Future – Proofing Our Energy System
On January 12th, the Government closed it long-awaited consultation paper A Smart, Flexible Energy System , a call for evidence which asked businesses for advice on how to best to develop a smarter, more flexible and user-friendly energy system.
Here Vijay Shinde, Grid Services Lead for engineering consultancy Sweco UK, examines what the consultation could mean for the UK s future energy system, and considers some of the possible barriers that were highlighted.
When the Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem published their long-awaited call for evidence, it was a milestone moment for the UK s future energy security.
Businesses finally had a chance to have their say on a smart revolution that could change the future of our energy system. More importantly, BEIS and Ofgem had finally confirmed their commitment to creating a smarter, flexible, more user-friendly energy system.
The paper focuses largely on removing barriers for energy storage and demand side response (DSR), which could save consumers between £17 billion and £40 billion by 2050 according to BEIS and Ofgem.
Energy storage technology and DSR where businesses are incentivised to reduce or shift their electricity use at peak times could be the key to unlocking the potential of greener energy production in the UK. New demands on our energy system for instance from electric vehicles and the need to manage renewable energy sources mean that these enhanced capabilities for Flexible Energy aren t just advantageous, but essential. And with the Government committed to closing all coal fired power stations in the UK by 2025, it s no exaggeration to say it could be crucial to keeping the lights on in years to come.
Despite its potential, the industry has been waiting for clarity, especially in light of the recent political changes. This call for evidence highlights some of the barriers that are in place for this emerging technology, like planning regulation and licensing, even the definition of storage and is the first step toward providing much-needed answers.
WHAT IS DSR?
One of the main solutions put forward in the paper is Demand Side Response, which mean increasing, reducing or shifting electricity demand in areas such as onsite generation, heating and cooling systems, business operations and appliances, and battery storage.
There are many examples already in operation in Business and Industry, including high street retailers such as M&S and supermarket chains such as Sainsbury s, which have HVAC assets in their stores available and online, so they can control and shift loads as required. In addition they have their generators upgraded to supply power to the grid when called upon. One unexpected benefit is that, by keeping their generators online for providing flexibility to National Grid, they are more confident they will run successfully if a power cut did occur.
In other examples, Bernard Matthews found that by shifting the lighting for its livestock by one hour to avoid peak times, it saved £40,000 whilst maintaining comfort levels. Bath NHS Foundation Trust, meanwhile, uses its existing two 800kW standby generators to offer services in DSR with overall benefits of £40,000/MW for 2015-16.
To fully understand the potential of DSR, we must first examine the barriers that were highlighted.
In preparing the paper, Ofgem conducted a survey of large non-domestic DSR, seeking views of both large consumers and those that procure DSR, including suppliers, networks and aggregators. The results of this engagement revealed a high level of interest in DSR, but barriers remain, which Ofgem has split into four categories; cultural, regulatory, commercial and structural. I will consider each category below.
Perhaps the most challenging barrier to overcome is the mindset of those that need to buy-in, including large consumers. Persuading people to change the way in which they consume energy will be difficult, but as the paper identifies, it will be even more difficult unless we can make information available to those consumers. This includes information on the flexibility of products and programmes, how to participate in them and even awareness that the opportunities exist.
For me this is one of the most important points. We have seen too many examples of Government energy initiatives fail because it has not been possible to drive cultural change, even though the incentives were – on the face it – good enough. Get this bit right, and we are well on the way to a successful roll-out.
For the domestic sector, Government s recent research found that 50% of respondents would take up a smart tariff if their supplier offered one to them now. For those who were not interested, scepticism and uncertainty over the impact of a smart tariff on energy costs was the most common reason for a lack of interest. Respondents also said they would need more information before taking up a smart tariff, and were concerned about loss of control and that it would not fit their lifestyle. For the non-domestic sector the returns are more visible and quantifiable.
DSR need not have any noticeable impact on day-to-day operations. Customers can decide the extent to which they are willing and able to change their practices to participate in DSR. Some customers are able to shift their electricity use themselves and respond to signals, others may have limited ability to change their practices or have smaller loads, so they can work with demand side providers and bring in the technology they need to participate.
Of course, there are still a number of operational challenges to overcome, not least the regulatory challenges, which focuses on the role of partners. Government and Ofgem need to develop policy and regulation that facilitates consumer benefits.
The consultation paper identified two areas in particular that will need careful consideration. Firstly, the process for getting an export connection to the distribution network for on-site back-up generation can be relatively protracted and expensive.
Secondly the relationship between DSR opportunities for different uses (for example network operator, rather than system operator-procured) may be unclear to consumers.
There are currently low levels of flexibility offered to the system by domestic and smaller non-domestic consumers because many of the building blocks that would enable them to participate are not yet in place.
Product specification, such as duration of response, may disadvantage DSR in competing with other sources of flexibility. For example, DSR response time is typically in minutes which makes it possible to participate for products such as STOR, STOR Runaway and Demand Turn Up, however SMEs are missing participation in whole fleet of Frequency Response services.
Clearly DSR will not work unless it is commercially viable for consumers, with the right incentives to encourage participation. The Government has recognised this in highlighting commercial as the third category and there are some very clear challenges to overcome here.
Specifically, it has been suggested that the technical and commercial requirements of flexibility products may not fit with the characteristics of the consumers, whilst DSR may also conflict with existing corporate environmental schemes/commitments. We must also be conscious that providing flexibility is not the core business for consumers, so the monetary value may not justify the effort required to sign a contract and provide the service.
Consumers interested in DSR opportunity need to understand both their power use and business operations. They need to gather information on their businesses : operational and safety requirements; electricity consumption; existing Building Management System (BMS); potentially suitable assets and who manages them; and if intending to use generation for export the type of generation connection agreement that is in place with local network operator.
It is important to establish contacts with electricity industry experts, such as electricity supplier, network operator, National Grid, aggregator or independent expert to understand different options, costs involved, timescales and revenue streams.
Finally, the paper focuses on the structural challenges or the costs associated with DSR. There are concerns that the disruption and the impact on business performance may preclude consideration of DSR and even if considered, the ongoing perceived risk and perceived associated costs of providing flexibility may be too high compared with perceived benefits.
For me, this again comes back to communication. As an industry we must work together to highlight the benefits and present a viable, compelling business case. If we can present case studies which demonstrate the potential not only for individual businesses but for the wider energy system, then people will sit up and take notice. In addition, we must seek ways to reduce the impact, especially for early adopters.
It will be beneficial to talk to someone with a similar business already providing demand side response and look at relevant case studies. It is also important to meet early with people across the organisation who might need to be involved, such as energy management, operations, finance, procurement and estates/building services. The approach could be treating demand side response as any other cross-departmental project with a project manager, team and plan.
So what next? The important thing now is how quickly BEIS and Ofgem can put in place the resulting roadmap that will set out the plan to remove those barriers and stimulate innovation and investment.
Energy storage is an incredibly fast-moving technology and it has already taken longer than the industry had hoped to issue this call for evidence. DSR also offers huge potential, but as the paper shows there are still some barriers to overcome.
The most important thing now is speed. As a nation we must move quickly if we are to take full advantage. That means the government, energy suppliers, networks and aggregators all working together to develop a common, innovative and scalable solution. If that can be achieved, then we can all look forward to the possibility of a smarter, flexible energy system.