SMART GRID DEVELOPMENTS IN THE UK CLEAN ENERGY, GOOD GOVERNANCE AND ELECTRICITY REGULATION CAPE TOWN MAY 2010 DR GILL OWEN, PROJECT DIRECTOR,SERN, WARWICK BUSINESS SCHOOL, UK

OUTLINE OF PRESENTATION Role of REEEP and SERN UK sustainable energy policy context UK policies for renewable energy, energy efficiency Smart meters Smart grids

WHAT IS REEEP ? Renewable Energy and Energy Efficiency Partnership -Initiated by UK at World Summit on Sustainable Development, 2002 Coalition of progressive governments, businesses and organisations - to tackle policy and financial barriers to energy efficiency, CHP and renewable energy – sustainable energy Aims to improve energy security, foster economic growth, support greater social equity and reduce environmental impacts of energy consumption and production.

SUSTAINABLE ENERGY REGULATION NETWORK(SERN) Sustainable energy regulation network (SERN) - for those involved in energy market and monopoly regulation - regulators, government departments and other stakeholders. Facilitates information exchange between regulators and others to : secure greater understanding of the benefits of energy efficiency,renewable energy and distributed generation (sustainable energy) secure regulatory mechanisms that incentivise sustainable energy SERN activities : Policy and regulatory review; good practice guides & case studies;E mail network and database; training and capacity building

UK SUSTAINABLE ENERGY POLICY CONTEXT Climate Change Act 2008 commits the UK to at least an 80% reduction in greenhouse gas emissions by 2050, compared to 1990 levels. The Government has put in place a set of five year carbon budgets to 2022 and set out action plans to achieve the targets within those budgets (July ‘The UK Low Carbon Transition Plan – National Strategy for Climate and Energy’) Despite change of Government in May 2010 this context unlikely to change significantly – cross party agreement. Range of policies for different sectors (households, businesses etc) and for energy efficiency and renewables – these may be subject to some change.

UK RENEWABLE ENERGY POLICIES The UK has signed up to the EU Renewable Energy Directive - a UK target of 15 percent of energy from renewables by Electricity target is 30%. Equivalent to a seven-fold increase in UK renewable energy from 2008 levels: the most challenging of any EU Member State. Policies include the Renewables Obligation (since 2000) and now (2010) feed-in tariffs for small scale renewable electricity. Renewable heat incentive (feed-in tariff for heat) from 2011.

ENERGY EFFICIENCY POLICIES Carbon Emissions Reduction Target (formerly Energy Efficiency Commitment - since 2002). Electricity and gas suppliers have targets to reduce energy use and emissions amongst household customers – subsidise energy saving measures to achieve this. Main measures have been CFLs, loft and cavity wall insulation. Previous and new Government have plans to scale up investment in energy saving via whole house upgrades – probably delivered via energy suppliers. Looking for integration of incentives for renewables (feed in and RHI) and energy saving – links into smart grid idea.

KEY CONTEXT FOR SMART GRID DEVELOPMENT - SMART METERS EU Energy Services Directive – May Requires accurate and informative metering – a key driver for smart meters. All businesses and homes should have gas and electricity smart meters by 2020 – consultation on roll-out model. The Government’s Meter Impact Assessment identifies energy savings (via improved feedback and new tariffs that incentivise demand response)as the largest economic value in the overall analysis of benefits from smart meters.

WHAT IS A SMART METER ? Measures energy consumed - quantity and when Two-way communication – meter-supplier Stores data electronically and transfers it to a data collector / utility Can facilitate various tariff options e.g. time of use, rising block etc – to incentivise demand response Can have a user friendly customer display for consumption and tariff information conveniently located – again helps stimulate demand response Meter on-site generation (e.g. small scale renewables) – link to feed-in tariffs

UK SMART GRID DEFINITION A Smart Grid can integrate actions of generators and consumers to deliver sustainable, economic and secure electricity supplies.A Smart Grid employs communications, innovative products and services, intelligent monitoring and control technologies to: Facilitate connection of generators of all sizes and technologies Enable demand side to play a part in optimising the operation of the system Provide consumers with more information and choice Significantly reduce environmental impact of electricity system Deliver reliability, flexibility, quality and security

CHALLENGES DRIVING SMART GRID DEVELOPMENT Smart grids could enable a radical change to power system and accelerate carbon reduction. Enable demand-side response - fast alternative to carbon-intensive generation and reduce need for grid reinforcement. Lower cost of low carbon transition. Help provide cost-effective management of intermittent renewables and integration of transport and heating electrification Facilitate real-time balancing – will become more important due to intermittent generation, Energy security - increasing network capacity to manage technical risk of connecting new generation and changing demand patterns

LOW CARBON NETWORKS FUND 2009 Distribution Price Control Review (DPCR5) by Ofgem – to establish incentives, revenues and expenditure allowed for the Distribution Network Operators (DNOs) from Included a £500m Low Carbon Networks Fund to support ‘large-scale trials of advanced technology including smart grids’ Bids for the Fund have to be led by DNOs DNOs encouraged to partner with suppliers, generators and others to explore how networks can facilitate take up of electric vehicles, heat pumps, micro-generation and demand side management, and the opportunities smart meters will provide to network companies.

CONCLUSIONS Smart grids attracting a lot of interest, given their potential to assist with two key energy policy goals – security and reducing carbon emissions Key potential is to integrate demand and supply side to deliver energy security and a low carbon economy cost effectively Developments in the UK, as in most other countries, are at an early stage Installation of smart meters and policies such as the Low Carbon Networks Fund (many countries have similar initiatives) should help to make the transition.

CONTACT DETAILS Dr Gill Owen, Project Director, SERN Centre for Management under Regulation, University of Warwick Business School, UK To join SERN - send an E mail to