In previous posts we have devoted a good deal of attention to DECC, the Department of Energy and Climate Change, but very little to its sister agency Ofgem, the Office of Gas and Electricity Management, which regulates the UK gas and electricity markets in the interests of the UK consumer (website here). But Ofgem too has its goals and strategies for a low-carbon future, and here we will take a brief look at them. I should perhaps mention before proceeding that this post is an outcome of an Ofgem article Hugh Sharman sent me, which Hugh says left him incapable of a coherent response.
Where Ofgem lives (image credit editoreye)
In September of last year Ofgem published a Position Paper in which it described its mission:
To deliver against our carbon commitments, while providing reliable and secure supply at minimum cost … to make a positive difference for energy consumers through independent regulation ……… to make networks more flexible and to provide residential consumers with new tools to manage their energy use through smart meters.
…. expressed dissatisfaction with the energy companies it regulates:
Against this background of ongoing change, consumers also face more immediate pressures from rising prices, poor customer service and, too often, serious failures by energy companies.
… and went on record as stating that the government’s strategy of ensuring security of supply by constructing more gas-fired plants, nuclear plants and interconnectors, as set out in the recent DECC Single Departmental Plan, isn’t going to work:
…. when there isn’t enough supply to match demand, we generate more and build more cables to carry it. As we decarbonise, simply building more power stations and cables to meet demand when the wind isn’t blowing, or the sun isn’t shining, is neither sustainable nor efficient.
One gets the impression that Ofgem is less than happy with the direction UK energy policy is taking. This is not surprising because Ofgem believes that demand-side management – smart meters, smart grids, flexibility, battery storage, asking people kindly to turn off their kettles, computers, TVs, offices, factories etc. – is the logical solution to meeting demand when the wind isn’t blowing or the sun isn’t shining, and the position paper linked to above describes Ofgem’s vision of how this is going to work. The entire document is worth a read if only because it demonstrates how like-thinking people bouncing ideas off each other soon become detached from reality, but unfortunately I only have the space to hit the high points in this post.
First the problems as Ofgem sees them:
Simply building power plants to meet expected peak demand and to manage greater variations in supply (known as intermittency) from renewable sources, would mean having a lot of excess generating capacity during most of the day, and long periods of the year. This is expensive and inefficient.
If we don’t modify our consumption patterns to use or store energy when it is available, e.g. at times of high renewable generation (such as sunny or windy days) with low demand, some low-carbon generators may have to be ‘constrained off’ at a cost. We are already beginning to see this happen.
We also need to be able to make the most of times when we generate more than we need.
Here we have a succinct summary of the problems of intermittency that mirrors much of what Energy Matters has been saying, although it’s a little light on detail. Ofgem’s solutions, however, aren’t quite the same as ours:
We can use batteries to store electricity when it is plentiful, or when there is too much for the network cables to carry.
Consumers can make more informed choices about when they use electricity. For instance, businesses could make small changes to when they use air conditioners or other appliances, in order to make savings.
We can also use low carbon electricity which we generate locally at home or at work – for example from a rooftop solar panel – to help reduce the costs of transporting it and save us money on bills. In future, buildings could be designed to include generation and energy storage, so that people using them can manage their electricity to make savings.
We can of course do all these things, although it would be nice if Ofgem provided some numbers to show how doing them will keep the lights on. But nowhere in the Ofgem position paper is a single number to be found.
Most remarkably, energy storage is identified as a legal issue. Ofgem appears to be totally unaware of the physical magnitude of the storage problem:
However, there are several issues which could act as barriers to storage developing and reaching its full potential in the near term. In particular, the regulatory/legal classification of storage is unclear. Storage can be classified variously as “consumption” and/or “generation” and/or “supply”. This creates regulatory challenges ….
Ofgem provides us with this graphical summary of their vision of what “smart” looks like. Consumers will become “empowered” and “engaged”, providers will “seize the opportunity” and innovation will flourish in a “dynamic market”. According to Ofgem the result will be a low-carbon economy with enhanced security of supply, although exactly how tomorrow’s empowered and engaged consumers will unite with their opportunistic providers to create these outcomes is again left unspecified:
And for those who like flow charts there’s this graphic. Note all the little green battery icons that keep everything running, or will do so as soon as the legal and regulatory obstacles that explain why there presently is no worthwhile amount of installed energy storage capacity in the UK are removed:
But anyone looking for a quantitative analysis of how this flexibility mechanism is going to work in practice will be disappointed, because Ofgem doesn’t supply one. The absence of any kind of backup data anywhere in Ofgem’s paper in fact makes one wonder exactly how far Ofgem has got in its investigations. And we don’t have to go very far before we find that they still haven’t made it to first base. They’re still trying to decide what the issues are:
This year we conducted work to understand what issues should be addressed to facilitate the use of new flexibility sources across the value chain. This position paper sets out our findings and next steps.
And what are the next steps? Begin reading on page 23 of the position paper. Continue to page 46. Then there will be a quiz.
The Ofgem paper does, however, contain an important take-home message, even if Ofgem hasn’t picked up on it:
More work needs to be done to make these (demand side) approaches part of everyday life.
To make these approaches part of everyday life. Now we get to the heart of the matter. To make demand side management work people must change their lifestyles. Will they? By paying them enough money it might indeed be possible to induce them to watch television only during the early morning hours of a summer Sunday, to discharge EVs back into the grid whenever the wind stops blowing and to shut down offices and factories before the electricity supply dries up on a cold winter evening. But peak demand isn’t something that arose with the advent of electricity. It began when prehistoric man first kindled fire as the sun went down, and reversing a human instinct this deeply ingrained isn’t going to happen overnight, if it happens at all. What Ofgem is in fact proposing isn’t demand-side energy management at all. It’s social engineering.
Yet Ofgem has no doubt as to the outcome:
But system needs and consumers’ needs can and will change.
This is a curious, even frightening position for a regulatory agency to take, particularly when it seems to have nothing other than pipe-dreams to back it up.
One final point. Ofgem is empowered as a regulator not only by the UK but also by the EU. I haven’t checked to see what additional powers this might give them.