Estelle Limon, advocacy and impact intern, dives into the numerous consultations released from government today on smart systems and flexibility
Today was another busy day in the net zero policy agenda, with six policy documents from the government and Ofgem which set out key steps towards enabling a smart, flexible, decarbonised energy system. These publications get down into the weeds of energy system development and actually provide us with some technical roadmaps for how we decarbonise crucial parts of our energy system.
We have also had the first detailed indications from government of how they intend to change the governance of the Electricity System Operator – on the surface, a bureaucratic change, but this could turn out to be one of the most significant announcements.
We have pulled out some of the key implications and issues below. However, there is a lot to digest here and we will be following up with comments in the weeks to come.
Call for Evidence: Role of Vehicle to X technologies (due 12 October)
Consultation: Proposals for a Future System Operator role (due 28 September)
Consultation: Energy code reform: governance framework (due 28 September)
Smart Systems and Flexibility Plan
The publication of the new iteration of the Smart Systems and Flexibility Plan is a vital piece of the policy puzzle and one of the few publications from government that promises the delivery of tangible, measurable goals.
Earlier this year, we set out five key recommendations to the energy minister which we believe are critical to the success of flexibility. Have those asks been delivered?
- Set out a clear roadmap for flexibility, including targets for deployment
BEIS and Ofgem have conducted analysis to understand the role and value of flexibility in a net zero system:
- By 2030, 30 GW of low carbon flexible assets (storage, DSR and interconnection) will be needed to maximise the 40 GW of wind on the system. Storage will be providing 13 GW of this flexibility.
- By 2050, 60 GW of total flexible capacity will be needed, with 15 GW of storage and 15 GW of demand-side response.
In addition, chapter 2 sets out a broader vision for flexibility for the mid-2020s and 2030 and beyond: by 2030, storage will be playing a prominent role in maintaining energy security, replacing traditional fossil fuelled generation. Long duration storage is not included in BEIS and Ofgem’s analysis, but a call for evidence has been launched to gather more information (see below).
For the industry, this modelling is influential – these projections, alongside National Grid’s Future Energy Scenarios, show how vital the government, regulator and system operator believe flexibility is to decarbonisation. These projections should give confidence to investors that flexibility is here to stay and has a secure future in the UK.
- Measure and value carbon in flexibility markets
“By 2023 we expect a consistent methodology in place providing full transparency on the carbon intensity of the actions and services procured by the networks and system operator.”
We are pleased to see that the Plan recognises zero carbon flexibility as essential to meet net zero, with a specific section on ‘addressing the carbon intensity of flexibility markets and services’ (pg 61) – something Regen and the ESN have long been calling for, as set out in our position paper. A particular positive is the Plan’s recognition of the need for better monitoring and reporting from National Grid ESO and the DNOs on the carbon intensity of the actions and services they procure.
The Plan does recognise the ‘potential gaps’ in carbon policies which give an advantage to high carbon assets – this is a great step forward, but the Plan stops short of any concrete measures that would help to mitigate, bar a commitment to ‘explore the role of carbon pricing in flexibility markets’. BEIS have been doing some excellent work in this area behind the scenes and we will be pushing them to continue it.
- Define storage in legislation
The Plan reinstates the promise to define electricity storage as a subset of generation, but with the incessant caveat of “when parliamentary time allows”. BEIS state regularly that they are committed to this, but there is still no fruition in legislation after 4 years.
The debate has been ongoing within the Electricity Storage Network as to whether storage should be defined as a subset of generation, or with its own asset class. We debated this last year at a workshop on the subject, but no agreement was reached. The longer BEIS leaves legislation unchanged, the less their argument of ‘creating a new asset class for storage will take too long’ holds water. Many in the storage industry hold the view that it should be treated differently in legislation and this Plan will do little to quell those debates.
- Continue to improve dispatch in National Grid ESO’s control room
Improving dispatch in the control room is somewhat beyond the purview of BEIS to deliver, so it’s not surprising that there’s little in the SSFP on this. However, the Plan does expect that the ESO ensures all shareable data is available in an accessible format by September this year, which is a step towards facilitating market participation.
The move to make the ESO independent (see below) could also allow very favourable developments in the control room. As mentioned in points above about valuing carbon in markets, BEIS could take more concrete measures to ensure carbon is a consideration in market development and dispatch – something which could have a positive impact on zero carbon assets in the control room.
- Ensure network charging approaches do not disincentivise flexibility
“Ofgem is considering the role that network charges will play in ensuring efficient network usage in the future and, as part of our broader work on access and forward looking charges, we will consider how demand and generation charges should be applied where storage is acting in a way that benefits the system.”
At the end of last month, Ofgem published their minded-to decision on distribution electricity network access, which contained some positives for helping electricity networks be enablers for net zero. However, the decisions we’ve seen so far are lacking in good news for storage and flexibility – the key decisions are likely to come with the work on Distribution Use of System (DUoS) charges.
Ofgem clearly recognises the investment case for flexible assets and their value to the system, but until further decisions are made on forward-looking charges and their relationship with flexibility, network charging approaches will continue to send the wrong signals on where these assets should be located and disincentivise flexibility where it’s needed.
We wrote a detailed blog on the impacts of the proposed changes which you can read here.
ESO to ISO governance change
BEIS’ consultation on a new Future System Operator could turn out to be one of the most important announcements in this year of net zero policies. The new body will be making decisions that affect the business models of everyone in the energy sector. The proposals sit alongside work on a new energy sector strategy and policy statement (SPS), which will provide Ofgem with strategic guidance, and the proposed reform of energy code governance. Some key points from the proposals:
- Remit. The FSO may take on additional roles of “strategic network planning, long-term forecasting, and market strategy functions, but not real time system operation” of the gas system. Also, notably the FSO is proposed to have a much clearer advisory role to BEIS and Ofgem using “its expertise on the impact of different potential decisions on the energy system.”
- Operational Model. Two models are proposed – a “standalone privately owned model” or a “highly independent corporate body model classified within the public sector” (or publicly-owned, for short…).
- Coordination with distribution networks. The thinking in this consultation on how the national FSO and the DSOs will work together is not very clear. The consultation points toward an Ofgem review of “DSO governance”. There is, however, a section looking at the FSO role in transport and heat decarbonisation which suggests roles might include local energy mapping and planning. This looks like a shift of responsibility away from a DSO to the central FSO. However, currently the ESO has very little expertise on the more local aspects of the energy system and it’s hard to see that sitting in one GB body.
The detail of the change will of course be important to realising these aims. We believe any change should consider the following:
- A clear, legal remit to decarbonise the energy system
- Additional powers devolved to the FSO to increase its role in shaping net zero policy, making decisions alongside BEIS and Ofgem
- A system architect role to plan and co-ordinate the future of the energy system
- Much clearer articulation of how the FSO, DSOs and Gas Distribution Networks will work together to address local energy plans, send clear signals to the market and to ensure efficient whole system solutions
- How the FSO will work with local and regional authorities, including the Scottish and Welsh governments
- Public ownership will be vital in achieving all of the above
The ESO has strong influence on many parts of the sector right now, particularly storage and flexible technologies which provide essential balancing services – increased responsibilities for the ESO to lead decarbonisation efforts in these areas and properly plan a future system could be game changing.
Large scale and long duration storage
We very much welcome the burst of activity around long duration and large scale storage that BEIS has produced in the last few months. This new call for evidence dovetails nicely with the long duration storage fund, which is currently in the process of being decided, and the tender for a modelling project which will look at the system needs and benefits of long duration storage.
We have long called for a clearer plan to grow and integrate the long duration storage industry and this trio of projects and documents will serve to significantly increase the government’s and sector’s knowledge of long duration storage and how it can feasibly be taken forward.
We will be responding to the call for evidence and will also be discussing it, along with the ongoing fund and modelling project, with Georgina Morris, Programme Manager for innovation at BEIS, at the Electricity Storage Network’s Innovation and Technology Working Group on 4 August (ESN member-only working group).