Worlds Apart

By Rachel Bray, Energy Policy Group, 22nd of July 

Delivering a decarbonised, smart and flexible energy system is increasingly a very interlinked process. Within this the role of flexibility is key for the future energy system if we are to see reductions in peak demand whilst also accommodating high proportions of variable power from renewables and high increases in overall demand due to the electrification of heat and transport.

A lot of renewables capacity is connected at the distribution network level, rather than at the transmission level.  The role and responsibilities of the distribution network operators (DNOs) in successfully managing the networks and providing flexibility to the system, are therefore becoming increasingly more important.

This was recognised by BEIS and Ofgem in their 2017 Smart Systems and Flexibility Plan which set out their intention to see the DNOs taking on a more proactive role of network management.  The Plan also called for the Energy Networks Association (ENA) through the Open Networks Project; to coordinate the development of flexibility markets across the DNO areas.

Clearly the Plan has yet to fully enter the ENA’s thinking because BEIS and Ofgem have just issued a joint letter urging them to increase their efforts to deliver markets for flexibility.

The letter states that flexibility will be a crucial component in facilitating significant deployment of renewables, electrified transport and heat in future; which will be essential if the UK is to meet the target for net zero greenhouse gas emissions by 2050.

The letter also states that a smarter and more flexible energy system could save the UK £17-40bn by 2050 with many of these benefits realised at the distribution level. These savings can be made through avoided generation costs; offset through the utilisation of demand side response, storage and low carbon technologies on the networks. Hence the urgent need for flexibility markets to emerge.

However, in order for these environmental and financial benefits to be realised, and for flexibility markets to emerge, energy network companies need to evolve. Whilst the joint letter acknowledges work that has already been started by the ENA through the Open Networks Project it also stresses that further change – and tangible results – are now required.

Despite this public call for progress, the ENA’s initial reaction appears to be one of self-congratulation; selecting to respond to BEIS & Ofgem’s opening words of encouragement:

We are grateful for BEIS and Ofgem’s continued support and involvement with the Open Networks Project. In particular, their recognition of the value that the Open Networks Project has provided for delivering change as part of the energy transition.”

But what are these changes? How far have they gone? And what more needs to be done to deliver the change required to meet net zero greenhouse emissions by 2050?

One major element of the Open Networks project has been the development of their ‘Future Worlds’ analysis – the ENA’s proposed scenarios for the procurement and dispatch of flexibility up to 2050. The 5 proposed Future World scenarios range from the ESO (National Grid) leading on coordination of procurement through similar arrangements to the current ancillary services markets; the DNOs coordinating through new local level arrangements; joint coordination or independent coordination.

So far, so realistic you might think.  But, extraordinarily, the Future Worlds scenarios do not feature electricity system decarbonisation as a key driver in determining between which of the 5 scenarios will best meet the UK’s future system needs.

Decarbonisation of generation has to happen within the lifetime of the Future Worlds plan if we are to achieve the UK’s net zero commitment. However, a recent Impact Assessment undertaken on the Future World scenarios failed to reflect this necessity in the weighting of different system drivers.

Decarbonisation of generation was ranked equally with 32 other objectives (with a total of 4 objectives being badged in the ‘environmental sustainability’ bracket) with no weighting applied. Through an online webinar hosted by the ENA in March we asked why decarbonisation was not seen as a key policy driver, to which we received the following response:

“Since this is an initial assessment which is not designed to ‘pick a winner’, we chose not to weight the different criteria. How to balance the competing objectives and trade-offs between the Future Worlds is more of a policy decision for BEIS and Ofgem.”

We do not accept that this is a reasonable stance. Although the UK’s net-zero legislation was not as yet in place at the time of the consultation, the 80% target set in the Climate Change Act 2008 was; and should have been built into the different scenarios; allowing respondents the opportunity to gauge each scenario accordingly.

In effect we consider that the ENA have been stalling; holding out with a ‘wait and see approach’ rather than leading the way on transforming the networks. Hopefully the joint letter will be taken as a ‘shot across the bows’ that will lead to tangible results. However, BEIS & Ofgem need to take control of the situation; including regulatory sanctions if necessary, if we are to see a decarbonised, smart and flexible energy system anytime soon.

Rachel Bray is a Research Fellow within the Energy Policy Group. Her staff profile can be found here.

 

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