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The power of consumer choice

By Caterina Brandmayr  

This article was produced in association with Shell

Find Prospect’s full report, “The Future of Energy” here

Small-scale energy technologies are shaking up the energy system. More people are choosing rooftop solar, storing self-generated energy and buying electric vehicles (EVs), with consequences for how the power system is run. What we are seeing is a new era where consumer choice will lead to the widespread adoption of low-carbon technologies. The days of consumer engagement just being about choosing which major power company to buy energy from are over.

As Green Alliance’s recent report “People Power” states, policymakers are not keeping up. They still operate under the assumption that large-scale power generation will continue to dominate. Yet, while large-scale power will still provide the cheap, reliable, bulk power the country needs, consumer-led technologies are increasingly disrupting the energy market, even if they will supply only a fraction of the UK’s energy needs.

Falling prices will make it cheaper for businesses to generate their own solar and wind power rather than just rely on the grid as early as 2020. IKEA is already ahead with 61 per cent of its energy from renewable sources. And, for homeowners, solar on rooftops and electric cars will be cheaper than grid electricity and conventional cars by 2025.

But it would be a mistake to see this as only cost driven: imitation and status are often as important as economics. Tesla is the biggest player in the United States luxury car market because it is providing a product that consumers like. This is an attractive market: more like buying an iPhone than paying a utility bill.

The choice for government is whether to plan ahead or just respond to the changes as they happen.

If it chooses to take a reactive approach, 21st-century technologies will force their way into a 20th-century energy system, with less than desirable results. This could cause grid congestion, expensive, short-notice network upgrades and rising peak demand. This is due to the defaults in our power system: EVs are often charged at peak times, solar feeds energy into the network when demand is low and energy bill structures reward consumers who self-supply during the summer months, shifting the cost of the grid to people who don’t own renewable generation.

Experience from abroad shows what this approach can lead to. In Nevada, a clampdown on rooftop solar to counter its impact on the local power system was met by consumer backlash so vocal it featured in the US presidential campaign, and ultimately resulted in the grid administration being sacked and the clampdown reversed.

This future is not inevitable. A pro-active approach, where government policy keeps in step with technology developments, would be better for everyone. In California, smart EV charging keeps the lights on by reducing demand when the grid is under stress. Germany has incentives for using batteries and rooftop photovoltaic panels (converting energy from the sun) together, so consumers can generate their own energy while supporting the grid. In the UK, EVs and heat pumps could provide
82 per cent of the National Grid’s frequency response needs by 2030, and EV batteries could provide power to back up the grid for up to seven hours at a time in 2025.

Much response to our report focused on the technical issues, especially our point that charging a cluster of EVs at peak time could be disruptive for local power networks. But the main challenge is not a technical one. Smart charging, batteries and demand management can solve the technical issues, enabling low-carbon energy and transport to be scaled up quickly and help tackle climate change and air quality problems.

The real challenge is political. We have the technology, but not the regulation or policy to use it well.

Four key interventions are needed: the establishment of an independent body to inform system design across electricity, transport and heat; new distribution system operators, so local grids can be managed more smartly; access to flexibile markets for small-scale energy, so the UK can replicate California’s EV success story; and mandatory standards for smart charging and appliances, so energy aggregators can use consumer energy technologies to support the grid by default rather than disrupt it.

The UK has all the right ingredients to take advantage of these small-scale consumer technologies: world-leading research institutions, a vibrant tech community, a strong manufacturing sector for renewables and now EVs, and a burgeoning consumer market for low-carbon options. The government should act now to support a clean, consumer-led energy future.

 


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