Which way to turn at today's UK energy market T-junction?

10/11/15 | Blog

Motorised transport revolutionised life in the UK, but cars would be nothing without roads.

Michael Rieley, Senior Policy Manager - Grid and Markets at Scottish Renewables, finds remarkable historical parallels between transport and our electricity network - and argues it's time to find a way to get rid of the Red Flag Act.

Seventy years ago, the UK reached a transport policy T-junction.

To the left, to deal with increasing traffic levels on congested A and B roads, often cutting through urban areas.

To the right, expanding to create a motorway network which could enable the country to reap the huge benefits brought by vehicles which were becoming faster, safer and more fuel efficient.

The Preston bypass, our first motorway, opened in 1958, 12 years after the first map detailing the new road system was published.

As the network grew, Britain grew as a force in the world economy, while at home wider employment opportunities became more accessible to all, driving economic growth and increasing standards of living.

Today, our electricity market may be considered to be experiencing its own T-junction moment.

The UK’s electricity network was built in the 1930s to transmit power from large, centrally-located plants to industrial facilities. Over time the network has grown, accommodating more homes and businesses, and as the economics of energy generation have adapted we have seen increasing numbers of renewable generators making use of that existing infrastructure to get clean power into the energy mix.

The Committee on Climate Change estimates that 66 – 93GW of renewables will be required to deploy in order to deliver an energy system in line with our 2030 carbon budgets – at least double today’s operational capacity.

Six weeks ago the UK Government’s Energy and Climate Change Committee, understanding that a revamp of the system not only must occur to make that increase possible but would bring huge benefits, launched an inquiry into ‘low carbon network infrastructure’.

In the Committee’s words:

“The UK’s electricity infrastructure is ageing and substantial investment will be required to upgrade the network (both transmission and distribution) to address today and tomorrow's energy system needs. As low carbon technologies and distributed energy play a greater role, the move towards a smarter, more localised and diverse system presents both challenges and opportunities.”

Scottish Renewables’ response to that inquiry is emphatic: updating our energy network to support the necessary transition to a low carbon economy presents a gigantic opportunity for carbon reduction, economic activity and social good.
Such transformational change typically places responsibility on regulators to strike a balance between protecting consumers and making the best use of new innovations and technology.

When the first motorcars found their way onto our roads, the ‘Red Flag Act’ limited their speed to 2-4mph, and required a man to walk 60 yards ahead of the vehicle to warn unwary pedestrians.

While the regulations on our energy market are far less draconian, it is clear that as technology develops, regulation must adapt.

A recent Ofgem position paper neatly summarises the regulator’s thoughts on the topic:

“The energy sector is changing. Generation is becoming more distributed and variable, and consumers are benefitting from new ways to monitor and manage their energy use. There are opportunities for new business models and technologies to emerge, and for existing businesses to develop, to deliver better services for consumers.

“To make the most of the opportunities offered by these changes, and to deliver against our carbon commitments, while providing reliable and secure supply at minimum cost, we need to consume and produce electricity more flexibly
“We propose to initiate work, focused around priority areas, to make sure that regulation supports an efficient, flexible energy system which delivers benefits for consumers.”

To date, increasing levels of interconnection or the construction of more flexible thermal generation has typically provided us with much of the flexibility required.
In future, that toolkit will include far more variety. By making better use of improvements in technology, increasing our understanding of the operational limits of the network, working with changing consumer demand through the uptake of electric vehicles, the electrification of heating and the development of demand side response and storage will all play their part. As, of course, will traditional flexible generation and interconnection.

Innovative projects such as the ‘Accelerating Renewables Connections’ (ARC) project in the Scottish Borders have shown significant scope to provide faster connections by removing the need for consenting and construction associated with traditional ‘wired connections’.

Equally, by removing the need for network reinforcement or upgrades these connections have proven the ability to reduce costs. Analysis of a similar project carried out by UK Power Networks has shown the cost of projects connecting under this system reduced by 70 – 90%.

So far, rolling out these solutions as ‘business as usual’ has been a challenge.
It’s now time to consider how we can safely, efficiently and securely lower those red flags in front of our energy network and begin to enjoy the benefits that doing so will bring.