By now we all know that the energy system is in a state of change, moving from the old world of centralised generation and supply to a digitised, decentralised world ruled by distributed generation and demand response at a local level.
Discussion is endless within the sector as to how we get there, what is needed and who is already engaged in activity to get us there (and who needs to get started). However, aside from the publication of the Smart Systems and Flexibility Plan (SSFP) from government and Ofgem, the same conversations are not crossing over to the mainstream in a way that will be needed.
No doubt civil servants are engaged with industry on the issues around the low carbon transition, but using yesterday’s feed-in tariff proposals as an example, it’s sometimes difficult to see the long-term thinking that will be needed to take us forward.
It was therefore an interesting experience to get an invitation to the House of Commons earlier this week to hear MPs from both sides discuss this issue.
While a government minister was not present, the Energy Networks Association (ENA) event was hosted by James Heappey, a Conservative backbencher whose knowledge and involvement in this area continues to beg the question as to why he is not included in the government’s ministerial energy team.
Joining him in a sadly all too rare cross party discussion was Alan Whitehead, described at the event as the father of energy in the Commons, who at least is included in Labour’s shadow energy team.
The two have clearly often engaged in both public and private discussions on the future of energy in the UK and, flanked by Northern Powergrid’s policy and market’s director Patrick Erwin and Chris Clarke, director of asset management at Wales & West Utilities, offered some lively discussion on where we’re headed, and what is required to get there.
Moving out of an analogue era
The progress already demonstrated by the completion of a number of actions within the SSFP – most recently the passing of the Automated and Electric Vehicles Bill – and the ongoing work of the ENA’s Open Networks project suggests the transition is on its way. But for Heappey, this has not nearly been fast enough, despite his warm words for the strides forward that have already been taken.
“As much praise as I have tried to lavish, I am a long way from convinced that our energy system is transforming quickly enough to meet the demands of the technologies that are increasingly trying to use our energy system,” he said.
“That transformation needs to accelerate quite a lot and with that comes a couple of leaps of faith and that’s not just for the energy networks but also for government.”
As with any discussions housed in Westminster, conversation quickly turned to the regulatory landscape. But in a week that saw seemingly all parliamentary time dedicated to Brexit, it’s not surprising that much of the time needed for debate is occupied.
We’ve already seen this affect the passage of progress for energy storage, with the Department of Business, Energy and Industrial Strategy’s (BEIS) head of smart energy admitting earlier this year: “We’re still seeking opportunities for parliamentary time to define storage in primary legislation and Brexit is making this difficult.”
For Whitehead, this is an intractable issue as more legislation will be needed to ensure the transition continues.
“There’s going to have to be a couple of energy acts in the not too distant future which actually recognise the architecture that’s going to be necessary to bring these things into being. There is a role for some government activism, not in terms of determining what happens, but in shaping the system,” he argued.
A lot of what the shadow minster envisaged is around the local energy system and allowing consumers to take the lead in areas like aggregated capacity and local balancing; a point picked up by Heappey who had a strong message for both government and the regulator.
“By far the most important thing is for government to give Ofgem the signal very clearly and unequivocally that the regulator needs to get out of the way in such a way that allows this disruption to happen,” he argued.
“If we can get out of the way and allow that consumer focused disruption to happen, all things flow from that I think and so that would be my top priority.”
This means shaping the regulatory landscape in favour of storage and demand side response, two technologies that Heappey claimed were “non-negotiable” in terms of facilitating a fully digitised, decentralised system.
The consumer revolution will not be televised
The trick here according to Whitehead is for these technologies to be integrated and active within homes and businesses, but without those consumers knowing they are contributing to the system. This has recently emerged as a key driver within the aggregation market, with companies working in both the residential and commercial sectors taking on management of load and assets while their customers quite literally go about their business.
Network companies have been wise to this requirement for some time, with Erwin painting a vision of the future where all systems are smart and available to the system.
“We need to get to a point where by default, people’s energy assets are smart so that they can participate in those markets. Once we’ve got to that point, we can use them across the country. It’s about taking the opportunity with new technologies to embed intelligence in them and then making the commercial and regulatory structures that let them work with the system,” he said.
“We want [homes and businesses] to start making assets available to the system. The customer proposition there is, if you have an EV for example, you have a 50kW battery or a 100kW battery. We’re expecting 11 million of those on the roads by 2030; that’s a huge resource for the energy system but it’s also an asset you should be getting the most out of.”
How consumers get the most out of these assets remains to be seen, with services for aggregating residential capacity to deliver value still under development. But Heappey argued that network operators will have a responsibility to be ready for this activity to play a role in the market.
“The network operators of course have to deliver a digitised system but they also need to be very unprotective and recognise effectively that what they’re doing is running an aircraft carrier onto which all sorts of other things will fly and take-off.”
“[They] have got to get into the habit and mindset of buying flexibility services from those who are able to deliver them,” he argued.
Fortuitously for Heappey, this appears to be how the market is shaping up with Erwin stating that Northern Powergrid’s ongoing strategy will see it purchase flexibility until this becomes more expensive than carrying out upgrades.
This will suit the signatories of an open letter sent to energy and clean growth minister Claire Perry on the day of the Westminster discussion, who argued for government to step up efforts to ensure Ofgem’s price controls for networks is predisposed towards flexibility procurement.
However, with Heappey stepping on Ofgem’s toes with his suggestions around the regulator getting out of the way, it will be interesting to see if any political force will be applied to Ofgem’s price controls as they are developed. But with the entire system seemingly shifting down to the distribution level, Erwin had some guiding words for consideration.
“We need to recognise the way that we run the energy system and raise taxes and levies…provide important services to society. So as we move towards this new world, there’s a real challenge for the regulator and our politicians to think about how we socialise some costs, which parts of society are protected and how we engineer benefits to everyone in society.”
Time will tell if these words fall on deaf ears but by hosting such a discussion within the grounds of Parliament, it could be up to the likes of Heappey and Whitehead to ensure that whichever political power holds sway over the country, progress is made at the highest level.