Energy Networks Association wants to work with community energy groups to boost low carbon grid flexibility and backup - but there is a great deal of work to do
This month's shock grid blackout, which appears to have been caused by an "extremely rare and unexpected" lightning strike, was by today's standards an unusual event for an advanced economy like the UK. But with massive changes underway right across the electricity system, the incident inevitably sparked a major debate over how best to ensure grid reliability is maintained as the UK transitions to a cleaner and more flexible energy system over the coming years.
The lightning strike preceded a loss of power from the Little Barford gas plant and the Hornsea One offshore wind farm, which resulted in 1,300MW of capacity being pulled off the system, more than the 1,000MW of backup capacity National Grid was holding in reserve at the time. Ofgem, which is now investigating the incident, said it was "important that the industry takes all possible steps to prevent this happening again".
The blackout may, therefore, provide a valuable and steep learning curve for the UK, as it seeks to build a smarter, decentralised, and decarbonised electricity system in line with achieving net zero greenhouse gas emissions by 2050. After all, pressure on the grid is only set to keep growing in the coming years, as increasing demand for products and services that require electricity - including cars, heating systems, and digital technologies, to name but a few broad areas - dovetails with greater amounts of intermittent, renewable sources of power coming online.
Indeed, National Grid estimates reaching the UK's new net zero emissions target by 2050 will push up electricity demand from 348TWh a year today to 491TWh in 30 years' time, when peak demand could spike at 115GW - almost twice that of today. To meet that surge in demand, therefore, 20 per cent more power generation capacity will need building by 2050, it said, while fossil fuel plants will also need retiring. That comes in addition to widespread energy efficiency measures and a mass rollout of smart EV charging and vehicle-to-grid technologies to alleviate those periods of peak strain on the grid. Overall, National Grid estimates the UK will need to flexibly manage at least 13GW of power capacity load during times of greatest demand by 2050, and in order to get there "immediate action" is required.
Quite clearly, if the UK is to avoid freak blackouts becoming a more frequent occurrence in future, far more grid flexibility and back-up power storage capacity will be needed to ensure a smooth, resilient, zero carbon energy system.
Which is where the still fledgling community energy sector may have a critical role to play. That was the topic up for discussion at the latest BusinessGreen Roundtable Lunch, hosted in association with the Energy Networks Association (ENA) last week, which brought together 15 key stakeholders from across the community energy sector to discuss its potential role in the emergence of grids that are not just cleaner, but also more flexible and resilient.
The ENA represents 13 distribution network operators (DNOs) for gas and electricity across the UK and Ireland, and is keen to harness the growing number of small local power generators up and down the country to help provide the grid flexibility and back-up storage capacity required by a decarbonising energy system.
Having made a firm commitment to boost grid flexibility, the networks have agreed to collectively put out for procurement up to 850MW this year of flexible capacity for the national and regional electricity system. Doing so would be a cheaper and more efficient means alternative to reinforcing the grid than networks building that new capacity themselves, while generators, aggregators, and other parties that supply flexible grid services would get access to new revenue streams. A win-win for all involved.
That, at least, is the idea. The challenge is that the nascent market remains relatively immature, lacks liquidity, and faces a number of complexities and barriers that continue to hamper its development. As such, network operators are keen to grow the market and work with a wider range of stakeholders to access the flexible grid services they need and community energy developers could have an invaluable role to play, according to Randolph Brazier, head of innovation and development at the ENA.
"I think it's fair to say that, as networks, we've been not the best engaged with community energy groups," he told the community energy figures covering from across the UK who gathered in London last week. "But we very much see it as a growing, important area going forward, particularly to try and meet net zero targets."
The meeting saw Brazier firstly explain that while some of the network operators have begun tendering for that initial 850MW of additional flexible capacity, they have on average so far managed to procure only a proportion of what they have sought.
"Now, there's a range of reasons for that," he explained. "Some of the reasons are simple: there's not the flexibility there, or the flexibility that is there doesn't know that there's a market for them to participate. That's one issue. Some are also technical issues to do with plant and how it responds, and others are to do with contracting and contract length. Plus they obviously need to be able to deliver on price. So there's a range of different reasons. Basically, what we want to do is try and work with you guys to get you connected properly."
The concept: a flexible, localised power grid
Of course, National Grid runs national capacity market auctions at a national level which generally favour larger, grid-connected generators. But the ENA wants to build local markets that could involve smaller, community generators that could help balance rising peak demand from households. The importance of more flexible markets is amplified by the way the energy market is changing. Householders have traditionally just bought energy from their supplier, and the energy has flowed in one direction from generators to a home or business, so there has been no need for people to interact with the network. But that is changing as thousands of buildings have installed solar panels, while electric vehicles have increased power loads for some homes and offices, together requiring a much more dynamic and consistent engagement between buildings and networks.
"We can't just build a grid that's so much bigger, to accommodate all these new technologies - we need to use the inherent flexibility in homes and businesses," argued Brazier. "We need that help as networks - it could be through suppliers, that's an option of course - but we need that help directly. We need these new types of entities and communities to help participate in these markets, bring liquidity in, help provide the services, and minimise the whole system costs of making sure that the grid can transition."
The ENA has therefore come up with six core steps towards standardising how DNOs engage with this envisaged new market for local, decentralised and potentially community-owned grid capacity. Championing a level playing field, ensuring visibility and accessibility for market participants, and conducting procurement in an open and transparent manner form the first three core principles. But in the longer term, the ENA also hopes to work with BEIS and Ofgem to help deliver a digital, accessible map showing networks, capacity, flexible generation sources, local demand and proposed new investments down to street level, detailing the workings of the UK's electricity system in real time. It could even include population trends, weather forecasts, or a whole range of factors which impact on the UK's energy requirements. A similar digital map is being built at state level in Australia, and the idea is to make the system and flexibility market as accessible as possible to small scale and community energy operators.
The level of data required to get such a digital map working down to street level could take some time - perhaps even years - but Brazier said he was keen to help get the project off the ground as soon as possible. "I'm not saying we'll get to the endpoint, where the Aussies are now, because they've got data from everywhere coming in," he said. "But we as an industry need to make it start on it ASAP."
So that's the ideal endpoint, and the concept was certainly greeted warmly at the event, where experts from across the community energy sector argued that access to such dynamic and transparent data would make it easier to work out where flexibility services are required. However, a great deal of collaborative work between networks and community energy operators is still required in order to get to the point where a suitably liquid and effective flexibility market is up and running.
Still, while the incentive for DNOs collaborating with local energy generators to build these new markets is clear - lower costs, improved reliability, cleaner grids - what's in it for community energy groups?
Afsheen Kabir Rachid, co-founder and co-CEO of non-profit Repowering London - and also chair of Community Energy England - highlighted a pilot project she was working on with housing associations with a view to recruiting around 160 participants to see how hot water immersion heaters could offer flexibility. "It's in the early stages and design and scoping is being developed, but part of it is about looking at what's the payback, and how do you support communities and customers in this process?" she said. "It's about stacking benefits."
Clearly, if communities are to invest in flexible generation projects, such as household low carbon generation or energy storage systems, they need certainty that revenue streams will ensure a payback, which should in turn increase confidence and incentives for communities and consumers to invest in even more of these projects. And to enhance that confidence, community energy needs access to as many difference revenue streams as possible, not just in a local flexibility markets, but also through the likes of the imminent Smart Export Guarantee, as well as national markets for providing services such as frequency response.
So-called benefit stacking from multiple schemes is, therefore, "absolutely critical", said Brazier. "The key thing is to be able to stack different revenue streams for your assets. So in the future part of it will be helping local distribution operators get more capacity into their networks - so part of that 850MW - but that's only part of the story, as community energy operators need to be participating in energy trading. There's a range of services, and we're working with our networks to make sure contracts are not exclusive. There's been a historical problem with exclusivity clauses in some contracts meaning contractors can't participate in other markets, so we're removing all of that."
Ultimately, networks and community energy groups both share the same vision: a low carbon, flexible, accessible, and affordable energy system for consumers. But the road to reaching that destination requires a great deal of collaboration and trust, and several logistical concerns and frustrations were raised by community energy figures at the meeting.
Firstly, in order for revenue stacking to work, and to create confidence to invest in local energy projects, there are evidently issues to be ironed out over the length of contracts offered by networks to community energy suppliers in these nascent flexibility markets.
Jodie Giles, senior project manager for communities at energy advisory non-profit Regen, raised concerns that one-year contracts or even shorter were typically being offered, but that these were not nearly long enough for many community energy operators that required longer-term certainty to sign off on an agreement. Ultimately, it comes down to risk: short term contracts may offer a good bet if there is confidence the market will become more attractive over time, but for community energy operators often operating with few resources, tight margins, and in some cases with considerable support from volunteers, they offer less security and revenues that are harder to predict, she explained.
"It is so difficult to try and stack all of those revenues, and looking at the revenue streams from flexibility, they are just too short term," she warned.
Moreover, issues were highlighted by community energy figures over the concept of pushing for a level playing field in flexibility markets, as this can in some cases end up favouring high carbon fossil fuel sources of power, according to Nigel Hargreaves, chair of Norwich Community Solar Coop.
"If you remain technology agnostic, then you're going to encourage, as we're seeing, the increase in diesel generators, which flies completely in the face what we're trying to do in terms of zero carbon by 2050 or before, so that obviously has to change," he said. "Community energy is I think mostly motivated by decarbonisation, so if you want to encourage community engagement and flexibility, then don't be technology agnostic."
Building new markets to foster decarbonisation without running into legal troubles by overtly penalising certain forms of generation, though - as the UK's capacity market troubles over EU State Aid rules demonstrate - is a tricky challenge. But there was wide agreement that steps need to be taken to stop diesel installations dominating the market and driving up emissions, while also recognising the wider social and environmental benefits community energy operators can bring. Moreover, there were some practical suggestions put forward as to how policy tweaks and market reforms could help accelerate the transition to a cleaner and more flexible grid.
Firstly, a frustration shared by almost anyone involved at all levels of green energy is that Ofgem still has no clear obligation in its remit for decarbonisation - rather its focus as a regulator is often on lowest cost options and short term considerations. Should that change, it could potentially help to iron out issues over fossil fuels competing against low carbon generators. "There is a fundamental mismatch between what Ofgem is directly telling all the DNOs to do, which is about least cost today, not about least cost long term, in terms of carbon reduction," argued Giles.
But while moves to tweak Ofgem's obligations appear to be stuck in limbo, and lie out of the hands of the ENA and community energy groups, there are other options on the table. Graham Ayling of the Energy Saving Trust suggested environmental and social obligations could be put into contracts in flexible energy service markets, which would emphasise the key role of community energy in tackling both decarbonisation and fuel poverty, for example. "Is there a way that we can put some sort of monetary value on social and environmental aims we are trying to achieve, and to actually build a model out of that?" he asked.
Others argued flexibility markets and DNOs needed to take a holistic approach that recognises how the relatively high levels of public trust enjoyed by community energy projects means they could play a key role in encouraging wider adoption of the energy saving measures, onsite renewables, and smart fridges and other appliances that could yet play a critical role in the development of a net zero energy system. Community energy projects have access to the engaged early adopters that could help spark the roll out of a whole host of emerging smart and clean energy technologies.
As Pete Capenter, chair of Bath & West Community Energy, pointed out, community energy groups often have strong, direct relationships with consumers and householders which are key to rolling out low carbon technologies in pursuit of net zero emissions. "I think community energy plays a vital role in supporting the emergence of these markets, because we have a whole range of consumers who aren't resourced to understand what this means, and are fundamentally distrusting of the energy industry, based on previous experience," he argued. "And so if you're going to introduce new complex markets that have data, privacy issues, I think going to run up big trust issues. And I think that's where community energy can play an important role."
Kayla Ente, CEO of Brighton & Hove Energy Services Company, agreed, highlighting how community energy groups are often working with limited resources on high-impact low carbon projects that are seen as too small or commercially unattractive for large renewables companies. "We are the route to market - we are the way that a lot of important projects and companies can get to market," she said. "We are so resource constrained, it's a miracle that we actually accomplish what we do. It's only our sheer grit and determination that gets us where we are. But if we had access to resources, we can really make a huge, huge difference."
In many ways, only a few policy tweaks and support mechanisms are needed for community energy groups in order to start building a thriving market for localised flexible energy. But for all the immediate concerns and frustrations voiced by some community energy figures, Brazier was keen to stress that these flexibility markets are still very new and are evolving all the time. "The networks have only just started doing it in earnest this year, so this is the time to try and get it right, and all of this feedback is really useful," he said.
Indeed, he added that there are a great many reasons for optimism that the right building blocks and support can be put in place to ensure the full potential of community energy is realised to the benefit of everyone - from network operators and large energy firms, to householders and businesses, and, of course, the UK's net zero climate targets.
"It's important to remember that on a global level, the UK is one of the countries which is really leading on building flexible, local, low carbon markets like this," Brazier stressed. "We can be a little inward looking sometimes, but the UK is really top of the tree on this stuff, so personally I am very optimistic."
The community energy sector may have endured a rollercoaster few years, as shock subsidy cuts, policy uncertainty, planning restrictions, and council budget cuts have all combined to create a daunting operating environment. But there is also a resilient optimism that the growing competitiveness of clean technologies and the surge in public engagement with environmental issues could unlock an exciting new era for the sector. As John Taylor, energy projects manager at the Greater South East Energy Hub, observed if the sector can manage the current transition from a subsidised clean energy market to one where distributed clean energy and flexible grids are the norm then a bright future awaits.
The latest BusinessGreen Roundtable Lunch was hosted in partnership with the Energy Networks Association