This week saw the launch of a £19 million 3-year local energy market pilot in Cornwall. The programme, developed by Centrica and co-financed by the European Regional Development Fund, comprises four elements:

    • A virtual flexibility marketplace;
    • A DSR platform for businesses;
    • Energy storage; and
    • Micro CHP and/or batteries to be installed in up to 100 homes.

According to Jorge Pikunic, Managing Director of Distributed Energy and Power at Centrica:

“Our ambition is to explore how battery storage, flexible demand and generation can reduce pressure on the UK’s electricity grid, avoid expensive network upgrades and support future decarbonisation.”

Centrica is partnering with Western Power Distribution, which is developing software that will allow constrained areas of the local network to be identified and enable them to buy flexible energy demand or generation from the Local Energy Market platform.

At the end of the trial, it is Centrica’s intention that they and other buyers will be able to buy energy and flexibility directly from the homes and businesses or via an aggregator. Local renewable generators will also have the opportunity to sell energy via the platform.

The trial will test a variety of technologies in both domestic and commercial settings to see how the platform will work in a wide range of circumstances. Centrica anticipates that homeowners would typically want the process to be as automated as possible, while businesses may require more control.

 

Local does not equal localism

The question of local energy networks as markets featured heavily in the IGov Energy Governance: New ideas, new institutions, new people conference this week. Creation of local energy systems has been identified by the energy policy team at Exeter University as one of the planks of the future energy model, which I described in a previous post. The logic for this extends from the emergence of an increasingly decentralised electricity system characterised by large amounts of intermittent generation, alongside the emergence of new technologies such as electricity storage and turndown DSR.

A recurrent theme in recent academic energy conferences has been how the UK can follow the example of the Energiewende in Germany in delivering the energy transition. This discussion has tended to focus on localism and community involvement, drawing on collective ownership of energy assets and local decision making.

There is rather less focus on the problems caused by localism for example the resistance to new transmission infrastructure that is needed to bring renewable output in the North of the country to the demand centres in the South, or that German energy policy in recent years has seen little impact on carbon emissions despite an extensive renewables build-out.

A number of delegates at the conference suggested that the UK energy transition needs to be driven from the community level, otherwise it’s unlikely to succeed, in other words, the notion of local energy markets in conflated with the concept of localism. This view ignores the cultural differences between the U.K. and Germany….while strong municipal structures and shared ownership are a common feature of the German socio-political landscape, that is not the case in the U.K. where government is highly centralised, and there is very little history of collective community based ownership.

Various delegates proposed local government as the appropriate vehicle for delivering community energy schemes, but this ignores the very low engagement the general population has with local government, as evidenced by the very low election turnouts at local level (typically 30-35%).

By and large, Brits do not appear to be very motivated by localism, and as long as bins are collected on time and neighbours are not causing a nuisance, most peoples' community engagement is minimal (excluding purely recreational engagement).
Aside on Localism in the UK
The 2011 Localism Act sought to increase local engagement, but the results have been mixed. Moves towards decentralisation seek to reduce the concentration of influence in London and narrow the “North-South divide”, however public acceptance of these moves has not always been demonstrated. In 2012, 9 of 11 cities that held referenda on whether to elect a mayor voted against their creation, including Manchester. Subsequently in 2014, the then Chancellor, George Osborne reached an agreement with regional leaders in Manchester that a city-wide mayor with powers similar to the London Mayor, would in fact be elected from 2017.

 

Designing local energy markets that work

This does not in itself mean that local energy markets are neither needed or useful in the U.K. context, but does perhaps suggest a common understanding of the concept is needed. As the energy system becomes increasingly decentralised, there are good arguments for the creation of local balancing zones, with Distribution System Operators carrying out a more dynamic role than the current Distribution Network Operator model.

This has been recognised by Ofgem which is promoting a transition from DNOs to DSOs. Ensuring that the emerging DSOs have the right tools to efficiently integrate all the components of the local market including local and domestic generation and storage, and DSR solutions, will be essential.

Organisation of local energy markets on this basis does not require local ownership models, or indeed higher than usual levels of community engagement. Most consumers are not, and do not wish to become, energy experts – they want an energy system that is reliable, low cost, and low effort.

Rather than trying to find new ways of engaging consumers to achieve significant behavioural change, a more productive approach might be to develop passive consumption management applications at the domestic level that will optimise the consumer’s electricity usage automatically based on data drawn from the system operator and the markets. This certainly seems to be the basis for Centrica’s pilot which assumes domestic consumers will continue to be passive.

Starting to build local energy models will create new options when considering the optimal pathways to decarbonisation of heat and transport, not least because this will allow different solutions to be adopted in different parts of the country where geography, population density, weather patterns and other factors may lend themselves to different outcomes. Assuming this model needs to include collective ownership, and/or relying on local communities to get the ball rolling, may well be a mistake.

 

 

 

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3 thoughts on “Creation of local energy markets

  1. “a more productive approach might be to develop passive consumption management applications at the domestic level that will optimise the consumer’s electricity usage automatically”

    In the absence of smart appliances/switches, it is difficult to see how the above can be achieved. I don’t think may domestic consumers would be enthralled by the prospect of the oven/TV/lights/etc being turned off by the DSO….

    I’d be very interested to hear more detail about how this approach might be effectively implemented. Clearly residential storage and remotely-automated micro-CHP can be of assistance but there is effectively zero market penetration of these technologies at present. Load shifting could be achieved by heat (hot water cylinders) and cold (freezers) storage overnight, but again the required technology and/or infrastructure is either limited or non-existent at present (e.g. many houses no longer have a hot water cylinder)

    As you correctly point out, most consumers are not energy experts and “want an energy system that is reliable, low cost, and low effort”. I’d add that they also want to feel in control; there is quite a degree of scepticism about smart meters (which really can achieve very little on their own) and concern about utilities using them to “interfere” with supply….

    It’s quite easy for me to identify a utopian market ideal in which I’d enthusiastically and actively engage, but then I’m a somewhat of an energy geek! Most of the rest of the population needs more of an economic stick and carrot incentive as well as education/enlightenment on the potential; we can see that relatively low levels of energy switching by residential customers suggests that is very hard to achieve in the existing paradigm…

    1. I agree, this isn’t a near-term prospect! Properly smart meters are necessary (and I’m sceptical that the current implementation will deliver what’s needed), as well as a more developed IoT environment.

      I think there should be a way for consumers to be both passive and have control, by setting up a rules-based system. Some devices, such as ovens, would not participate as they are only used on an as-needed basis anyway, so there is little scope to optimise their consumption. Other devices could be flexed (heating, refrigeration) and some have consumption shifted (washing machines, charging devices).

      The DSO wouldn’t be controlling the consumers usage (unless they sign up for some fee-based service), but the consumer would install and programme some kind of unit that would optimise their use for them, within parameters that they set. To work, the system would need to be easily programmed, but as with current domestic heating systems, you can have a range of sophistication.

      I absolutely accept this isn’t something that can happen overnight, but I believe the development of commercial DSR services can evolve into domestic solutions once smart meters and IoT develop sufficiently to support them.

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