Transformation Moment

6. Re-thinking the Grid

No one is going to democratically re-structure the Grid without at least a basic grasp of what it is, and how it works. Alongside electricity, heat and power form the complementary parts of Britain’s energy equation.

Heat accounts for 45% of UK energy use and is responsible for the bulk of residential greenhouse gas emissions. The UK’s Committee on Climate Change (CCC) provided the most useful info-graphic of the significance of ‘heat’ within Britain’s bigger energy picture.[100]

Even more useful are their 2 reports on Next Steps for UK Heat Policy[101] and Best Practice in Residential Energy Efficiency Policy.[102] Paradoxically, the more devolved nature of heat networks has also led to more contentious divisions between the competing technologies that form part of the answers.

The good news is that ‘heat’ is an area that generates as many answers as it does obstacles. These range from ‘green gas’ to zero carbon homes, from power-to-gas to the hydrogen economy.

Ecotricity, for example, has been trialling its ‘grass to gas’ proposal for a network of Green Gas Mills, claiming that by 2035 –

“The construction of 5,000 Green Gas Mills, each of 5MW capacity, would be enough to supply 97% of British households and would create around 75,000 jobs and pump £7.5 billion into the rural economy.”[103]

The scale of these claims (and their land-use implications) were almost instantly challenged, along with other existing UK policies promoting the use of bio-fuels.

Homes need heating, but an increasing body of evidence suggests that neither maize, nor grass, nor any other bio-fuel is the answer, unless Britain tackles the problem of cold homes first.

“The sad truth is that biogas from crops, alongside so many other approaches to bioenergy production, deliver very little apart from the opportunity to harvest large subsidies from the public purse, which as we know is rather empty at the moment. If we really wanted to do something about reducing carbon emissions, there are probably better ways of using the money – like a massive national housing insulation project.”[104]

Answers will invariably come in a combination of technologies and strategies. An array of green ‘solutions’ – including syngas and biogas, from waste, and hydrogen from wind/solar surpluses – will join in. All will add to existing local ‘heat’ plans running from Cornwall to Newcastle, Leeds to Southampton, and from Peterborough to Edinburgh.[105]

What really matters is whether the various solutions are used to democratise the UK energy sector or not. These are the lessons Britain has to learn from Europe and elsewhere.

If technology solutions fail to directly reduce energy costs to the poor, they will remain ‘developer’ solutions, not ‘consumer’ ones. Tomorrow’s smart-energy systems will undoubtably embrace far more flexible connections between power, heat, electricity and transport. The more critical questions are about who will be the owners of the new ‘smart’.

The basis of a more democratic and sustainable energy ‘system’ probably needs to begin with electricity.

6.1 From one-way street to two-way traffic.

Physically, the electricity Grid is the hard-wiring that moves electricity around the country.

Much like the roads network, it is a combination of ‘motorways’, ‘trunk roads’ and ‘local roads’. The Grid is the system we use to connect power producers to consumers, and is responsible for the balancing and back-up storage of electricity. It is what ‘keeps Britain’s lights on’.

For the technically minded, parliament produced a 2001 handy guide to the Grid itself.[106] You don’t have to be an engineer to grasp its outlines. There are several levels at which the Grid operates:

the high voltage transmission network (400kV-275kV) from power stations to distributors (DNOs), and

localised distribution networks (132kV-230V) serving the majority of customers.

Within the (regional) distribution networks there is also separate provision for large and small scale industrial consumers (33kV-11kV) and for household supply (230V).

For most people, the relevant starting point is their own home – the small (230V) end of the electricity system. It is the point where ‘keeping the lights on’ matters most. No one really has a direct connection to the high voltage transmission grid. If we see any connection with others it is only in recognition of our common dependence on the local sub-station(s).

Britain’s current electricity grid was designed as a one-way street; a ‘power-station to plug’ supply system, intended to sell electricity but not to receive it. Smart cities and smart technologies are turning this thinking on its head.

Many countries already refer to the public as ‘prosumers’; households and businesses that are both producers and consumers of (clean) electricity. Towns, cities and villages are beginning to treat these producer/consumers as the core of their new energy systems. For Big Energy, this has become an existential challenge.

A system designed to sell consumption doesn’t welcome invitations to sell less. It is even less enthusiastic about paying customers for energy they generate themselves. Power stations that used to be at the centre of everything, suddenly aren’t.

What the UK needs to understand is that other/wider choices already exist…without anyone’s lights going out.

“About 48 million Americans, in over 2000 cities and districts, get their electricity supplied by public sector companies, at a price which is on average 12% lower than the price charged by private energy companies. This represents 14.5% of the total market – and a further 13% are supplied by electricity co-operatives…

“Over 80% of the distribution networks [in Germany] are now owned and run by organisations owned by the regional and municipal public authorities. Municipal organisations – ‘Stadtwerke’ – supply half of all the electricity in Germany to households. Stadtwerke have also developed a greater role in generation of electricity, mainly in order to develop renewable energy much faster than the private sector…”[107]

Part of the UK answer could be to separate discussions about the High Voltage Transmission grid (which National Grid and central government have an enduring responsibility for) from those about regional Distribution Networks and more dynamic local grids.

Tentatively, some of this is reflected in the proposed change of Distribution Network Operators (DNOs) to Distribution Systems Operators (DSOs). The big caveat is that the proposed changes do not include rights – currently denied to DNOs – to discriminate in favour of clean (and local), or to any duty to reduce annual grid-carbon content and overall energy consumption.

These rights/duties become essential if Britain is to move rapidly towards a low-carbon economy and catch up with changes taking place elsewhere. Rapid advances in communications technologies are making it possible for ‘micro-grids’ – serving much smaller areas – to transform grid operation, energy security and system financing. Examples of doing so now run well beyond the boundaries of the German village of Wilpoldsried.

6.2 Micro-Grids: where ‘smart’ meets ‘local’.

Internationally, the biggest changes in grid and energy thinking are being found in partnerships that don’t include big energy generators. They revolve more around localities and smart technology providers.

California’s ‘MASH’ programme[108] – ‘Multi-family Affordable Solar Housing’ – offers community-scale scheme ‘virtual’ net metering, allowing collectively generated solar power to be shared equally between tenants in the whole scheme. By July 2013, 6,265 social tenancies were benefitting from schemes delivering almost 100% of their electricity – and which power common/lighting services – before putting surpluses into the grid.

Not to be outdone, the Brooklyn district of New York set up its own TransActive Grid, within which

“Instead of being locked in to buying (and/or selling) electricity through a large utility company, TransActive Grid (TAG) will allow for greater choice for consumers, and can help individuals become local energy providers by selling their excess rooftop solar electricity production to other local residents or businesses.”[109]

The micro-grid planned for Brooklyn is being developed as a partnership between LO3 Energy and Siemens Digital Grid in the US. For the first time, a micro-grid control solution from Siemens is being combined with the peer-to-peer trading platform from LO3 Energy, known as the TransActive Grid.

“This solution will enable ‘blockchain’-based, local energy trading between producers and consumers in Brooklyn’s Boerum Hill, Park Slope, and Gowanus neighborhoods as well as balance out local production and consumption.

Blockchain technology is an innovative method of storing and validating data that permits direct transactions between energy producers and consumers. Transactions are trackable and tamper-proof on distributed systems without the need for centralised monitoring. Thanks to a cryptographic process and distributed storage, the possibility of manipulation is virtually eliminated. In addition, authentication processes guarantee the confidentiality of user data.

The combination of a microgrid control solution and blockchain technology will make it possible for a provider of photovoltaic systems on the roofs of buildings in Brooklyn to feed its excess electricity back into the existing local grid and receive payments from the purchasers.”[110]

In an effort to break into the Australian energy market, the Germany battery company ‘Sonnen’ is even offering free electricity to customers who join their virtual grid.

“The deal, called ‘Sonnen flat’, offers free power to households using the company’s integrated solar and storage system, including for any electricity drawn from the grid when the sun goes down and stored energy is used up.

In return, Sonnen has access to its customers’ installed battery storage capacity to use as a sort of virtual power plant, to provide grid balancing services to network operators – most of the time, without any discernible impact at the customer’s end.

…you buy a Sonnen battery to go with your solar and don’t pay for electricity any more.”[111]

Similar micro or mini-grids are also emerging in the emerging economies of Bangladesh, Pakistan, the Yemen and Peru[112], along with island nations including the Dominican Republic, Samoa, Fiji and Indonesia[113].

Within Europe, September 2016 saw the village of Eeklo (in Flanders, Belgium) hosting the first gathering of areas involved the EU’s own ‘Nobel Grid’ Project.[114] Funded as part of the Horizon 2020 Programme, this involves partners in 5 pilot areas, developing their own dynamic local energy grids.

Eeklo’s ‘Smart Grid’ revolves around Ecopower, a co-operative that is both a renewable energy producer and retailer. Ecopower has nearly 50,000 co-operative members and more than 40,000 customers, consuming 98GWh annually. The village already has eight wind turbines, a solar system and cogeneration based on biomass.

Other areas piloting schemes within the ‘Nobel Grid’ programme include the Alginet co-operative (Spain), the public DSO in Terni (Italy) and the Meltemi eco-village (Greece). For the UK, there is some comfort in the programme’s inclusion of the Carbon Co-op’s micro-grid project in Manchester.[115]

Britain’s initiatives are, however, not limited to Manchester, Wadebridge’s ‘Sunshine Tariff’ and Bethesda’s ‘Energy Local’. Low Carbon London will offer a time-of-use tariff linked to electricity from wind turbines. ACCESS (in Scotland) offers a tariff linked to hydro.

Oxford’sERIC’ project has installed PV on over 100 homes, with back-up from a 40kW and a 60kW solar array – promoting localised self-consumption and reduced grid impact.

Oxfordshire’s Low Carbon Hub also launched their ‘People’s Power Station’; aiming to turn the County into a series of interconnected micro-grids, beginning with a mapping of all the renewable energy projects across the County.

Their opening, interactive map has

“… plugged in our own Low Carbon Hub projects and other community-owned renewables projects in Oxfordshire, as well as Oxford City Council’s solar PV projects.”[116]

Each of these stands as a sub-set of the evolving Smart Towns and Smart Cities movement; expanding, rather than subtracting from, visions of a quite different energy future.

6.3 Energy Democracy

The problem is that, in every case, Britain’s best local initiatives exist almost in defiance of the national energy framework. As Nottingham’s Robin Hood Energy discovered, local energy companies are anything but welcome entrants into the UK energy market.

New entrants to the UK market have to navigate their way through over 10,000 pages of Grid Balancing Codes. These codes have been written by the Big 6, take years to alter, and can be amended only by a panel made up of them. As 10:10 observed

“To enter the UK supply market, one must first escape the bewildering thicket of network codes and agreements that comprise over ten thousand pages of obscure jargon. This alphabet soup can only be deciphered by career specialists employed by the giant utilities and grid operators party to the regulations. Changes to the codes typically take years to process and are decided on by opaque panels of industry technocrats. You and I cannot propose changes, nor can Ofgem or the Department of Energy and Climate Change.”[117]

For a long time, this has been where Britain’s energy debate has been stuck; locked into ‘big ticket’ answers, trying to make yesterday’s markets work. Often the pretext for doing so was the claim that renewables just couldn’t be relied on: sheltering behind the truism that the sun doesn’t always shine and the wind doesn’t always blow.

But rivers and tides do. And heat can be drawn from recycled and renewable sources. And vehicles can be powered in non-polluting ways. And energy can be saved more cheaply than new energy generated. And smart technologies can weave these together in ways that no previous generation could access.

At every level, there will still be balancing problems to resolve. But that’s what smart engineers are really good at. And the biggest game-changer of all could come from the breakthroughs they have been making in how to store, share and transform energy.

7. Energy storage

Once the Achilles Heel of the clean-energy movement, energy storage has now become the most dynamic piece in the transformation jigsaw.

“Led by price declines in lithium ion (li-ion) batteries, system prices have fallen significantly over the last few years, according to the Grid-Connected Energy Storage Report from the IHS Energy Storage Intelligence Service. Average li-ion battery prices fell 53 percent, between 2012 and 2015, and by 2019 they are forecast to again decline by half again.”[118]

Developments in the energy storage sector could bring savings to British consumers, secure energy supply for a generation and meet carbon reduction targets. Moreover,

“In 2020, America’s energy storage market will likely surpass 1.6 gigawatts – making it 28 times bigger than it was in 2015. The U.S. market in 2020 will be defined not just by higher volumes, but by diversity in project types. While large storage projects on the utility’s side of the meter currently dominate deployments, smaller batteries in homes and businesses on the customer’s side of the meter will become the biggest segment in terms of capacity in the next four years.”[119]

It is the scale of this deployment that is most breathtaking.

“Three massive battery storage plants—built by Tesla, AES Corp., and Altagas Ltd.—are all officially going live in southern California at about the same time. Any one of these projects would have been the largest battery storage facility ever built. Combined, they amount to 15 percent of the battery storage installed planet-wide last year.”[120]

Even the nature of batteries themselves is in a state of flux. Researchers in Harvard University have developed a new flow battery that stores energy in organic molecules dissolved in neutral pH water. This new chemistry allows for a non-toxic, non-corrosive battery with an exceptionally long lifetime and offers the potential to significantly decrease the costs of production.[121]

And, in a whistle-stop review of some of the most exciting battery storage research nearing deployment stages, Daily Telegraph columnist Ambrose Evans-Pritchard observed that

“Cutting-edge research into cheap and clean forms of electricity storage is moving so fast that we may never again need to build 20th Century power plants in this country, let alone a nuclear white elephant such as Hinkley Point…

Once storage costs approach $100 per kilowatt hour, there ceases to be much point in building costly ‘baseload’ power plants such as Hinkley Point. Nuclear reactors cannot be switched on and off as need demands – unlike gas plants. They are useless as a back-up for the decentralised grid of the future, when wind, solar, hydro, and other renewables will dominate the power supply.”[122]

Other studies, specific to the UK, suggest that energy storage could bring equally profound changes, both to democratic engagement in the energy sector, and to saving money,

“Energy storage could save £2.4 billion a year system wide by 2030; if regulatory hurdles are overcome this could rise to £7 billion a year.”[123]

“…If 50% of this [£2.4bn] saving was simply passed on to domestic customers it could reduce the average electricity bill per household by c. £50 per year.”[124]

‘Behind the meter’ storage at a household level, offers even more intriguing possibilities. One project, monitoring energy consumption in a 4 bedroom, ‘solar-plus-storage’ house in the North of England, has delivered huge savings (even in less-than-Mediterranean conditions).

The MyGridGB house has been delivering almost 40% of its own electricity from solar and storage, even before it gets anywhere close to summer months.

It is at this point that bigger issues emerge.

The UK energy market is laced with market and regulatory barriers to the savings energy storage might bring. Not least of the absurdities is that electricity storage is double taxed; first as an ‘end user’, when electricity is stored, and again when it is actually used. Ofgem has been in no hurry to resolve this, focussing instead on a desire to tax households that are using ‘behind the meter’ storage as a way of reducing their energy bills.

A large part of the coming debate about energy storage will revolve around who are to be its principal beneficiaries.

In the Carbon Trust study, its ‘£50 savings’ figure carried no guarantee that savings would be passed on to consumers. The emphasis was more on a refreshed business case for big energy providers. Nowhere did ‘Smart City’, ‘smart community’, or even household storage get a look in.

This absence can also be seen in National Grid’s £65 million programme of energy storage contracts, mainly awarded to large providers in August 2016.

“In the last week, National Grid awarded eight ‘enhanced frequency response’ contracts to storage providers to help regulate the system.

The largest contract awarded was to RES to provide 35 MW at £11.93 £/MW of EFR/h. Contracts were also awarded to EDF Energy Renewables, Vattenfall, Low Carbon, Eon UK, Element Power and Belectric – a total capacity of 201 MW and contract value of £65.95 million.”[125]

Energy storage is already a huge political battleground. Much will depend on whether it is used to support incumbent generators or to promote more decentralised (and democratic) energy systems.

The Carbon Trust study overlooked the more ambitious/democratic scenario, merely commenting that –

“National Grid scenarios do not currently consider storage beyond a limited build of pumped hydro. The annual saving of up to c.£2.4 billion per year is based on additional storage that is retrospectively, rather than incrementally, added to the 2030 generation portfolio and network infrastructure as described by the National Grid’s ‘Gone Green’ scenario.”[126]

Without being unkind – as the USA, Germany, China, Japan, and all points beyond demonstrate – a myriad of opportunities exist outside the realms of pumped-hydro. Three London Boroughs

“…have begun testing the potential of more than 40 solar-plus-storage installations to reduce the bills of households in fuel poverty.

The 24/7 Solar project, which is part funded by National Energy Action, is being led by Camden Council working in partnership with Islington and Waltham Forest councils. The scheme is testing the potential benefits of storing daytime electricity generated by solar PV to supplement the householder’s evening use.”[127]

SoLa Bristol (in partnership with Western Power) is already piloting decentralised energy plus storage.[128]/[129] Project SENSIBLE[130] in the Meadows, Nottingham, is trialling storage in homes with and without PV systems, looking at its impact on bills and grid demand, and Stirling (Scotland) has just installed its 1,500th solar roof on the latest of 50 new bungalows with battery storage built in.[131]

Thousands of individual houses and businesses are doing the same. It is where some of the most exciting cultural changes in energy thinking may yet be found; changes running (inclusively) from the household to the State.

Whether he turns out to have the best product in the market doesn’t matter. Elon Musk’s ‘Powerwall’ battery storage system has been a game-changer in the politics of energy storage. Musk’s marketing deal with Walmart turned electricity storage from a ‘niche’ market into a mass one. Within months, Musk discovered he was not alone.

Germany, facing problems of an over-supply of wind energy in the North, has been pursuing storage solutions (especially for its ‘solar’ South) in the most structured way –

“The Renewable Energy Storage Subsidy Program of the KfW Development Bank arranges low-interest federal loans and payback assistance covering up to 25% of the required investment outlays.

KfW has determined that 41% of Germany’s new solar installations in 2015 included battery storage, compared with less than 14% the previous year. This level of adoption likely constitutes a world record for dedicated solar storage.”[132]

Last year, Germany installed 15,000 clean energy storage systems and plans to install 35,000 this year. Italy already has 75MW of installed battery storage. While, in the UK, Local Energy Scotland have been installing hundreds of ‘heat batteries’ (in combination with PV) as part of their Eastheat trial scheme, combatting fuel poverty in social housing.[133]

Scotland is additionally looking to become a world leader in new technologies to store excess electricity from wind farms; creating thousands of jobs and looking to store surpluses, not just as electricity but in batteries that can deliver both heat and hot water on demand.[134]

The real dynamics, however, are being driven from elsewhere. In late 2016, Chinese battery giant BYD announced it would launch

“… a residential battery system for the UK market and host a series of training events for installers later this month. The Mini ES battery has been designed with a 20-year life expectancy through a built-in battery management system, and the product will be initially launched in 3kW and 6kW sizes.

The product launch builds on BYD’s presence in the UK, which was dealt a significant boost late last year when it was awarded a £2 billion contract to supply its battery technology for London’s future fleet of electric buses. The contract was one of many signed during Chinese president Xi Jinping’s visit to the UK.”[135]

In the USA, over 220MW of energy storage was installed in 2015 alone; an astonishing annual growth rate of 243% (with an astonishing growth rate of 403% in home energy storage).[136]

Annual U.S. Energy Storage Deployments, 2012-2015

Even batteries themselves are being reinvented. Researchers from Harvard University report that they have tested a ‘flow battery’ that uses cheap and abundant chemical elements, can be operated with plastic components, will not catch fire, and can operate at 99% efficiency.The battery they have developed uses common food additives to enable abundant solar and wind power to be stored cheaply and safely in homes and offices.[137]

In a race for market share, international companies are ‘teaming up’ to offer the ease of setup (for installers) and cloud connectivity (for consumers); with current partnerships including Tesla and SolarCity, Sungevity and Sonnenbatterie, SunPower and Sunverge, Sunrun and Outback Power, and Enphase and Eliiy.

This rate of change is forcing critics of the clean energy revolution to revise their thinking.

The traditional criticism of renewables was not only their intermittency, but the ‘hidden costs’ – of back-up and balancing – that came with it. Storage is changing the terms of this debate.

A report by Aurora Energy Research turned the ‘hidden costs’ argument on its head.[138]

Aurora took the view that, if Britain had 40GW of installed solar capacity on the Grid by 2030 this would (conventionally) bring ‘hidden costs’ with it of £6.80/MWh.

What they did next, though, was to model this cost alongside a presumption of 8GW of installed storage by the same date. This transformed the economic case

A serious UK investment programme of energy storage would turn a net cost of £6.80/MWh into a net saving of £3.70/MWh.

Such calculations make a mockery of UK government subsidies to new nuclear, to a 75% write-off of capital costs for Fracking and to on-going subsidies to North Sea oil.

Britain needs to look at the more integrated programmes already being deployed elsewhere. In addition to Germany, Italy and the USA,

Japan, offers a 2/3 cost subsidy for all homes/companies installing solar-plus-storage[139] and

in Puerto Rico, all new renewable energy projects must include a 30% ‘energy storage’ element.

8. Britain’s ‘sting in the tail’/ the Empire Strikes Back

In this moment of huge excitement, the UK has chosen to pursue policies designed more to protect the power of existing generators than promote systems change.

It began with a succession of Treasury cuts to Feed-in-Tariff payments for clean energy generation. Then came de-recognition of community energy Co-ops and the removal of tax advantages available to them. Carbon taxation (the Climate Change Levy) was extended to include clean energy and followed by proposals for a 6-fold (or 8-fold) increase in ‘business rate’ charges on companies that installed their own solar roofs.

Businesses and commercial leaders, who were the pioneers of clean-energy generation, found themselves penalised for doing so … while subsidies for fossil fuels continued unabated.

National Grid may recognise that clean, decentralised generation – and the rapid growth of energy storage – is changing the world in which we live[140] but this has not triggered a shift in UK policy. If anything, it provoked the backlash.

Ofgem – more consistently the voice of power stations rather than the public – treated the changes as a threat rather than an invitation; never placing climate change, fuel-poverty or clean energy high on its agenda.

Behind a veneer of short-term, ‘consumer interests’, Ofgem’s role has been to secure the financial viability of existing generators. It’s approach to the clean-energy revolution has focussed more on how this might be taxed and limited; protecting existing generators who would otherwise be left with ‘stranded assets’.

“Energy regulator Ofgem is worried that people who can afford to install solar panels and generate their own power for much of the day may end up not paying their fair share of the costs of the UK’s electricity pylons and cables…

“Dermot Nolan, [Ofgem chief executive, warned that] the question of how to charge for networks in an equitable way was a “huge challenge” facing the UK energy system in coming years.

“Currently, the cost of maintaining and upgrading the networks is factored into the prices energy suppliers charge for electricity, accounting for about £140 a year on a typical household bill. Households that install their own panels will need to buy less electricity, so will avoid paying as much toward the costs of the network.

“If people all go off grid, the phrase has sometimes been used that there will be a ‘death spiral’; that you’ll end up with some bizarre example that there’s only one person left paying the entire cost of the network. I think those examples are very extreme, but I still think there’s a huge challenge,” he said.”[141]

In simple terms, what Ofgem wants is to tax households, schools and businesses that have solar roofs for the extent that they don’t draw on the high voltage Transmission grid. This is like fining drivers who obey speed limits because they don’t contribute to speeding fines and maintaining the network of speed cameras.

Other countries laugh at Britain, pointing out that if you want to go ‘clean’, tax the problem not the solution.

Ofgem tacitly recognise this. The official notice of their concern about embedded generation explained that the growth of household and community ‘clean’ electricity was distorting the market by:

“… leading to an inefficient mix of generation by encouraging investment in smaller distribution connected generation (which can take advantage of the embedded benefits revenue stream) over potentially more efficient larger transmission connected generators (TG) or over-100MW EG (which do not have that revenue stream);

“… leading to TG exiting because it cannot compete;

“… distorting dispatch by dampening prices at peak times when EG dispatch out of merit15 to generate in the triad periods; and

“… distorting the outcome of the capacity market by holding down prices since smaller EG can bid in at significantly lower prices than larger EG and TG;”[142]

Skip past the Ofgem language and abbreviations. The message is a simple one: Ofgem is desperate to rig the market (again) in favour of large scale (non-renewable) generators.

Even smaller generators are now objecting to what they regard as ‘Mafia-style’ rigging of the market reform process.

“The panel of industry leaders responsible for reviewing modifications to network charging arrangements in the UK has been accused of skewing reforms to favour established players in the energy system.

UK Power Reserve chief executive Tim Emrich told Utility Week the make-up of the Connection and Use of System Code (CUSC) panel is “mafia-like”.

“I do not believe that employees of National Grid and big utilities are in a position to act impartially in the context of the CUSC panel,” he insisted.

“As anyone who has worked in both a big and a small company will know, there are profound differences in culture, loyalties and thinking. It would be difficult for panel members not to reflect their big company thinking and the votes show this.”…

“The CUSC panel is currently made up of an independent chair, a secretary and appointed representatives from Ofgem, National Grid and Citizens Advice, as well as seven members representing energy system users who are elected every two years.

Out of the seven elected members, four are employed by big six energy companies – EDF Energy, Eon, SSE and Scottish Power. The remaining three work for Drax, First Hydro Company and the trade association Energy UK.[143]

The existential crisis is a simple one: old energy is being being undercut by new ‘systems’ – particularly of storage and sharing – that are set to change the whole concept of future grids.

Much of how we think about energy will change from being a market to a service; a change that will ill-suit those obsessed with selling consumption.

Nothing is going to avert the death spiral of today’s energy system. What Ofgem fails to grasp is that grid balancing and maintenance costs must be put on polluting, rather than non-polluting, energy sources. Families with solar roofs are not the problem: dirty power sources are.

Ultimately, clean energy will supersede dirty, and ‘dirty’ will be left with stranded assets and clean-up costs. None of this will mean “…there’s only one person left paying the entire cost of the network”. It just means that the role of networks (and the nature of the Grid) must itself be re-defined.

But the race for control of this re-definition has already started.

Stung by earlier criticism, Ofgem produced a ‘conversation’ paper on Local Energy as the third of its Future Insights programme. Though it usefully summarises varying approaches to what this might mean, Ofgem steers away from the more profound market changes. The most interesting part of its ‘Insights’ turn out to be the omissions.

Nowhere does Ofgem make the case made for markets that sell ‘less’ consumption (ie energy saving) in preference to more.

It offers no exploration of energy systems that live within contracting carbon budgets.

Nowhere does Ofgem recognise that clean energy must be taken before dirty.

Nowhere does it explore the role network operators might play as co-investors in energy saving and ‘smart’ balancing systems, and

Ofgem studiously avoids any recognition that tomorrow’s ‘security’ will see local energy being stored and shared for cross-sectoral purposes (transport, heat, air quality, environment, etc).

Ofgem’s Insights turn out to focus more on the limitations of local energy rather than its transformational possibilities.

“Some consumers desire greater control over their energy affairs and more independence from familiar utility arrangements. Reductions in technology costs may make this more realistic, even if more expensive than traditional solutions. Greater control and independence could serve the interests of those consumers.

Historically, ‘off-grid’ micro-grids have emerged as a means of providing more reliable energy to isolated communities which could not feasibly connect to the national grid (such as some Scottish isles and particularly remote mainland locations). However, if consumers place increasing value on independence we may see consumers choosing off-grid solutions even where a national grid connection is a feasible alternative. Under this scenario, households on off-grid micro-grids may not be afforded some of the other benefits associated with a connection to the national grid, such as the ability to choose a different supplier if they are dissatisfied. Where this is an informed choice, that may be acceptable. We should however recognise that, for example, subsequent occupiers of the same property may inherit the choice.

Another implication may be that they avoid contributing to the costs of national energy policies and systems.”[144]

This is a world away from the villagers of Wilpoldsreid or the citizens of San Diego. Ofgem’s Insight only turns out to be a view of the world, as seen by big energy.

Charging households and businesses that have ’embedded generation’ ie solar roofs[145] becomes a mechanism through which existing major power producers secure a re-structuring that will keep them in control.[146]

9. Silver linings

Clean, decentralised energy does, however, have its champions. One collaboration – between Distribution Network Operators and renewable energy advocates ‘RegenSW’ – organised regional ‘community’ consultations around local energy systems. Their focus was around the principles upon which more sustainable and interactive energy networks might be built;[147] a counterweight to everything the government, big nearby operators and Ofgem are now pushing for.

If one paper crystallised the more democratic, alternative approach Britain might take, you would be hard pressed to improve on the Centre for Sustainable Energy response to Ofgem and government ‘consultations’.[148]

Ignoring the straitjacket of government-framed questions, the CSE has argued for changes that would make the public partners, not just consumers, in tomorrow’s energy system

“…we need to establish the meaningful public consent of people as consumers, citizens and members of many communities (from neighbourhoods to workplaces to networks of shared interests) because the shift to a low carbon electricity system ultimately requires everyone:

• to alter their individual and collective energy using behaviours and habits

• to invest, purchase and spend differently in relation to energy and energy using equipment

• to give consent for changes in the buildings and landscapes where they live and work and in the markets in which they participate and in the services they receive

• to pay for many aspects of this transition through their bills (mainly) and taxes.”[149]

In effect, the CSE make the case for something that looks more like a public service than a private market.

9.1. Pushing the boundaries

Nothing will stop technology from transforming energy in the same way it has done in telecommunications. Tomorrows energy systems will have find a different centre of gravity.

Maintenance of the high voltage network (and interconnectors that support it) will probably revert to National governments (and National Grid). More sophisticated balancing mechanisms will become the responsibility of Distribution networks and (within them) local supply companies. Critical to everything, however, is the acceleration of ‘Smart’; a process with little connection to the current UK ‘smart meter’ rollout.

Micro-grids – whether in Berlin, Brooklyn and Flanders or Bristol, Bridgend and Falkirk – will depend on ‘real time’ information flows, not just local supply. Britain’s current smart-meter roll-out programme does not begin to address this. A £10bn+ rip-off, it is principally a means of delivering remote-metering for big generators, not smart balancing for local communities.

Smart-grids, however, are now critical to systems change. These are the access routes to a much wider concept of energy thinking. Scotland’s heat networks, Ecotricity’s ‘grass to gas’, Leeds’ race into the hydrogen economy, and network operations that sell ‘energy and carbon saving’, all depend heavily on more interactive grids. Such grids will then provide pathways into improvements in air quality and housing, heating and transport, food and flood prevention. This is the economics of low carbon living.

Already, conversations about energy storage, transformation and sharing are well beyond the ‘keeping-the-lights-on/grid-modulating’ stage. The US Energy Department has invested more than $20 million in 10 projects to advance fuel-cell and hydrogen technologies. In part, this is to enable early adoption of fuel-cell applications such as light-duty, fuel-cell electric vehicles (FCEVs).[150]

Norway will ban the production of fossil-fuel vehicles by 2025. Already, 37% of its new car sales are of electric vehicles. In another 8 years they expect it to be 100%.[151]In the Netherlands – the home of Shell –

“The Dutch government has presented a long-term energy plan that stipulates that no new cars with combustion engines may be sold from 2035 on.”[152]

and the German Bundesrat

“… has passed a resolution asking the European Commission ‘to look into existing tax regulations of member states in regard to how useful they are to support emission free mobility – so that starting from 2030 at the latest, only emission free cars will be allowed in the Union’.”[153]

Denmark will establish an energy and transport system which relies on 100% renewable energy sources by 2050. (As an intermediate step, it has set a target of delivering an electricity and heat sector based on 100% renewables by 2035).

Sweden is turning all biodegradable waste into bio-fuel, in order to power the entirety of its public transport fleet vehicles.

In the UK, Bristol followed Sweden, with an imaginatively designed bio-bus; more affectionately known locally as the ‘poo’ bus, and running on fuel derived from its sewage waste.

Renewable electricity surpluses are already crossing into a raft of other energy spheres; electricity-to-gas, electricity-to-fuel, hydrogen fuel-cells, electric vehicle charging networks and sustainable heat.

Smart energy networks are what will bind them together.

9.2 Leaders or laggards?

In or out of the EU, Britain looks a long way off the pace of European plans for integrated urban infrastructures. Within them, energy storage will become an everyday part of grid systems that combine decentralised generation and distribution, decarbonisation, demand reduction … and ‘Smart’ everything.

For a more coherent approach, the UK needs to

promote the rapid growth of decentralised ‘smart grids’

remove the double taxation currently levied on energy storage,

copy international initiatives offering soft finance for combined clean-generation and energy storage,

enable communities and localities to store and share their own clean energy, and

develop the skills infrastructure necessary to make the UK not only an installer of energy storage systems, but an innovator in the international ‘smart grids’ sector.

Energy storage and interactive grids will be integral parts of the transformation that supports the growth of Smart Towns, Smart Cities and Smart Regions. It will underpin the development of localities that become their own ‘virtual’ power stations; a journey cities like Munich began almost 20 years ago.[154] Britain needs to join the same race.

9.3. Back to the future

The idea of towns and cities turning themselves into ‘virtual’ power stations – using state of the art technologies to store, share, generate, distribute and save their own energy – may seem daunting. It certainly looks a long way from the cumbersome framework that currently constrains UK energy thinking.

It is easy to forget that Britain has been here before. In 1817, Britain’s first public energy company was set up (by the Police Commissioners) in Manchester – installing a gas lamp above the entrance to the police station at the corner of Water St. Within 10 years this had become the Manchester Municipal Gas and Water Company. For the next 70 years municipal energy transformed the character of Britain’s towns and cities. Most of Britain’s parks, libraries, museums and swimming baths came, not from central government, but from the profits of their municipal utilities.

These companies were set up to reduce the cost of street lighting, add to public security and to supplement local authority incomes from the sale of gas to industrial and commercial customers[155]. It was driven by

“… the desire of local authorities to get access to gas company profits in order to relieve local taxes and finance urban improvements.”[156]

The whole process was financed through municipal bonds; people putting small or large savings into long-term investments which offered modest returns but huge ‘quality of life’ gains. After the catastrophic crash of casino economics, it is a model Britain might revisit.

By the time the industry was nationalised in 1948 almost 50% of local authority income came from the supply of municipal utility services – gas, water and electricity.

Even now, this might be a better starting point for today’s challenge to deliver energy policies that can live within much tougher ecological limits.

The self-interest of localities today must begin by including the fuel-poor rather than ignoring them; re-directing public subsidies from the polluting to the non-polluting, using integrated energy-saving and Smart Energy programmes,[157] [158] and re-structurin energy markets in favour of ‘clean’, ‘local’ and ‘less’.

To make this possible, Britain needs to –

Make the 2030 ‘grid carbon’ target – 50gCO2/kWh – a binding obligation across the energy sector.

Turn DNO’s into Distribution System Operators (DSOs); with a right to discriminate in favour of clean energy, co-invest in energy saving, sharing and storing, and a duty to deliver grid-carbon reductions

Give localities the right to set up local (not-for-profit) energy companies, supplying local markets, at local prices and within local carbon budgets

Restructure a Green/Infrastructure Investment Bank (along German lines) to provide low-cost finance for energy efficiency, climate repair programmes and the growth of Smart Towns/Cities

Give localities intervention powers to set higher energy efficiency standards for existing buildings

Require the Grid to take clean energy before dirty (a Merit Order system),

Make ‘energy-plus’ the new standard for all new housing construction

‘Socialise’ grid connection charges of community-owned renewable energy,

Adopt a ‘polluter pays’ approach to grid-balancing charges, and

Restructure UK energy market subsidies in favour of renewables; making support time-limited (with degression rates), and with each fuel/technology carrying its own disposal/clean-up costs.

9.4. A ’50-50-50′ plan

In reality, we do not have a lot of time to play with. Politics cannot negotiate with climate physics, and the scope for working with (or around) it narrows by the day.

Researchers at the London School of Economics warned that climate change could wreck the global economy; with up to 17% of the entire world’s assets (£1.8 trillion) wiped out by temperature rises over 2C.[159] Carbon Brief already warns that (on current emissions levels) Britain has just 4 years left of its carbon budget if we are to stay within the 1.5C global warming target range.

Avoiding climate crisis requires transformative change on a scale bigger than anything seen outside war-time. Some part of this journey will have to be in hope as much as expectation, but an element of this can be found elsewhere. Germany’s Energiewende programme led the way into the clean energy revolution, with their own mixture of successes and failures. The most interesting evaluation came as a description of it as a 50-50-50 process.

Local and national leaders expected that 50% of their pilot schemes would work (and continue) and 50% might fail (and be put to one side). The surprise came from the other 50% – the avalanche of innovations and ideas that the process itself threw up. Politicians of all persuasions recognise that it was the pace of innovation that has given Germany its biggest boost.

One look at the ‘Cleantech Innovate’ website[160] makes it clear that Britain is no less creative or innovative. What is missing are the ‘routes to market’ that Germany has been more rigorous in delivering. Radically changing today’s energy market framework is the key. If parliament cannot rise to this challenge, then the leadership must come from elsewhere. That means us.

Smart citizens … in towns, cities and communities; in universities and technology hubs; in business and commerce, in faith groups and village halls…can (and must) become the drivers of this Transformation Moment.

The key is not to get stuck in small details. These may be important but smart engineers and innovators are currently coming up with answers faster than we can come up with questions. We need to focus on the bigger picture. This probably comes down to 3 key elements

a right of local supply

a duty to reduce grid carbon levels to 50 gCO2/kWh by 2030, and

a commitment to annual reductions in UK energy consumption

Energy policies that are ‘clean’, ‘smart’, ‘democratic’ and ‘sustainable’ will then race into the transformation space.

At some point the ideas will make it into Westminster too. But Britain’s intellectual gridlock on energy policies will not be broken by parliament.

The transformation process will have to be driven from outside – by us – often in the strangest of coalitions. But a 10-year window of opportunity is probably all we really have. This means being as brave as we ever dreamed we might be … And doing it now.

Alan Simpson

April 2017

A Postscript

The lives of others

If any extra courage is needed, we might just want to draw it from the ‘ordinariness’ that drove Germany into its own Energiewende transformation programme.

In 1986, in the aftermath of the Chernobyl disaster, people in the small Black Forest town of Schönau asked their local energy company if they could have clean (non-nuclear) electricity. The energy company refused. So the community, led by a primary school teacher (Ursula Sladek) decided they had better do so themselves.

It took a decade of organising and campaigning for this citizen’s movement to take control of their local electricity grid away from the energy utility. They were to become a movement that inspired a nation. Today, Germany has over 1,000 community energy co-operatives, 90 co-ops that own their local grid, and 190 local authorities that do so.

Schönau’s original bid to buy the rights to their own grid was followed by a national fundraising appeal (a precursor to today’s crowd-funding initiatives). This, in turn, was followed by a share issue not dissimilar to the municipal bonds that underpinned Britain’s 19th century energy revolution.

German pension funds and commerce then joined in as investors, largely on the basis that the German government was forcing its energy market to open up.

Low risk, environmentally virtuous, investment in the Schönau company became a badge of honour. Then, Germany’s long history of decentralised governance facilitated a much wider citizen engagement that eventually became their Energiewende transformation.

Britain, is not without a large body of expert advice on how it might to do the same.[161] The problem is that, politically, the UK energy market has been designed to be anything but clean, open and democratic.

British law prohibits energy co-ops from selling (beneficially) into local markets in ways that are permitted in Germany. Thus (both the Treasury and Financial Conduct Authority have argued) Britain’s energy co-ops can’t be real co-ops. Germany had little truck with such nonsense, knowing it wasn’t co-ops that were the problem. The problem was the market. So this was what they changed.

What Germans also learned was that single, clean-energy technologies were the start, not the end of the process. Joined-up technology solutions began to form the bedrock of ‘Smart’ (integrated) energy systems. They, in turn, needed joined-up social partnerships. Local authorities had to learn to lose (or share) power in order to gain it. At some point, Schönau seamlessly melded into Wilpoldsreid, into Munich, into Hamburg. It is an ‘energy democracy‘ story, now beautifully documented by Craig Morris and Arne Jungjohann.[162]

What motivated people in Schönau was the desire to be the answer to a problem, rather than the problem itself. German energy co-ops are full of parents, grandparents, nurses, farmers and innovators; a grand coalition of voices hungry for change.

Such voices have moved ‘community ownership’ and interdependency into a different space; making shared ownership an integral part of common security. Transformation Moment invites Britain to do the same.

Tomorrow’s energy security will be found in adaptability and accountability, in interdependency and inter-connectedness. In such a world, we will also discover how to build an economics that delivers ‘more’ but consumes ‘less’.

This transformation is not just about energy. It is about how, publicly, we see (and nourish) the world we share. It is the moment when Britain’s towns and cities really could put themselves at the heart of the new Global Covenant; leading the way in how we must live more lightly on an increasingly fragile planet.

Everything that follows will be shaped by whether we rise to this challenge.

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