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Distributed energy: from supply to demand

By Dave Elliott

Energy networks and distributed energy resources in Great Britain”

The context for this IGov paper from Matthew Lockwood at Exeter University, UK, is the desirability of a fundamental shift in the underlying design of the energy system from the supply side to the demand side. It starts by quoting the words of Professor Strbac ‘The whole culture and philosophy of the system is based on a predict-and-provide mentality’. According to the report, arrangements for gas and electricity, from production or generation, through to networks and retailing, have been designed to provide secure supply for whatever consumers demand. It says “this system has been remarkably successful in its own terms, but is becoming increasingly outdated and problematic, for a number of reasons. As energy service demand has grown, an infrastructure geared simply to meeting, as opposed to influencing, that demand has also grown. The resulting energy system we have is now very large and costly. As we move to decarbonise energy production, it is becoming clearer that this will be far easier and less costly the smaller is energy demand”. It adds “this is true not only of overall energy demand, but also of peak demand, which tends to occur at particular times of day and year (i.e. in the winter, in early evening). The energy system is effectively sized to meet this demand, so being able to make demand more flexible, to reduce peaks, will become increasingly important as decarbonisation proceeds.”

Given that, as the paper points out, energy efficiency and demand side flexibility are increasingly included with energy storage and generation/production of energy by consumers in a wider concept of ‘distributed energy resources’”, a broad approach has to be adopted looking at the complete system and the way it might change in terms of new networking systems and demand management strategies. In particular, this paper examines the rules and incentives governing UK electricity, gas and heat networks and at the operational codes and system design issues from the perspective of how far they facilitate or prevent a shift towards a system using distributed energy resources more effectively.

It’s a complex web of institutions, rules and regulatory frameworks. But, standing back from the specifics, IGov concludes, none too positively, that the British system of energy governance has been dominated by principles of economic liberalisation and delegation since the 1980s. These arrangements are intended to increase the credibility of policy and reduce costs. However, they have also delegated essentially political decisions to actors who are not necessarily best placed to resolve them. As a result, government and the regulator have increasingly intervened both in markets and in processes relating to networks, although such intervention appears ad hoc rather than strategic, and it is not clear that state actors always have the capacity and information to intervene to greatest effect.” The simple message is that we have to do better. And not just at prediction.

IGov at Exeter University clearly sees distributed options as a better bet, stressing the benefits of focusing more on the demand side, as part of a radical new approach to energy provision and energy policy, replacing the old centralised version: and

Similar points on the need for more emphasis on the demand side have been made by the Lancaster University-based Demand Centre. In its submission to the House of Lords review of “UK energy resilience”, it argued that a more resilient electricity system could be achieved in part “through the pursuit of changes to patterns of energy demand rather than focusing only on the supply side”, adding that “these changes may, indeed, prove cheaper or have wider social benefits than the more commonly-considered alternatives”.

The Institute for Public Policy Research has adopted a somewhat similar approach, although it puts more stress on small-scale renewable energy supply technologies, like PV, and new “smart” technologies, as part of a more efficient energy system. But like IGov, its report “A new approach to energy markets: why new disruptive technologies change everything”, basicallysays the government is wrong to prop up an outdated model of large, centralised power stations:

The implications of these various studies are thus that large-scale centralized supply side thinking, epitomised by the current UK nuclear programme, ought to be rethought. However, while there is some interest in distributed power, the official line is still that large-scale new nuclear is a key component of the future low-carbon energy system, and that, as the ETI put it in evidence to the Lords’ “resilience” review: “without investment in a major new nuclear build programme, the cost and difficulty of meeting the UK climate change targets will rise very significantly”

Then again there are other variants, including that promoted by former environment secretary Owen Paterson, who thinks large nuclear is not viable on the scale needed, and opts instead for “mini-nukes”, along with Combined Heat and Power/District Heating. Presumably the CHP would be shale-gas-fired (he is a fan of fracking), but nuclear CHP has been promoted as an option, though it assumes that people will be happy to have nuclear plants in or near cities. He also backed demand-side management. Which puts him in line, on that at least, with the sort of thinking outlined above. However, Paterson was also very disparaging about renewables, large and small, which he portrayed as mostly expensive and ineffectual. For example, on offshore wind he said “there is a reason we are the world leader in this technology – no other country is quite so foolish as to plough so much public money into it”. Overall, the current green programme would, he said, cost £1.3 trillion by 2050.

Would his alternative package be any cheaper? And will it be taken seriously? The Times welcomed it as timely and pragmatic: “His views are undoubtedly in tune with the mood of the Tory backbenches and more importantly a public that resents paying high and rising electricity bills”.

And an amusing, if rather wild, speculation was floated by Euan Mearns on the Energy Matters web site. After noting that Owen Paterson “has been well advised” by various contrarians (he name checks Matt Ridley, John Constable and Benny Peiser) he suggests, as “a speculative fantasy” that “Owen Paterson was sacked by David Cameron to provide space for him to go off and formulate a sensible energy policy for the Tories in the lead up to next May’s general election. That Ed Davey is sacked in the New Year to be replaced by Mr Paterson and then the gloves come off and the general election takes centre stage.”

We live in interesting times!

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