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Government and our sector must work together for smart energy transition

Government and our sector must work together for smart energy transition

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According to Professor Dieter Helm, lecturer on Energy Policy at the University of Oxford, “an increasingly digital world is electric, so our energy future is electric”.  This is a very positive message for our sector and, crucially, it seems the government has got the message with July’s publication of ‘Upgrading our Energy System – Smart Systems and Flexibility Plan’*. The plan came out alongside announcements of major financial support for battery R&D and the remarkable - if long range - undertaking that by 2040, pretty much the only new vehicle you will be able to buy will be an EV.  

Government and industry hopes for this smart, distributed energy plan are high - it is not only part of the Government’s ‘Industrial Strategy’ (which aims to boost UK GDP and productivity) but also of the much-anticipated ‘Clean Growth Plan’ (aiming for further UK carbon reductions).

It’s clear that a big challenge for the UK over the next five to ten years is less about how to generate low carbon electrical energy, and more about what to do with it (storage, distribution and use). ‘Upgrading our Energy System recognises this, in line with recent assessments from the ECA and other key players that neither new technology or lower prices will deliver a truly smart, low carbon future, unless there is significant UK market and regulatory reform. It’s a topic we discussed recently at the ECA’s Business, Policy and Practice Committee, and we are pleased that the government has highlighted a host of measures which aim to remove market and legal barriers to energy storage (energy storage isn't defined in law, so its regulatory status in planning, procurement and distribution is unclear, and this is hindering growth).

The new plan aims to remove barriers to deploying all types of battery technology, boosting its role with renewables and electric vehicles, and the provision of valuable grid services such as 'demand side response'. This will be further enabled, says the government, through increasing digitisation and notably by “harnessing the power of enhanced data communication” (including smart metering).

As battery costs continue to fall, a major commercial attraction is that - unlike other energy storage - batteries can be sited pretty much anywhere, with flexible capacity. Many commentators speculate that the overall cost of Lithium-ion battery storage will continue to fall until it matches the cost of buying peak electrical energy, perhaps within five years. If this happens, there could be an array of energy options for businesses in particular – if the market and the regulations work properly. This would be the much-vaunted point of UK energy market disruption.        

Meanwhile, renewable energy (once it's installed) tends to deliver the cheapest (and lowest carbon) electrical energy on the market. Depending on the hour and the weather, it is already revolutionising how the UK buys its primary energy. However, for the grid to handle increasing input from renewables, and changes in customer use, we need increasingly smart deployment of our existing energy capacity, and much smarter energy use.  Solar and energy storage could be a winning combination, offering a range of smart and lucrative energy options.  The drivers include lower energy bills (from solar generation, delivered by batteries when external charges are high) and additional (‘stacked’) revenue from sources such as grid balancing services and uninterrupted power (UPS) replacement.

Policy, regulatory and market uncertainty are the enemies of positive change and the opportunities that may come with it. ‘Upgrading our Energy System’ attempts to untie the knot of complex, changeable, and contrary regulatory and market measures. It also aims to use new standards to ensure that safety, quality and cyber-security is upheld. In pursuing this goal, it has our full support, and ECA members are ready to deliver the smart energy transition that the UK economy needs.

*https://www.gov.uk/government/publications/upgrading-our-energy-system-smart-systems-and-flexibility-plan