Regulatory Change is Essential to Secure a Smarter Energy System for the UK

Regulatory Change is Essential to Secure a Smarter Energy System for the UK

  • 09 Nov 0

A smarter, more flexible power system which takes advantage of low-carbon innovations and technologies such as battery storage and demand response could create savings for the UK of approximately £8bn by 2030, according to new research from Policy Exchange. The Policy Exchange report calls for a complete overhaul of the current system to accommodate emerging technologies, including wind and solar power and recommends the removal of several regulatory and policy barriers to create a level playing field and negate the UK’s reliance on forms of electricity generation that impact more heavily on the environment.

The existing set of policies is encouraging a growth in dirty generators exacerbating air pollution. A good example of this is the Capacity Market Auction that facilitates generation of additional electricity at peak times to provide an insurance policy against the possibility of future blackouts. The current model favours small embedded generation (including diesel) and disadvantages Demand Side Response (DSR) projects from accessing the market, particularly with the requirements of the metering regime. In its last report before being disbanded, the Energy and Climate Change Committee (ECC) urged the Government to redesign its Capacity Market to give a clear signal that demand response capacity is a preferred option to diesel generation. In response, the Government has launched a consultation, with proposals to simplify and improve accessibility in future capacity auctions, which suggests including measures to address the regulatory barriers faced by energy storage.

There are short-term measures the Government could implement to encourage flexibility. The introduction of a carbon tax levied against polluting diesel generators would inhibit development of such technologies. Whilst such a measure would penalise the use of dirty generation, it is vital that support is given to alternative cleaner technologies such as demand response and storage. Indeed, the National Grid’s new Winter Outlook report highlights the potential for demand response measures to keep the system balanced during the winter months.

There is growing support across industry groups that are calling for the incentivisation of energy storage and demand response technologies to provide a clean, flexible and secure energy system. In terms of a longer-term approach, the report highlights a need for a major reform of the wholesale power market. The Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem have jointly issued a consultation document raising a number of matters relating to smart energy regulation and energy storage. According to the document, the UK Government is looking to ensure that planning rules do not serve as a barrier to energy storage projects. In addition, a more ‘technology neutral’ flexibility licence model for electricity storage schemes is also under consideration. Earlier this autumn National Grid unveiled eight successful battery storage projects following its first ever Enhanced Frequency Response’ (EFR) tender. The initiative will see the storage projects provide sub-second power to the grid at times of peak demand.

Whilst these steps are positive, the next Capacity Market Auction takes place in December 2016 securing capacity for 2020/21 and any outputs with regard to energy storage consultation will not be seen until later in 2017. It is therefore unlikely that any positive outcomes from these actions will have any effect on the existing environmental impact for several years. In order to move to a low-carbon power system, incorporating more renewable energy, we must create a smarter, more flexible power system. It is vital that new and existing forms of flexibility are able to compete efficiently within the energy market as this is key to ensuring that the UK will have a dynamic and responsive energy system which works for consumers and supports low carbon generation. It is therefore essential that the regulatory difficulties for cleaner generation and storage technologies are resolved to ensure delivery of these projects.


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