Giving evidence in a marathon two and a half hour session on low-carbon networks in front of the Commons Energy and Climate Change committee last week, I was reminded of a quote from one of my favourite authors, William Gibson: “The future is already here — it's just not very evenly distributed.” All the elements that we need to assemble a responsive, flexible, low-carbon power network are to hand; what is really needed is to roll them out, gaining experience on how the pieces work, individually and collectively, and consequently making them business as usual. Sure, reductions in cost of key elements like storage are going to be necessary, but we shouldn’t be waiting for those to happen before taking action to ensure the commercial arrangements are right to incentivise cost-effective applications of the key technologies. The legal and regulatory changes necessary are likely to be time-limiting steps for the low-carbon and distributed energy revolution that we need so desperately.
Firstly, there is the rapidly rising deployment of the variable renewables of wind and solar. It’s becoming a cliché to point out that these are now directly competitive with the cheapest new fossil-fuelled electricity. It is reasonable to point out that these technologies bring system challenges, though it is important not to overplay these. If we were to use “traditional” tools for managing these, primarily new peaking capacity and a lot of new wires, then the cost would likely be very high, so it is important that we bring on cost-effective alternatives. It is also vital that we open up the market for ancillary services so that where renewables are able to provide these economically, they can be rewarded appropriately. Wind turbines can provide frequency response, voltage control and reactive power, and National Grid is going to need more of all of these and other services besides. Ancillary services are going to be a much larger part of the cost of providing power to consumers, and it is important that as many participants as possible are incentivised to play in the markets for their provision to ensure that the cost is minimised.
Even more importantly, though, we are seeing huge activity in the areas of storage and demand side response, but their contribution to the system is currently being stymied by rules and regulations designed for an earlier era, and slowness in the roll-out of market arrangements that would allow the full potential of smart meters to be exploited. Nonsensical regulatory treatment that sees storage being charged twice for network services as it both receives and sends power out to the system clearly needs to be reformed. The spread of half-hourly metering to all classes of consumer would also allow full time-of-use tariffing and the ability to ensure response of demand to system signals.
Having been around this industry for over a decade, however, I know that even logical changes that everyone agrees must be implemented take a long time to work through the process, and if there is any contention then it is even slower. We must prioritise the regulatory changes needed for storage and DSR so that business models can be constructed around these exciting new technologies, and that as they mature they can be rolled out at the highest speed possible.
One thing that will have to be acknowledged is that a significant opportunity to get on the front foot with the smart grid was missed in the RIIO-ED1 distribution price control review. This process set business plans for the Distribution Network Operators that put off their transition to being Distribution System Operators until the next price control period, which does not start until 2023. The DNOs also massively underestimated the deployment of distributed generation in their planning, and thus the RIIO-ED1 settlements do not provide for sufficient investment in capacity to provide connections to such generators. Some form of reopener of the RIIO-ED1 settlements would obviate the purpose of having long-term price controls and so we may have to wait until the planned Mid-Period Review in 2019 to see any substantive action. This will slow progress in deploying smart technologies just when we need to accelerate.
In conclusion, it can be seen that unnecessary legal, regulatory and policy barriers are the major issue in getting that future network well distributed in the UK. Dealing with these won’t cost money but will require significant will on the part of policy makers and industry to see through the required changes in a timely way. I know that there is considerable excitement across the sector at the prospect of radical technological change leading to a new and more efficient system, with consumers at the heart. If we can channel that excitement the UK can get ahead of the curve and achieve a network fit for the 21st century, with huge opportunities to export expertise and solutions as others follow in our wake. Let’s get to work.