Monthly Archives: February 2017

It’s time to talk: why GB household demand-side flexibility needs a high-level standing group

For the past two years Sustainability First has provided support for a major demand-side initiative, designed to encourage industrial and commercial (I&C) customers to understand more about the opportunities that their flexibility could unlock and how to set about it: whether to save money from active peak avoidance, or to earn potential new revenues if they can successfully offer services to the GB balancing or capacity markets. From time to time, business customers might be paid to export generation or to flex their power off-take to respond to the wider needs of the overall power system.

Power Responsive is a collaborative effort led by National Grid for I&C electricity customers to raise awareness, improve understanding and support development of sustainable markets for GB demand-side flexibility. The initiative is delivering a systematic work programme alongside active outreach to business customers, coordinated by a steering group whose main task is to get to grips with the major enablers and blockers for future demand-side market development:

  • What factors will drive forward market development?
  • From a customer viewpoint, what still stands in the way of successful demand-side delivery for GB ?

The group is high-level but also has the experience to flag up potential problems and to anticipate developments, focusing on matters that risk stalling wider development of GB flexibility markets before these get the chance to grow, including potential issues of trust and reputation. The group draws from a mix of market actors – retailers, aggregators, brokers, networks, the system operator – together with I&C customer representatives, including distributed generators and storage operators, and Ofgem and BEIS. The group’s job is to take a strategic look out to 2025 at what demand-side success might look like – both for the market and for industry customers. The group does not shy away from difficult or complex topics. There is a strong focus on landing outcomes and on delivery.

One important output has been the Power Responsive annual report for 2016, just published, written for the group by Sustainability First. The report offers a good overview of the current patchwork that makes up the GB demand-side flexibility markets and a useful snap-shot of the current views of both market actors and I&C customers. There is also a good ‘state-of-the-market’ infographic.

But perhaps most important, the simple fact that a group was charged with looking right across the demand-side markets for I&C customers meant that it was possible to start a productive conversation about metrics needed for these markets:

  • How to judge success?
  • How to base-line the state of demand-side markets today?
  • How to begin to assess market progress year-on-year?
  • What data is already collected? Is it comparable?
  • What analysis is already produced and published?
  • Where are the gaps in data, analysis and knowledge for future years?
  • What is the best way to tackle this going forward?
  • And, importantly, who to lead and how best to coordinate?

And so, a main conclusion must be that it can be ‘good to talk’. A constructive start has been made for the I&C customer side. But strangely, and despite rapid developments on smart meters and the burgeoning home control market, there are no current plans for an equivalent cross-industry and consumer forum for small customer and household flexibility. Why not?

Sustainability First is convinced that it is time to join the dots at a high level for the household sector too. In our response to the recent BEIS smart energy call for evidence, we pointed out that there is an unmet and current need for a high-level standing group able to look at household flexibility and the GB household demand-side in the round. Current work on household and small-customer flexibility has an inevitable focus on detailed ‘process’, organised in separate work-streams. Of course this is necessary and important (half-hourly settlement, smart meter roll-out etc). But, there is a significant gap in looking across the board – including at wider outcomes, whether intended or unintended. The aim would be to ensure coherence and consistency of approach, early warning on unexpected outcomes, to improve consensus, and to achieve a degree of common understanding across the many different actors, interests and complexities.

This is not to suggest that development of a flexible household demand-side should not be market-led. Rather, that the complexity and scope for sub-optimal and / or unexpected outcomes is significant. The potential for reputational problems are major – even from just a handful of ill-judged or mis-sold products or schemes.

 Any such group would need strong BEIS and Ofgem involvement. Because its main focus would be households, including energy customers in vulnerable circumstances, it would need appropriate consumer representation, and this may need resourcing in some way.

Sustainability First’s initial ‘menu’ of topics – based on our current and former research – and where high-level thinking is needed over a sustained period includes the following:

  • Future tariffs: implications of half-hourly settlement and cost-reflection, principles of ‘fairness’,  retailer responses including cherry-picking, choice, approaches to price comparisons.
  • Customer safeguards and protections: unexpected bills, ‘lock-in’ to kit or other sales (e.g. connected home), multi-utility models, pre-pay, debt calibration, third-party actor roles – aggregators, brokers.
  • Community & local flexibility schemes: group approaches to supply, supply licence requirements.
  • Smart appliances: requirements (if any), standardisation, avoiding proprietary set-up.
  • Privacy: customer consents on use of their data.
  • Cyber security: smart meters, smart appliances etc – minimising customer and system risk?
  • Export metering: future metering requirements for PV, storage
  • Trials: probing knowledge gaps, institutional and regulatory barriers, customer outcomes
  • Customers in vulnerable circumstances: whether and how demand-side flexibility might serve such customers well.

Sustainability First’s long-standing experience on household ‘smart’ energy tells us that such a group would add up to more than a sum of its parts. It would help focus hard on the major barriers and could resolve problems in a collaborative way to ensure a better implementation / transition to household demand-side flexibility.

The pace of change for household energy customers is set to quicken. As household flexibility markets start to evolve and to grow, it is in everybody’s interests that customer outcomes are beneficial and positive. We look forward to the BEIS / Ofgem Smart Systems Plan due this spring. We hope that it will include a clear recognition that it is now ‘time to talk’.

Judith Ward
Director, Sustainability First

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Civic pride, the public interest and paying the bills: what does fairness look like for our water supplies?

On hot, sultry summer evenings tourists unsurprisingly flock around the Trevi Fountain in Rome.  There is no better place to enjoy the beauty of the city, an Italian ice cream and dream.  Whilst throwing coins into the Fountain, what few may realise is that the water they are looking at is being transported through an ancient Roman aqueduct. Infrastructure that the far-sighted Romans recognised could help provide one of the foundations for the prosperity of the city  – and indeed empire – for generations to come.

From fine art and the flowing waters in Rome, take an about turn and move on literally to what was London’s dirtiest hour: the Great Stink of 1858.  Sewage on the banks of the Thames had accumulated to such an extent that cholera outbreaks were rife and thousands were dying.  Step forward one of the greatest of the Victorians, Joseph Bazalgette.

Joseph, London’s Metropolitan Board of Work’s Chief Engineer, realised something needed to be done – and at scale.  He designed London’s sewer network, in the process reducing the risk of future cholera outbreaks and cleaning the water in the Thames.  His vision was such that he ensured that the diameter of the sewer pipes being built was considerably wider than what was needed at the time.  This enabled the network to accommodate the extra demands of the growing city and keep the river clean – without the need for digging up roads and knocking down buildings to build more pipes.

As these examples illustrate, the benefits of any new water related investment extend beyond the individuals that use it to wider society and can often be enjoyed both today and way into the future.  Having a long-term vision for such as essential service that can deliver multiple benefits, along with civic pride, would therefore seem important.

But here’s the rub. The future is uncertain.  No one knows exactly how much water will be needed in the years to come, where it will be needed and whether new technologies will emerge that will change the way it is delivered and used.  In addition, the coming generations that may benefit from such far-sighted investments and infrastructure aren’t around to speak up.

At the same time, those who currently use the services, and are likely to be expected to pay for future investments, may already be having problems in terms of paying today’s bills.  A sobering one in eight households across England and Wales currently struggle to be able to afford to pay for their water.  For many, the current system looks far from fair.

This presents policy makers and regulators with an age old challenge – how to balance the interests of current and future generations.   Clearly much can be said about not investing in new pipes and other infrastructure ‘ahead of need’. No one wants to see white elephants and stranded investments that aren’t really needed, particularly when many of today’s consumers already find it hard to make ends meet.  However, it is also important to recognise that putting off decisions around new investments may potentially make them more expensive in the future, reduce opportunities for growth or foreclose future options, particularly if space subsequently becomes more restricted.

These are big issues of public policy that all consumers and citizens should have a say in.  In an investor-owned water system as in England, it is even more important that the public interest is heard when significant decisions are made if they are to be seen as providing ‘just’ water for both today and tomorrow.

In recent years there have been significant and welcome developments in GB in terms of consumer engagement in the water sector.  Local people are now being given a voice in many of the decisions that relate to their water services through formal ‘consumer challenge groups’.  How the collective interests of citizens and communities are able to shape how services and investments need to evolve is likely to be the next stage in this journey.

As our future climate becomes more unpredictable and we increasingly face the risk of too little or too much water, uncertainty may well become more acute.  What we do know, however, is that when droughts and floods hit, communities are in the front line and need to pull together.   Having a shared and developed view of how far and fast we need to invest for a resilient future would seem wise.

All this will necessitate a ‘deep dive’ into the issue of fairness:  what is fair for individuals, communities, our shared society and the future?  People often have clear views about what is unfair – such as risks and benefits not being shared – but less so as to what fairness itself is.

A public dialogue over the issue of public interest and what a ‘just’ water system looks like is a good place to start. It would seem unwise to wait for what could be the UK’s Twenty First Century equivalent of the ‘Great Stink’ before we are galvanized into action.  If we do, Bazalgette and the architects of the Roman aqueducts may rightly question whether we have learnt all we can from their pioneering legacies.

This post from Sharon Darcy has been written as a contribution to the JustWater programme that is raising awareness and activism about water in the run up to the UN World Water Day in March.  Sustainability First’s New Energy and Water Public Interest Network (New-Pin) is exploring these issues.   At a workshop later this month New-Pin will be asking how far market approaches can deliver desired long-term public interest outcomes such as fairness in energy and water supplies.