Small scale technologies are shaking up the existing energy paradigm, where the only consumer choice is to decide which big and distant power company to buy from. This ignores rapid developments in solar panels, onshore wind, electric vehicles (EVs) and battery storage. People are increasingly choosing to be energy owners, and are able to take back at least some control over energy production.
A recent report by Green Alliance, People power: How consumer choice is changing the UK energy system, looks at how the energy system and, most importantly, the government are not keeping up with the pace of change. Policymakers assume that large energy businesses will continue to be the dominant players in energy markets. This is half right: consumers will still depend on large-scale energy to provide cheap, reliable power, especially in the winter. We aren’t going to enter a world where small can do it all.
But, even if they only supply a fraction of UK energy needs, small-scale energy technologies will disrupt the markets and regulations that currently govern the power system. As a reminder of what this could mean, just a 10% fall in market share for the US coal industry was enough to cause its near collapse.
Technology is marching on relentlessly. By 2020 it will make economic sense for businesses to draw their power from solar rooftops instead of the grid, and this will be true for homeowners too by 2025 at the latest. Tesla is already the largest selling luxury car manufacturer in the US and has surpassed General Motors to become the US automaker with the highest market value.
To understand what’s at stake, imagine two different visions of the future.
Business, as usual, could be costly and disruptive
The first vision, business, as usual, is one where 21st-century technology forces its way into a 20th-century energy system. The defaults in this system will lead to grid congestion, expensive short-notice network upgrades and rising peak demand. Without change, clusters of EVs charging at peak times could disrupt local power networks; and energy bills today reward customers that opt for self-generation, leaving those who don’t own renewables to bear the costs of the grid.
The benefits of active governance
The second vision is where policy keeps in step with technology. Actively governing the transition to a new system which incorporates small-scale technologies will give UK consumers the freedom to choose while cutting costs.
California is already using smart EV charging infrastructure to manage demand at peak times, and Germany has incentives for coupling battery storage with residential solar PV to give consumers what they want without disrupting the grid.
This grid support potential is a real opportunity for the UK: EVs and heat pumps could provide 82% of National Grid’s battery coupled solar could provide net system benefits and EV batteries alone could back up the grid for seven hours at a time by 2025.
How the government can support consumer energy choices
Business as usual, as the market is currently structured, will not deliver a smart, consumer-led energy system. And, while smart charging, batteries and demand management will be key to solving the technical issues for optimal integration of small scale technologies, it is the government that will decide which energy future we end up with.
If the government wants to give consumers real choice over energy generation and consumption it must actively govern the transition to a smarter system. Action is needed in five areas:
- Govern energy infrastructure to support small-scale energy choices. Large scale energy will continue to be essential, but policy is needed to make it investable and help it to support small energy technologies while providing low carbon bulk power.
- Create an independent body to inform system design through robust technical analysis and option testing because the transition will be complex and policy should be informed by experts.
- Transform distribution network operators into distribution system operators, so that local grids can be managed smartly and the need for expensive grid upgrades can be reduced.
- Enable small-scale technologies to provide system flexibility, so that the UK can replicate California’s EV success story and realise the potential of small-scale energy to deliver system benefits.
- Use automation and aggregators to allow small-scale technologies to support the grid rather than disrupt it. The government should require EV chargers, solar, batteries, appliances and grids to be smart by default.
As technology prices continue to fall, the UK can have both a vibrant market in consumer-led technologies and economically viable large scale energy infrastructure. But this can only happen if politicians actively govern the system to support the energy future that is rapidly unfolding. MI
ABOUT THE AUTHOR
Caterina Brandmayr, policy analyst, Green Alliance. Caterina joined Green Alliance in August 2016 as a policy analyst, providing support in the Low Carbon Energy and Resource Stewardship themes.
Prior to Green Alliance, she worked as a researcher at the Institute for SocialEcological Research in Frankfurt, focusing on the development of precautionary measures to tackle pharmaceutical residues in the aquatic environment.
Caterina holds an MSc in Environmental Technology at Imperial College London, a PhD in Biochemistry from the Ludwig-Maximilians-Universität in Munich and an MChem in Chemistry from the University of Oxford.
ABOUT GREEN ALLIANCE
Green Alliance is a charity and independent think tank focused on ambitious leadership for the environment. We have a track record of over 35 years, working with the most influential leaders from the NGO, business, and political communities. Our work generates new thinking and dialogue, and has increased political action and support for environmental solutions in the UK.
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