Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Government sets out plan for a smart and flexible energy future

The government and the energy regulator Ofgem published their joint plan on 24 July to enable a smart, flexible future energy system.

The Upgrading Our Energy System: Smart and Flexibility Plan outlined actions that will be taken to remove barriers to smart technologies, enable smart homes and businesses and improve access to energy markets for new technologies and business models.

In updating and reforming the UK energy system, the government seeks to secure economic benefits for consumers – both business and household – saving up to £40bn of energy costs over the coming decades.

Action to support innovative technologies

The plan outlined 29 specific actions which the government, Ofgem and industry will take to remove barriers for new and innovative technologies.

Storage is seen as crucial to the future electricity network as it allows electricity generated by intermittent sources such as wind and solar to be used when needed most. However, it has been held back by the lack of appropriate rules in existing codes and regulations, due to storage being both a generator and consumer at times.

One of the key moves to removing barriers to the increased use of energy storage will be creating a definition for storage in legislation. When parliamentary time allows, the government intends to amend the Electricity Act 1989 to include a definition for storage as a subset of generation, as well as review the planning process for storage to ultimately simplify it.

The plan also included proposals to clarify the rules on co-location of storage facilities and renewable generation and how this will interact with existing renewable energy support schemes. Government will also ensure that stored electricity is not “double charged” environmental and network costs.

The plan outlined the government’s and the regulator’s shared vision for enabling demand-side response (DSR) – end energy users varying their demand up or down according to the system’s needs in return for payment. The electricity system operator National Grid sees scope for nearly 5GW of industrial and commercial DSR by 2050.

Government’s proposed actions to enable DSR include: actions to implement government-led standards to ensure interoperability of new products, DSR metering requirements will be simplified, and DSR will be granted access to the balancing mechanism (one of the tools National Grid uses to balance electricity supply and demand close to real time) via new BSC parties. Ofgem will also ensure that consumers are protected by developing a Code of Practice for independent DSR aggregators.

Businesses set to benefit

One of the aims of the plan is to support innovative businesses in providing them an easy method to offer their new technologies and services to consumers.

This, intertwined with the leading role that smart meters and other smart technologies will play in the future energy system, is designed to leave businesses in a strong position to gain substantially from proposed changes to legislation and regulations.

For example, the introduction of mandatory half hourly settlement (HHS) along with the widespread deployment of smart and advanced meters, will enable suppliers to offer smart tariffs, such as “time of use” tariffs. These types of tariffs encourage consumers to minimise or eliminate consumption during peak times. This could significantly drive down business customers’ energy bills as well as reducing pressure on system costs as a result of lowered distributional impacts.

Business and Energy Secretary Greg Clark said that upgrading the energy system is an essential part of the Industrial Strategy and will “create opportunities to reduce energy costs, increase productivity and put UK businesses in a leading position to export smart energy technology and services to the rest of the world”.

More broadly, the creation of a level playing field for demand flexibility and storage is intended to help the most efficient products and services to emerge and unlock the benefits of technology innovation for the UK economy and businesses.

Plan wins plaudits from industry

The publication of the plan was met with positive response from a range of stakeholders.

The Renewable Energy Association’s (REA) Head of Policy and External Affairs, James Court, supported the government’s decision to launch a battery institute but highlighted that more energy storage technology is needed to “empower” the move towards a low-cost and lower carbon energy system. In the groups statement, Court said: “The UK is among the global leaders for battery technology, but for the handbrakes to be taken off we need to see the rules and regulations made in a different age updated for these new technologies and approaches, coupled with a renewed commitment to renewables […] The government needs to remember that the success of batteries, renewables and smart technologies are all interlinked.”

Similarly, in response to the announcement on battery technology investment, the Chief Executive of Energy UK, Lawrence Slade said it would create a “level playing field” for all technologies hence driving innovation and providing an appropriate regulatory framework for battery storage development.

Aimee Betts-Charalambous, Programme Manager for Smart Energy at techUK, said the plan recognised the vital role of technology in the transition to a resilient, cost effective and low carbon energy future: “The Smart Systems & Flexibility Plan sends a strong signal to industry. Levelling the playing field by removing key barriers to innovation as part of a realignment towards a ‘whole systems’ approach that recognises dealing with the energy trilemma is no longer about trade-offs.”

The Association for Decentralised Energy (ADE), however, noted the government’s reliance on Ofgem’s forthcoming Targeted Charging Review to deliver many of the envisaged changes. The group called on the government to ensure that any review of network charging is “rigorous, holistic and fairly reflects the benefit that embedded generation provides to the network”. In a statement, ADE Director Tim Rotheray, said: “The review of network charging is critically important. We need a rigorous review to ensure that local generators and flexibility providers are fairly compensated for the value they provide.”

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