The PSI Blog
4 March 2015
The benefits of being 'smart' about our energy future
The World Energy Council coined the term ‘the energy trilemma’ as a way of describing the tensions between our need for ensuring our energy supplies are secure, affordable and low carbon. In the UK, the decline in North Sea oil and gas production and steep rises in consumer prices in recent years have brought energy issues back into the political foreground – and in a radically different context from that seen before the industry privatisation of the 80s and 90s. The pressing need both to reduce our carbon dioxide and navigate the economic mire caused by the 2008 financial crisis leaves politicians and policy makers pulled hither and thither by a cast of characters ranging from international oil and gas companies to fuel poverty campaigners all jostling for influence.
Meanwhile, a number of big power generators – mostly coal-run, but also older nuclear power stations – will soon be reaching the end of their working lives, leaving a shrinking gap between the country’s demand for power and its ability to meet it. Building more power stations has been the traditional solution, but we could also use our existing infrastructure more effectively – be more ‘smart’. Slightly at risk of using the term as a catch-all (and laughing in the face of syntax), the Smart Grids European Technology Platform understands smart grids as ‘electricity networks that can intelligently integrate the behaviour and actions of all users connected to it – generators, consumers and those that do both – in order to efficiently deliver sustainable, economic and secure electricity supplies’. This refers to a raft of technologies and practices that together optimise the way the energy system works. This could mean changes such as smarter meters, new power company business models, time-of-use tariffs, new network technologies and improved ways of using data.
It is hoped that these changes can enable us get the most out of the parts of the system that already exist, as well as integrating new elements, like rooftop solar panels and electric vehicles, to take maximum advantage of their characteristics. Some technologies can act as storage devices or generators, reducing the drain on the national electricity system by meeting local demand. Others may allow network operators to gain a better understanding of the power flows along the low-voltage networks – something of which little is currently known. In this way, smart grids could reduce our energy usage, shift usage around across the day (or even the season) so that demand peaks are smoothed out, and find ways to increase the proportion of renewable energy on the grid without compromising reliability of supply.
Culminating in February 2014, Dr Nazmiye Balta-Ozkan led a two-year research project at PSI examining how the future of smart grids in the UK might look. Our aim was to build four scenarios, taking numerous aspects of the energy system into account, including government policy, consumer views, data and information flows and technology – and we hope this will help policymakers consider the often far-reaching implications of decisions made today. This has particular significance in energy policy, where decisions about new plant and infrastructure are commitments that last decades, and often strongly influence the range of future options available.
There were two broad areas to the research – data collection and scenario development. A group of experts was interviewed about the benefits and pitfalls of smart grids, as well as their expected functions and barriers to achieving them. The results were then used to formulate a further survey expanding on these issues. Finally, public workshops were convened to find out about how people used energy, before presenting four scenarios about the future of smart grids:
- Minimum Smart: Where a lack of coordination and long-term visions, combined with weak consumer acceptance of smart technologies and demand-side measures, restricts meaningful smart development.
- Groundswell: Where strong consumer interest causes rapid growth in community and local authority-run electricity generation and even some local network management.
- Smart Power Sector: Where consumers are resistant to changes in the way they use energy and smart techniques are only applied by power companies ‘behind the scenes’.
- Smart 2050: The upper boundary, where well-coordinated and coherent policy action builds consumer interest, resulting in a greater number of smart grid-support services.
What did we learn?
First, a wide variety of outcomes is possible with very different implications for achieving policy goals. In particular, there could be critical ‘branching points’ in switching between future pathways – points at which decisions are made that influence the range of choice and the eventual outcomes.
Second, the implementation and acceptance of smart energy delivery for consumers is unlikely to be the same across the board. Different groups and localities will have different experiences, and so ensuring equitable costs and benefits will be a challenge.
Third, that the public is able to engage with these issues, but that there is concern around how costs may fall to consumers whilst the benefits accrue elsewhere, particularly to the power companies currently seen so unfavourably by the public. Related to this is a fourth point: there is a need to demonstrate clear benefits for consumers if they are going to be asked to share data (or even, in more advanced scenarios, allow some external control of their power usage).
Regulation of distribution network companies has thus far obliged them to focus on the incremental cost savings, which has acted to discourage riskier investments that may have system-wide, long-term benefits. A culture more accepting of risk taking that is both responsible and in the long-term interests of consumers may increase costs in the short run but could yield substantial benefits from innovation.
Finally, we note the importance of looking out for ‘no regrets’ solutions that might help mitigate uncertainty in the system. For example, this could mean using a more rigorous approach to energy efficiency, regardless of decisions made in other parts of the system.