The UK government and regulator Ofgem have launched what they call the ‘Smart Systems and Flexibility Plan’ to upgrade the nation’s energy system changing with the growth of distributed low carbon generation and other new technologies.
The aim is to “deliver a smarter, more flexible energy system” with a focus on three pillars – removing the barriers to smart technologies, including storage; enabling smart homes and businesses; and making the markets work for flexibility.
The plan is based on a public call for evidence and envisages “empowering consumers and helping people save up to £40bn off their energy bills” by 2050.
Flexibility and storage
Storage, and its role in providing flexibility, is very much at the centre of the plan. While not setting any targets for storage, the report notes that over 550MW of battery capacity was contracted in 2016 to come online by 2020.
The approach is not to favour one type of flexibility over another, but to allow different forms of flexibility, including forms which will be developed in future, to compete against each other, and against more traditional solutions, within a market framework.
For this reason, i.e. not to impede the development of a competitive market for storage and flexibility services, Ofgem considers that network companies should not own or operate storage and will take steps to ensure they cannot do so.
However, storage faces a number of specific regulatory and policy barriers that may place it at a disadvantage to other forms of flexibility. Issues such as network charges, planning and connections are some that Ofgem says it will address.
On the innovation front a separate announcement was made on the first phase of a £246m investment to establish the UK as a world leader in battery technology. This includes the creation of a Battery Institute.
Smart homes and businesses
Regarding smart homes and businesses, the focus is on enabling the residential and small business sectors to participate in the demand response market. While it isn’t clear how big this market will be, the enablers need to be in place, according to the report.
This starts with the smart meter rollout, with the report confirming that all households and small businesses will be offered – but presumably not obliged to accept – a smart meter by the end of 2020.
Further issues that will addressed are the provision of half-hourly settlement, standards for smart appliances, standards for electric vehicle chargepoints and consumer protections for new service offerings.
According to the report the call for evidence identified the need for better and more transparent price signals that reflect the true value of flexibility actions to the system.
Two broad types of flexibility are envisaged: price flexibility, which occurs when any party varies its demand or generation in response to the price of energy and network use at a particular time; and contracted flexibility, where parties trade and directly contract with one another to procure flexibility.
As part of this, there is a need for roles and responsibilities of different actors in the system to evolve. In particular is the evolution of distribution network operators (DNOs) to distribution system operators (DSOs), which forms part of the Energy Networks Association’s (ENA) Open Networks project.
Commenting on the proposals, Business and Energy Secretary Greg Clark said: “Upgrading our energy system to make sure it is fit for the future is a key part of our Industrial Strategy to deliver a smarter, more flexible energy system. A smarter energy system will create new businesses and high-skilled jobs, while making sure our infrastructure is able to cope with demand.”
Andrew Wright, Senior Partner, Energy Systems, Ofgem, added: “We want to open the door to new technologies and services so that they can help to reduce bills for consumers in the long term. It is vital that we get the changes in place as there is potential for a smarter system to save consumers billions between now and 2050.”
Capacity market changes
Alongside the upgrade plan, the Department of Business, Energy and Industrial Strategy (BEIS) also released a consultation on proposals “to improve” the capacity market framework.
The consultation is focussed primarily on amending the de-rating methodology related to storage, apparently in response to concerns raised by stakeholders that storage in this market has the potential to pose a risk to security of supply if the batteries are unable to generate for the full duration of stress events.
The proposals are to break down the storage technology class into multiple categories based on its duration and to take the duration into account when setting the de-rating factors.
Other aspects up for review in the consultation include the provision of delivery assurance for unproven demand side response awarded agreements, allowing capacity providers to re-take a metering assessment and disaggregating some of the generating technology classes to improve transparency, support analysis and allow the potential for more specific application of de-rating factors in future.