Proposals to create a more flexible energy system using energy storage, electric vehicles and demand-side response (DSR) have been published by government.
The consultation outlines the ambition of regulator Ofgem and the Department for Business, Energy & Industrial Strategy (BEIS) for a system in which businesses, power stations, vehicles and homes actively balance their energy needs.
This should drive down the cost of energy for businesses and consumers by as much as £8bn a year by 2030, the National Infrastructure Commission predicted in a report published earlier this year.
The Ofgem and BEIS consultation is seeking views on how to encourage businesses to participate in DSR, where they would be paid for reducing down electricity use at peak times.
In a survey of 92 large companies by Ofgem fewer than one third (29%) said they took part in DSR.
Source: Ofgem
Around 60% of respondents not taking part in DSR acknowledged that their business had the potential to participate. Of those already participating, the majority believed they could offer more flexibility without affecting their businesses.
The survey identified more than 400MW of potential additional demand reduction, Ofgem said.
Barriers to a higher uptake of DSR by business, according to research by the government, include: a lack of awareness of the opportunity to participate; a perception that business processes are not suitable for DSR; lack of clarity on; conflict with existing environmental schemes; and concern about impact on business performance.
The consultation also looks at how network companies can streamline the process of connecting storage technologies to the grid. In recent months, more than 19GW of applications have been made to connect storage to the grid, Ofgem noted.
Ofgem and BEIS have requested evidence on the role of electric vehicles (EVs) in a smart energy system. The mass roll-out of EVs could shift peaks in electricity demand and function as a substantial energy storage system, they said.
Dermot Nolan, Ofgem chief executive, said: ‘Having a smarter system will revolutionise how we all interact with the energy market. A smarter system also makes it far easier for new businesses to enter the market and offer new services. To get there we must make sure the regulatory regime is fit for the energy system of tomorrow and remove any barriers.’
The renewable energy industry welcomed the consultation. Nina Skorupska, chief executive at the Renewable Energy Association, said: ‘This document clearly shows that the government is aware of the revolution taking place in the energy sector right now, and sees that the shift to a more decentralised, flexible system could feel as radical as the emergence of mobile phones.’
But she added that policy needed to change quickly, since storage and DSR technologies are evolving very rapidly and the government risked being in a position where it is playing catch up or standing in the way of progress.
‘Moving quickly by addressing policy barriers and prioritising these technologies in the industrial strategy would also help position the UK as an international leader. This translates to more jobs for UK firms as these technologies will also be deployed on a massive scale internationally,’ she said.
Leonie Greene, who leads on the Solar Trade Association’s smart power work, said: ‘For decades the electricity sector was one of the least innovative industries in the world. It is potentially poised to become a global hotbed of innovation and by moving early the UK has the chance to do more than save consumers a lot of money – we can become an international leader in the smart power industry.’
Last week, think tank the Policy Exchange called for regulations to be updated to boost the UK's potential for a smart grid.
