390 million turning off wind farms and using gas since September 2021.
Note.
- As the press release was published in July 2022, was the £390 million for ten months.
- Will this level of spend continue, as we’re not creating any electricity storage or building any factories that will start in a year or so, that will need large amounts of electricity?
- The Germans are at least building the NeuConnect interconnector between the Isle of Grain and Wilhelmshaven.
- As we’re adding up to 5 GW per year to our renewable energy systems, this problem will surely get worse and we’ll spend more money switching off wind turbines.
We have the money to build a very large amount of energy storage.
Improving The Control Algorithm
A better control algorithm would always help and politicians should only be allowed to set objectives.
Conclusion
There is a chance we’ll have an oversupply of electricity, but this will have effects in the UK.
- Gas-fired power-stations will be retired from front-line service to produce electricity.
- Some will question the need for nuclear power.
- Gas may even be used selectively to provide carbon dioxide for agricultural, scientific and industrial processes.
- Industries that need a lot of electricity may build factories in the UK.
- We will have a large supply of green hydrogen.
But it should bring the price of electricity down.
Zopa Co-Founders Speak Out Against Fintech’s Peer-To-Peer Exit
The title of this post, is the same as that of this article on Financial News.
Read it, as it a cautionary tale about what happens to disruptive innovation.
Eventually, the big bad boys make sure you don’t disrupt their easy life.
Zopa has been part of my life for fourteen years and it did me well. Especially in the bad times and when I had a personal crisis.
I wrote Stability in Financial Systems in 2012, where I said this.
I have a strong feeling that Zopa, the peer-to-peer lender, is also a stable system. Other companies of the same type may well be too! but I am not as familiar with them as I am with Zopa.
Unfortunately, the decision makers in Zopa decided to become a bank, broke the stability and crashed the company.
Son of Zopa will arise!
Zopa Pulls Out Of P2P Consumer Lending As It Blames Cowboy Firms For ‘Damaging Customer Trust’
The title of this post, is the same as that of this article on City AM.
This is the first three paragraphs.
Peer-to-peer giant Zopa has started to inform customers it is closing down its P2P consumer investment division, transferring its loan portfolio to its relatively new bank unit.
In an email to customers, Natasha Wear, peer-to-peer CEO at Zopa, wrote that “after 16 years of peer-to-peer consumer investments at Zopa, we’ve taken the difficult decision to close this part of our business..
“To support this, Zopa Bank will be buying your entire loan portfolio at current face value without any of the fees you’d normally pay for a loan sale,” the email reads.
This is a very sad day.
I have been an investor in Zopa for fourteen years and it has done me well, returning four to five per cent before tax in that period. My first investment was the money, I received from the sale of C’s Porsche.
I also feel that since Giles Andrews ceased to be at the head of the company, Zopa rather lost its way.
Perhaps, their mathematical modelling wasn’t up to scratch.
But at least, I haven’t lost any money on my investment.
Never Remove A Feature In A Computer Program
One of my golden rules in updating computing programs, is never to remove a feature however obscure it is. The reason is obvious, in that if the feature exists someone will find an extremely useful way to use it.
Here are two changes in other software systems that are annoying me at present.
The Windows 10 Photo Viewer
I use an SD card to capture images in my camera..
On my old laptop with Windows 7, if I was looking at a folder of images, I could scroll past the last image to the first and vice-versa, which was a very useful feature, when looking for an obscure image.
Windows 10 doesn’t have this feature and it is very annoying.
Zopa’s New System
I invest some of my savings in Zopa and use it as a high-interest one month-access deposit account in a concept that I call hybrid banking, which I wrote about in The Concept Of Hybrid Banking.
The old system used to give two figures about your money, that was yet to be invested.
- The money sitting there waiting in the queue for new borrowers.
- The allocated money waiting for the borrower to be checked and sign up.
The first figure was invaluable, as by watching it, it enabled me to see how constipated the system was. There’s not much point, of putting more money in Zopa, if it will just sit there. It could be more productive in crowdfunding an outstanding idea.
But in the new system, they have added these two figures together.
It’s not catastrophic, but it’s a nuisance.
Conclusion
Never disobey, the title of this post!
Who Needs Offices? Zopa Doesn’t!
opa’s update to all their investors yesterday.
It had a sub-heading of At Zopa!
Finally, a quick update on where we’re at as a company. All of our staff are still working remotely. Our diligent preplanning for a situation in which we could lose access to our offices has meant we’ve been able to continue to serve our customers throughout the pandemic, while also implementing new solutions to adapt to this unprecedented situation. Like other businesses, we’ve been planning for what a return to our offices looks like. But as we’ve been able to keep serving your needs while operating from home, we are in no rush. Being in this position allows us to stay focused on supporting your needs during this challenging moment.
How many companies after we are through the COVID-19 pandemic will decide to downsize their office requirements considerably?
Zopa Seems To Have Deconstipated
In early March, I wrote Is The COVID-19 Having An Affect On Lending At Zopa?, where I said this.
I lend money on Zopa and at the moment no-one seems to be borrowing any money.
I put some of my pension in my lending pot into the peer-to-peer lender each month and it’s still there sitting safely in the queue for a borrower.
Perhaps everybody is being cautious because of the COVID-19 alert.
At the time of writing this new post, everything seems to be back to normal. Or at least money, that I put in my lending account yesterday, has now been allocated to borrowers and is awaiting the final checks.
Eight years ago, I wrote Stability in Financial Systems, where I put forward my belief that Zopa is a stable system, that adjusts itself to the conditions it encounters.
Has the peer-to-peer lender just demonstrated, that my thoughts are correct, by sailing untroubled through the COVID-19 crisis, with just a small adjustment on the tiller here and there, just as it survived the Banking Crisis of 2008?
Zopa Resumes Lending To ‘C Risk’ Borrowers
The title of this post, is the same as that of this article on Peer2Peer Finance News.
Zopa, the first peer-to-peer lending site, rates all borrowers as to risk, between A (the best) down to E.
Certainly, since they introduced this policy, my invested money gets lent out more quickly.
Hopefully, the risk won’t have been increased by an amount, that is unacceptable to lenders.
What Exactly Is Upside Energy?
On Friday, August 9th, 2019, there was a massive power cut in the South of England, that is described in this article on the BBC, which is entitled Lightning Strike ‘Partly To Blame’ For Power Cut.
This is the introductory paragraph.
A lightning strike and the sudden loss of two large electricity generators caused nearly a million people to lose power in England and Wales earlier this month, an interim report has found.
So what exactly happened?
This article on Wired is entitled How Batteries Stopped The UK’s Power Cut Being A Total Disaster, was written after the report into the cut had been written.
This is the third paragraph of the article.
But it could have been even worse. Within seconds of problems hitting the grid, a fleet of batteries dotted around Great Britain were able to pump power into the system, preventing a rapid drop off in transmission frequency.
Is fleet the right collective noun for storage batteries? But it will do for the time-being.
This is the next two paragraphs.
Upside Energy is one firm that lent a helping hand by supplying six megawatts (MW) from five large lithium-ion batteries located on a solar farm near Luton Airport. “Those batteries responded immediately – actually it was sub-second,” says the firm’s chief executive Devrim Celal.
Six megawatts may not sound like much. It’s about the same capacity as a single medium-sized wind turbine, but in the context of national electricity supply that can make a difference, says Tim Green, co-director at Imperial College London’s Energy Futures Laboratory. “A home on average is consuming about two kilowatts – six megawatts gets you 3,000 homes maybe.”
But every little helps!
So who are Upside Energy?
If you look at their web site, this is the headline on the home page.
Smart Energy Management Systems
There is also this description.
Our award-winning cloud-based platform provides our customers with a way to capitalise on new opportunities, while supporting an acceleration in the use of renewable technologies, and overall helping to create a more sustainable and efficient power network.
From what I can gather with further reading, it almost looks like a peer-to-peer network for energy, akin to how Zopa is one for money.
- If you or your company, built a battery or a solar farm, then Upside Energy would control it, in the most efficient way.
- As the Wired article states, they also have a few batteries of their own.
On another page they describe the system as a cloud-based platform can connect with a multitude of devices across commercial, industrial and domestic sites. They give the following examples of devices.
- Battery storage systems.
- \electric-vehicle charging points.
- Uninterruptible power supplies
- Heating and cooling systems.
They then say a bit about how it works.
It uses advanced algorithms and artificial intelligence to match energy demand with the available supply, helping the electricity grid deal with fluctuations and times of peak usage. Supporting the grid in this way, opens the doors to additional revenue streams for our customers, who also benefit from significant reductions in energy costs and carbon emissions.
The platform can manage demand response for more than 100,000 devices running in parallel.
As a Control Engineer, whose friend went on to manage ICI’s power networks in the North West, I know management of these complex networks was difficult even in the 1970s.
It is interesting to look at their funding page.
- Legal & General is an investor.
- systemiQ is an investor.
- Innovate UK is present, as they are in many British technology developments.
Funding would appear to be typical for a company like this.
Conclusion
If I was a farmer, who was investing in a solar farm on a piece of land, I would check out Upside Energy.
But I’m not!
Over eight years ago, I wrote Stability in Financial Systems, where I used my Control Engineering and mathematical experience to postulate that Zopa might have found a way to create a system with an equilibrium between saving and borrowing, that responded to politics, the economy and unforeseen circumstances.
Could Upside Energy have created a system that balances energy production, storage and use, which navigating the perils of the modern world?
Zopa And COVID-19
As regular readers of this blog will know, I invest my spare savings in the peer-to-peer lender Zopa.
I have a feeling, from my experience of reading the statistics of my lending on the site, that money is slow to be lent out!
But there are people out there, even in these insecure times, who have a guaranteed cash-flow and a good credit rating.
And some of these may need a loan to perhaps replace a car, that has expired and they need to get to their essential job or to furnish a spare room as a home office or schoolroom.
If I needed a sensible loan, which I don’t, I’d check out Zopa.
Is The COVID-19 Having An Affect On Lending At Zopa?
I lend money on Zopa and at the moment no-one seems to be borrowing any money.
I put some of my pension in my lending pot into the peer-to-peer lender each month and it’s still there sitting safely in the queue for a borrower.
Perhaps everybody is being cautious because of the COVID-19 alert
The Anonymous Widower 