Take back control?
Blog post from CEO at the REA (Renewable Energy Association) Nina Skorupska.
Bills, bills, bills
Recent Ofgem statistics say that the average dual fuel energy bill costs households £1,165 per year, while the cheapest available tariff was £834 per year. Being “in control” of how much you pay could mean just “switching” to the cheapest tariff and yet 45% of people don’t recall ever switching. (Note: one of the easiest ways to save some money, of more than a hundred pounds, is to switch from any “Standard” rate to the best in the market!). From this you could hopefully imply that 55% of consumers are engaged even if just from a financial perspective. The next question then is to ask what proportion of engaged consumers are concerned enough to choose “where” their energy comes from, for example, is it from renewable sources from their retail supplier or from generating the energy themselves - making them a Prosumer? Looking at the first option, there are now 48 active suppliers competing in the domestic market with many of the relatively new small suppliers offering a low carbon or completely renewable offering. So you can be in control of where your energy comes from just by switching suppliers to one such as Good Energy, Ecotricity or even Bulb.
Engaging with the energy system
Engaged prosumers though have taken advantage of renewable energy support schemes and there is no better example than the million plus homes and offices with solar PV now installed2. Communities have come together to own or support local renewable schemes that benefit not only climate change but the local people socially and economically. Local Authorities are the more recent organisations that have stepped up to the plate to deliver energy solutions. They have developed new business models that take advantage of their locally-owned technologies (such as energy from waste and solar). Interestingly, one of the key reasons for embarking on such a venture, of moving away from and competing with “traditional utilities”, is to address wider social challenges such as neighborhoods trapped in fuel poverty as well as addressing their low carbon and air quality goals. Whilst Local Authorities see the opportunity to commercially benefit from national government support schemes, their ambitions are prevailing even through the recent bonfire of renewable energy subsidies. The business case can remain attractive when bundled with their relatively low risk cost of financing.
Leading the way
Businesses, including many leading brand names such as Unilever, Proctor and Gamble and IKEA, have positively taken control of their energy choices. For example, they have gone so far as to publically state a 100% renewable energy future as their aim. Starting with a focus on renewable electricity, many are now turning their attention to tackle their low carbon heat requirements and transport concerns. Organisations such as the RE100, which bring together like minded committed organisations, have been a valuable voice to ensure that the UK does not fall behind and lose control of the important stages needed to tackle climate change.
In last year’s REview, we stated that the prospect of further decentralisation of energy generation is revolutionising the energy market. One year on this revolution is accelerating. What is driving this acceleration? The answer is all of the above, PLUS the tumbling costs for solar, wind and energy storage. This is combining with the real prospect that electric vehicles finally cut through as the car of choice for tackling air quality, while facilitated by demand side management technologies and the burgeoning array of improved energy management options for consumers in new affordable, efficient zero carbon homes. Many more people engaged in energy are now aware of these developments and are embracing the opportunities.
Ofgem have stated that 38GW of electricity generation capacity is connected to the low voltage grid, demonstrating the volume of small scale decentralised technologies entering the system. In the past, many of the “authoritative voices” argued that a secure future energy market can only be met by large scale energy technologies, yet they too are coming round to the fact that these developments will radically change the way the energy market can be regulated and operated. The Green Alliance in a very recent report called “People Power: How consumer choice is changing the UK Energy System” highlighted that the biggest difference between small and large scale technologies is that “small scale assets will be driven by unsubsidised choices of individual consumers and non-power sector businesses that results in a system that features multiple buyers and multiple sellers that will look much more like other markets for goods - (cheap and everywhere!), in contrast with the current energy market where individual consumers have almost no choice over what sort of power generation is built”.
There is no question that we are close to this tipping point, as the majority of the traditional utilities have already taken steps to reinvent their offerings in order to position themselves as service providers in this evolving market. There are different views, though, as to when this will occur and even how the system can be controlled.
So what is causing the different views? Refreshingly both Ofgem and the Department for Business, Energy and Industrial Strategy (BEIS) have started to ask the right questions. The “Smart Flexible Energy System” call for evidence and key chunks of the BEIS Industrial Strategy Green Paper focused on this opportunity. The feedback to them from stakeholders ranges from doom-laden messages of “connect too many EVs to the system and we will see rolling black-outs so we must reinforce all the networks” and “nuclear and gas are THE low carbon fuel combination and answer-to-everything”, through to more positive views. Such as creating the right regulatory frameworks that enable an energy market free of the constraining legacy “rules”, that provides clear and easy access to networks via proactive Distribution System Operators, to ensure the UK is at the forefront of benefiting from these new smart technologies. Of course, in a perfect world all homes/businesses will have the smartest meters NOW and consumers will have a clear understanding of how Time of Use Tariffs can truly benefit them and be in control of their energy choices.
Moving the converstaion forward
The REA has always argued that decentralised renewable energy for electricity, heat and transport is complimentary to any core low carbon centralised generation that is needed to replace coal and old nuclear in the future. Such systems must be coupled with smart energy storage solutions placed in a system that can adapt and reflect new developments. Such an approach gives control to the engaged consumer, as well as the regulator and Government to deliver a low cost clean energy future. This is what the REA said in the consultation responses to both the regulator and government. During conversations over the last year with influential groups and developers as part of the REA’s DECENTRAL activity, we also believe that these opportunities will move from pilot/demonstration to mainstream in the next three years. You will have to read REview 2018 to know whether what we have predicted here really starts to come true.
This article has been taken from REView 2017.