Policy Exchange: Flexible energy system could save Britain £8bn by 2030

A smarter, more flexible power system which takes advantage of low-carbon innovations and technologies such as battery storage and demand response could create savings for the UK to the tune of £8bn by 2030, according to new research from thinktank Policy Exchange.

The report calls for regulatory changes to remove the ‘double charging’ of environmental levies on storage, which it contends is undermining their viability

The report calls for regulatory changes to remove the ‘double charging’ of environmental levies on storage, which it contends is undermining their viability

The Policy Exchange report, released today (7 November), calls for a complete overhaul of the current system to accommodate emerging technologies, including wind and solar power. The thinktank recommends the removal of several regulatory and policy barriers to create a level playing field and negate the UK’s reliance on dirtier forms of electricity.

The report’s author Richard Howard said: “Making the power system smarter will also mean it can provide cheaper and cleaner electricity. The current set of policies is encouraging a growth in dirty diesel generators - exacerbating air pollution in UK cities and towns.

“The Government needs to level the playing field to encourage the use of cleaner technologies such as demand response and storage. This approach is not only greener, but could also lead to savings worth £90 per household per year by 2030.”

Smarter system

The report highlights a number of short-term measures the Government could implement to encourage flexibility. The regulation of polluting diesel generators through carbon taxes would curtail the technology’s development, the paper suggests. The Government is urged to review the Capacity Market to ensure that technologies such as storage and demand response are able to access longer contracts.

Moreover, the report urges regulatory changes to remove the ‘double charging’ of environmental levies on storage, which it contends is undermining their viability. Distributed Network Operators (DNOs) are earmarked as outdated models which require encouragement to consider emerging technologies for improved network management.

In terms of a longer-term approach, the report highlights a need for a major reform of the wholesale power market, recommending a shift to a ‘nodel pricing’ model. Additionally, Policy Exchange proposes the simplification and major overhaul of balancing services managed by National Grid.

Commenting on the report, Sir David King, Special Representative for Climate Change, Foreign and Commonwealth Office, said: "In order to move to a low-carbon power system, incorporating more renewable energy, we also need to create a smarter, more flexible power system. This important report from Policy Exchange shows how Government can encourage smart technologies such as storage through changes to policy, regulation, and market design.”

Industry demands response

Policy Exchange joins a growing list of industry groups calling for the incentivisation of energy storage and demand response technologies to provide a clean, flexible and secure energy system.

In its last report before being disbanded, the Energy and Climate Change Committee (ECC) urged the Government to redesign its Capacity Market to give the market a “clear signal” that demand response capacity is a preferred option to diesel generation plants, and “move quickly” to address the regulatory barriers faced by energy storage.

The National Grid’s new Winter Outlook report released last month highlighted the potential for demand response measures to keep the system balanced during the winter months. In the build-up to the report's release, a seperate ECIU study concluded that an increased uptake of demand response would help to keep the system balanced and, ultimately, cut the cost of national energy security

The business case for demand-response now makes "complete sense", according to major construction supplier Aggregate Industries, which recently told edie the technology should be exploited alongside other emerging green technologies such as battery storage systems.

George Ogleby


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