Monthly Archives: June 2014

More needs to be done to break down the barriers community energy projects face

With levels of confidence in the Big Six energy providers close to an all-time low, it is perhaps not surprising that increased attention is being given to how to help community energy projects establish themselves.  DECC published their Community Energy Strategy in January this year, which was a promising start but only indicated what more needed to be done if these sorts of projects were to attract wider support.  And this week, on 25 June, environmental law organisation, ClientEarth, published Community Power: Model legal frameworks for citizen-owned renewable energy, which argues that community power is an essential element in Europe’s low carbon energy transition and needs the legal and regulatory measures to realise that potential.  All of which suggests that it would be useful and timely to reprise the conclusions of Paper 10 of SF’s GB Electricity Demand Project:  The Electricity Demand-Side and Local Energy, published in January this year.

The paper explored the intuitive premise that underpins many community projects – that it would be somehow “better” if local demand for electricity could be met by local generation of electricity – but took this a stage further by recognising that this local matching has also benefits for the rest of the electricity system and therefore could earn income as well as creating a cheaper local source of power.  Being able to reduce local peak demand (net of local generation) at a particular location has benefit to the local electricity distribution network operator in avoiding the need for network reinforcement.  And reducing net local demand at times when electricity generation costs are high across the overall electricity system has benefit to the electricity suppliers in keeping those costs down.

But can these benefits be realised? The paper reviewed a number of community demand-side case studies, from the Ashton Hayes low energy village through commercial demand-side trials to energy balancing on the Isle of Eigg.  The short answer appears to be not completely yet, unless you are a large commercial user of electricity.  If you are, then your electricity price already contains a locational element and is priced according to time of day and year through a meter that records your usage on a half-hourly basis.  So you are already paying the full cost of your electricity and anything you can do to change your pattern of usage brings direct benefit.  With a little extra reward from agreeing arrangements to help the network operators at times of emergency or extra high load, the system is already in place and it works.

It is different if you are a domestic electricity user or even a group of consumers: be that at a street, neighbourhood or community level.  The network charge element of your electricity bill is different in different parts of the country for historical reasons; but it does not distinguish between rural or urban locations or, whether your part of the network is heavily loaded or under-utilised.  Unless you are on Economy 7, your electricity is the same price, day or night, winter or summer, and so you would get no benefit from avoiding peak times or from assisting your local distribution company to avoid local network reinforcement.  That is, even if your efforts could be noticed, because it will not be until we all get smart meters that the time at which you use or generate your electricity can be recorded and, as a result, perhaps be incentivised or ‘rewarded’.  And the current regulatory and commercial framework was not set up with smaller, community-led projects in mind.  While the weight of detailed licence conditions is an overhead that large companies can bear and may indeed be needed for the larger companies, it is a massive and unnecessary burden for small projects.  Although some encouragement has been provided with the introduction of Licence Lite, much greater focus is needed from the Government and Ofgem on removing the barriers if community projects are to succeed.  This would be worth the effort because, not only are community projects good in themselves and politically popular, but, as Paper 10 argues,  they provide a useful and enthusiastic test bed for the introduction of low carbon technologies and experimenting with demand-side response.  

So, for community projects to be able to get the full benefit of local balancing, we need to get the technology in place, remove the administrative barriers and, ideally, make some move towards making electricity prices more cost-reflective.  But here we reach a dilemma, which we will be exploring in a later paper and blog:  the general feeling at present is that electricity tariffs are currently too complex and need simplifying.  And is it fair to charge people high prices for their electricity if they are not able to respond to the price signals, for instance, because they are house-bound?  Will we have achieved enough if we only rely on the enthusiasts who are willing to change their behaviour?  And if only the knowledgeable and well-informed change their behaviour and reap the benefit, will this just push even more costs onto the people who are least able to afford it?  This brings us back to community energy projects and the “free rider” problem:  what do we do about the people who do not want to take part in the project, but because the benefit is gained by the whole community they get the benefit in any case?     

Clearly more thought is needed before community projects can achieve their full potential.

What do we mean by sustainability these days?

For an expression that is used more and more by an ever-wider number of people, sustainability is getting harder, not easier to define.

I was prompted to this thought by attending the 20th anniversary celebration of the Prince of Wales’s Business and Sustainability Programme at St James’s Palace recently.  I had taken part in the very first of these programmes at Madingley Hall, Cambridge in 1994.  In fact, apart from Jonathan Porritt and Polly Courtice, the indomitable Programme Director and Director of the Cambridge Institute for Sustainability Leadership, I was the only one present who had done so.  The programme was called Business and the Environment then and was concerned largely with environmental pollution and the scarcity of natural resources.  Over the years since then, climate change has become a much more significant issue and the need to address social as well as environmental issues has been widely recognised.  Hence the change in title for the Programme.

In this context, it was interesting to compare the issues raised by the speakers that I noted down.  Jonathan Porritt was concerned by the central role, and not always a positive one, big business had taken over the last 20 years in the political arena.  He made the obligatory reference to Thomas Piketty’s recent book, but acknowledged that nevertheless the business community as a whole had made significant strides to embrace sustainability.  Terry A’Hearn, Chief Executive of the Northern Ireland Environment Agency, focused on the need for regulation but referred to his attempts to get companies to go beyond mere compliance to adopting good behaviour.  Philippe Joubert, ex-President of Alstom Power and Chair of the Prince’s EU Corporate Leaders’ Group, saw climate change as the major challenge for business but said that if business was to be able to make the investments needed to deal with it, it needed stable long term policies from the politicians.  Idar Kreutzer, CEO of Finance Norway, spoke of the increasing importance of ESG issues in financial investment. (For those who are not fund managers or pension trustees, ESG stands for environmental, social and governance issues.)  The Prince himself, as always, seemed modestly surprised at the momentum he had succeeded in generating, but felt that the battle was far from over;  the next twenty years would be more difficult than the last twenty years.

So is sustainable development still as defined by the Brundtland Commission in 1987:  “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”?  Is it now focused solely on climate change as described by the Stern Report as the greatest market failure ever seen?  Or does it include all the non-financial issues not usually contained within the financial parts of companies’ reports and accounts?  Or is it simply that we all have different ideas about what the “needs of the present” might be?  Over the next few months as Sustainability First approaches its fifteenth anniversary, we shall be exploring these issues in this blog.

let us know what you think.

Jon Bird

Associate, Sustainability First

President Obama’s plans to curb US carbon emissions major step forward but leaves the job half done

The Obama administration announced plans on Monday, 2 June, to cut US carbon emissions.  These plans give an extremely important new and much-needed lead in an area where the US has in the past been reluctant to move forward.  The announcement by the US Environmental Protection Agency will aim to cut carbon emissions from existing and new power stations and improve energy efficiency.

The EPA says that the Clean Power Plan will cut carbon emissions from the US power sector by 20% by 2030, cut pollution and, as a result, improve health, and reduce energy bills by about 8% by increasing energy efficiency and reducing energy demand.

While these aims are still modest compared with actions being taken in Europe, for example, they are a major step forward and will give a powerful lead at the climate summit in September 2014 in New York and COP21 in Paris in 2015.

But concentrating on emissions reduction is only part of the story.  Without action to limit production of fossil fuels, we shall be no further forward.  We have seen what the impact of shale gas in the US had on US coal prices and the resulting increase in coal burn in Europe leading to higher carbon emissions in the UK and elsewhere in 2012.  Reducing coal burn in the US without reducing US coal extraction will have the same impact on coal prices.  And, if the coal is not burnt in Europe, because of closing coal-fired power stations, it will go elsewhere.  The availability of cheap coal will make it politically much more difficult for countries not already committed to reducing their carbon emissions to do so.

Cutting back on fossil fuel production is far from easy for any country.  Economies and jobs depend on it.  But it is simple Economics 101 that if demand is reduced while production is not curtailed, prices will go down.  In the absence of global agreement to reduce carbon emissions, cheaper coal will be just too tempting to some countries.  Some solution must be found.

Bard Halstad  has suggested that countries committed to emissions reduction should buy up fossil fuel deposits to leave them in the ground.  This may not work, but at least he has focused on the problem and started a debate.

Two aspects of what are needed are clear, however.  Help must be given to those regions that currently depend on coal-mining to assist them through the transition.  And, as the Commons’ Energy and Climate Change Committee recommended last month, we need to fast track decisions on carbon capture and storage.

Better coordination of innovation efforts needed if domestic customers are to benefit fully from demand-side response

Activity on innovation projects to help encourage demand-side response is at an unprecedented level, but needs better coordination, and greater focus on customer reactions to innovation,  if customers are to benefit fully.  This is one of the key findings of Paper 11 of Sustainability First’s GB Electricity Demand Project, which was published in April 2014.

This paper explores how, in the longer term, innovation could best serve the customer on demand-side response. It considers the approaches adopted by the current innovation funds (such as the Low Carbon Networks Fund) and related projects, and investigates in detail the potential for two practical examples of domestic customer-facing innovation, automated control of electrical devices and household-level thermal storage.

Innovation funding, and the LCNF in particular, has given a major boost to electricity demand-side research. The LCNF has required cultural change in both the network companies and in Ofgem, and has fostered collaboration, often with partners from outside the industry, and emphasised the need for value for money.  Knowledge sharing is taking place, but there may be a need for some soul-searching as to how far some of the outcomes may prove truly innovative in the end. From a customer perspective, it is perhaps disappointing that LCNF (with some exceptions) tends towards funding technology projects rather than projects which are primarily end-customer focused. The Technology Strategy Board however was seen by those we have spoken to as useful for funding smaller innovators and customer-facing initiatives. One finding in our paper is a need for better coordination between the different funding bodies in their support for electricity demand-side research. This includes a need for greater understanding about where the gaps in knowledge lie, where applied R&D is likely to have greatest impact, avoiding duplication and ensuring value. Lessons from the many smart projects and trials need distilling, analysing across the projects, and feeding into the development of policy and measures.

Both automated control and household-level thermal storage offer significant opportunities for the future, and there is no shortage of potential suppliers of equipment.  However, there is not sufficient value in today’s energy market for market actors to attract many domestic demand-side customers just yet.  And to equipment manufacturers, it was far from clear how quickly the opportunity will develop.  Evidence from innovation trials of the extent of customer interest in innovative products is still limited – especially when it comes to customer appetite for automation and / or household-level storage.  More research is needed, particularly on the customer commercial proposition – and in particular on how the vulnerable customer can benefit from innovation developments. Vulnerable customers should be a focus of electricity demand-side innovation funding. There should also be more proactive dissemination of innovation project results.   

It is however encouraging that Ofgem, government departments and the research councils are starting to work together to improve on current coordination between funding streams –and hopefully to draw out some systematic lessons from the many smart research projects and trials. 

Welcome to Sustainability First

Welcome to Sustainability First’s blog.  This is a new venture to set alongside our more studied and detailed research, to offer views and comment on topical issues in the energy and sustainability spheres.

If you have arrived at this site, you probably already know something about Sustainability First and its work.  But for newcomers, Sustainability First was set up fifteen years ago. It is a UK-based think tank with a focus on policy and practical solutions in the energy, water, waste and other sustainability areas.  It concentrates largely on UK issues, but draws on evidence and experience both within the UK and abroad.   Sustainability First is concerned to ensure that the consumer’s voice is heard, and works closely with government, regulators, consumer groups and companies to provide an independent and balanced view. Completed research includes reports on smart meters, demand response, energy efficiency and ensuring the water consumer’s interests – near and long term – are properly taken into account.

Part of the strength of SF’s work is the breadth of knowledge and understanding of its Associates, Trustees and project sponsors.  Individually, they have wide experience of the energy, water and environment industries, the Government and regulatory sectors, and consumer issues.  By working together, they pool this experience to create robust and well-respected research.

SF’s most recent and ambitious work is the GB Electricity Demand Project.  This is a three year project to investigate the contribution that customer-driven demand reduction and demand response could provide to the developing low carbon electricity market.  Its sponsors and partners have been drawn from throughout the electricity and related sectors and the work has been coordinated through quarterly meetings of the Smart Demand Forum, comprising project sponsors, consumer bodies (large & household), Ofgem and DECC.  Eleven of the twelve project papers are now available on the SF web site (http://www.sustainabilityfirst.org.uk/gbelec.html).  The project has made a major contribution to the developing electricity demand-side debate, and its widely-cited papers are an important resource for policy thinkers and academics alike.

We shall be using this blog to give you short summaries of our recently published research work and comment on national and international sustainability issues.  Feel free to add your own comments. If you would like to know when we have posted a new blog or have published a new paper, you can follow SF on Twitter (@SustainFirst) or, if you are not yet a member of the Twitterati, let us know at jon.bird@spencermills.co.uk and we will keep you in touch by email.