Response to the ENA Consultation on Future Worlds

Transcription

1 Response to the ENA Consultation on Future Worlds For discussion please contact: Daniel Mee, +44 (0) The Energy Systems Catapult The Energy Systems Catapult (ESC) supports innovators in unleashing opportunities from the transition to a clean, intelligent energy system. We are part of a network of world-leading centres set up by the government to transform the UK s capability for innovation in specific sectors and help drive future economic growth. By taking an independent, whole energy systems view, we work with stakeholders across the energy sector (consumers, industry, academia and government) to identify innovation priorities, gaps in the market and overcome barriers to accelerating the decarbonisation of the energy system at least cost. In doing so, we seek to open up routes to market for innovators, as well as supporting them to understand how their products, services and value propositions fit into the transforming energy system. We are a public-private funded, non-profit organisation that seeks to leverage our core grant funding with the private sector to enhance our capabilities and directly support innovators across the whole energy sector from power, heat, transport and industry to energy infrastructure. We support innovation and share best practice at local, regional, city, national and international levels. Executive Summary 1. We welcome the ENA Open Networks initiative. Understanding the potential of new technology and services to improve the outcomes for consumers and society is an essential area of focus for networks. 2. We believe some of the tools and capabilities that the ESC has developed could be helpful in informing Future Worlds analysis. We would be willing to explore further collaboration. 3. We have made suggestions in this response where the analysis may be broadened for it to be genuinely whole systems in scope. We also believe that some additional Future World options could usefully be considered. 4. There is an opportunity to use formal, systems engineering approaches to facilitate a smooth requirements capture, analysis and implementation process, with change management techniques speeding up complex interactions. 5. SGAM is a useful presentation method but focused on electricity only, so may need to be supplemented to enable full consideration of multi-vector dimensions. We have scrutinised SGAM as an approach in our previous work. The comments and responses to the consultation questions below build on our previous work.

2 Section 2 Questions 1. We have set out five potential Future Worlds. Do you believe these provide a reasonable spread of potential futures? 2. Are there other areas of potential Future Worlds you would like us to consider to inform our thinking? 3. Do you have any key concerns with any of the Future Worlds we have set out? 1. The five potential Future Worlds provide a reasonable spread for considering the requirement to procure flexibility, but some of the worlds could have a broader scope. We believe some additional possible futures could usefully be considered. The ESC proposes some additional possible futures which are described in the response to the next question (2). We also have some comments on the implications of the worlds put forward (3). Previously the ESC developed some ways of viewing the spread of the attributes of possible futures against a framework of dimensions of difference 1. Considering the purchase of flexibility on a standalone basis might miss out on the opportunity to make more significant contributions to some of the biggest challenges the energy system faces e.g. decarbonisation, increasing customer value and promoting decision-making through market forces. Therefore, the ESC recommends that the work on future worlds is considered as part of a broader scope which includes changes to the capacity market, the procurement of goods and services, the impact of service provisions, the internalisation of carbon costs and the development of new market structures. Ofgem has recently consulted on future network access and charging arrangements and is proposing a Significant Code Review. We would expect the SCR and development of the Future Worlds to be closely aligned. 2. The ESC s own thinking on potential future market architectures 1 suggests that other potential futures or dimensions could usefully be considered. A new type of service model could emerge in the retail space where provision of energy services (e.g. energy as a service, heat as a service etc.) would be mediated through and integrated by consumer/customer-focused Energy Service Providers. This Energy Service Provider could take on the majority responsibility for balancing supply-demand etc. with signals driven from a DSO to influence on network constraints etc. There are options around whether those signals can also influence location of injection of, for example, reactive power or if a local reserves operator is still needed to balance. This organisation would provide a set of functions similar to the flexibility operator in World E but with the 1

3 additional responsibility of delivering outcomes to consumers (and with an additional responsibility to deliver the government s decarbonisation strategy. Re-bundling retail and distribution as a model is one that would may also be worth considering. A combined retailer / distribution owner, similar to those in other European countries and beyond, seems to have merits and would allow an integrated organisation to begin to deliver electricity to end-users with full knowledge of the constraints on the network (and potentially developing pricing models that would reflect that). There are potential political and legal barriers to such an approach, so a less contentious model might work where the unbundling remains in place, but consumers have a separate contract with the distribution network to allow for contract terms around demand-side to be negotiated and delivered. World D could be extended to allow the Electricity Systems Operator (ESO) to be responsible for everything described and the provision of sufficient capacity. 3. The ESC recommends considering a consumer-centric approach and a review of some of the challenges inherent in the worlds. The ESC thinks that the Future Worlds described could give more consideration to the impacts on the end-consumer. Challenges such as, Who has responsibility to ensure that customer wants and needs are balanced versus the need to offer network operator flexibility services? do not appear to have been considered fully. In particular, consideration could be given to: Consumer engagement: Do any of the worlds suggested have a more or less likelihood of engaging with consumers. In this context, it would be helpful if consumers were not considered to be homogenous but rather that there are those with different needs around protection, vulnerability considerations, willingness and ability to pay, desired outcomes, level of interest. 2 Decarbonisation: In each of the worlds it is not clear how the impact of carbon is internalised. Who has responsibility for balancing costs versus greenhouse emissions? It would be good to describe, in each of the worlds what the assumed policy approach to require / incentivise decarbonisation. Interoperability: Through smart appliances and other interoperable technology 3, it seems that there will soon be the opportunity for more demand side flexibility. It is, broadly assumed, that time-of-use (ToU) pricing could lead to smoothing the demand curve, however, it would be interesting to see if one future world enables more or less flexibility. For example, today the peak period is approx. 16:00-19:00 on a winter s evening, however flexibility may, in the future lead to a dynamic peak (where the peak period moves and is based on the difference between supply and demand alongside network constraints). Multi-Vector: In the longer-term, energy vectors will become increasingly interconnected 4, such as through gas boilers hybridised with electric heat pumps, petrol engines hybridised with batteries for vehicle motive power, multiple energy conversion assets in heat network 2 See pages of

4 energy centres, etc. At times of electrical system stress, it should be possible to switch gas/electricity hybrid heat pumps to operate on gas for short periods, thus creating electrical demand reduction. Without hybrid solutions, the demand for electricity will become both larger and more volatile. The ESC recommends that a more multi-vector view is taken, considering at least; electricity, gas, heat and transport networks. Section 3 Questions 4. Is there anything missing from the SGAM methodology that have been implemented? 5. How can SGAM modelling be used in further work to extract maximum value? 6. What are the limitations of using the SGAM modelling for informing the Impact Assessment? 4. SGAM could be broadened to include other energy vectors SGAM is currently limited to electricity. It could be extended to cover gas, heat and transport fuel vectors to provide a more powerful whole-system view of the world. Flexible and demand side services could be better explored if they extended across multiple domains. The ESC has used Sparx Enterprise Architect 5 in its work around architecting future possible energy systems (focused around market arrangements). We would be happy to share its methodology on using a formal development approach for capturing multi-vector requirements. It may be useful to note we started with development using SGAM but ran into issues as we tried to expand the work. Therefore, we used the more generic, Model Based Systems Engineering (MBSE) approaches using SysML and UML and then converted the outputs to SGAM for communication to accommodate the presentation of our findings to a broader industry audience. Our experience may be helpful as you explore these worlds in more detail. 5. SGAM is a useful presentational tool SGAM is useful for discussion with interested parties across the sector and the diagrams should be used in future working groups. 6. SGAM is effective at communicating concepts and high-level interfaces. SGAM describes things at a very high level of abstraction but it is hard to develop more detail in either business models or technical products. The ESC has been using Sparx EA (as has the Future Worlds team) but we have developed in SysML and used the SGAM plug-in as a 5

5 communications tool, linking more detailed work to a higher-level representation to suit our discussions. The ESC would be pleased to share its insights today on this if it would be helpful. Finally, SGAM models are difficult to assess or validate for efficacy and the ESC recommends more detailed simulation approaches are taken before real world trials are carried out (saving considerable time and money to find solutions which are more likely to be successful). Here the ESC has developed the capability to take the work designed in EA and incorporate into simulation tools to provide rapid feedback. Again, we would be pleased to share our insights into this work (a paper is due to be released soon describing the work in this area). Section 4 Questions 7. How do you believe neutral market facilitation for SOs can be achieved? 8. What are the possible conflicts of interest that SOs need to be aware of when facilitating the market? 9. What additional requirements would be appropriate to ensure the neutrality of SOs in facilitating the market? 7. Neutral market facilitation could be driven through a transparent trading mechanism. The ESC has been working on possible market structures for the future 6 and believes that the key to neutral market facilitation is predicated on the ability to transparently trade between as many parties as required. An interface (to be co-created in the future by the market stakeholders) would help to alleviate the many-to-many organisation challenges. In one possible view of the future consideration could be given to the many aspects of commodities to consider when trading. This includes costs (capital, operational, marginal etc.) and also carbon impact, dispatchability, responsiveness (i.e. the ability to ramp supply/demand up and down) etc. These properties can then be balanced on the open market and driven by clear policies (including incentives/disincentives etc.). The key here is that any provider can offer their services and any purchaser can buy what they need to satisfy their objectives. There seems always to be a need for a residual purchaser of assets for last resorts or 1 in 20 type events such as the Beast from the East etc. to make sure there is sufficient capacity for rare occurrences. Traditionally, this has been provided by the systems operator and the capacity market, but additional consideration may be required to understand how this function is maintained in a neutrally facilitated market. Note that there will always be a need for mitigating localised issues such as congestion, and national issues such as frequency management and the neutral facilitation must either seek to utilise, replace or support such measures. 6

6 8. A possible conflict exists with: a. Minimising costs to end consumers but ensuring there is sufficient contingency for rare occurrences. b. Proactive preparation for disruptive technologies As briefly described above, rare events happen and although flexibility seems to be a positive approach to deferring reinforcement and increased generation costs to consumers there still needs to be a balance between using flexibility as answer to these challenges while still provisioning for corner cases, for which flexibility might not be enough. Additionally, we know that some disruptive technologies are coming. Connected homes, electric vehicles and electrified domestic heating arguably being the most likely. These technologies bring the perfect storm of being mass-market (and therefore bringing less diversity and more homogeneity), having the ability of creating large swings in power use (potentially synchronised by pricing/other control signals) and having the ability to be incredibly fast. For the consumer, these are undoubtedly huge benefits but for the physics of the electricity system they are likely to be in conflict. Procurement of flexibility services need to be considered in the context of the commercial, social and physical behaviours they will encourage. It is important to adopt a whole system perspective when developing policy and regulatory measures for Distributed Energy Resources (DER). For instance, the optimisation of power system storage requires multiple effects to be considered across the supply chain, both technically and commercially. Electrical storage connected at the transmission level may not help to defer investment in the reinforcement of a distribution network and therefore a whole system approach is required. One factor that will limit the deployment of storage is the need to achieve a significant number of charge/discharge cycles per annum. If this does not happen, then the fixed costs must be recovered over a small volume of energy delivered, making it financially unattractive. 9. No additional comments These requirements are implicit in the responses to questions 7 and 8. Section 5 Questions 10. Which SGAM actor(s) best describes your future role(s)? 11. Do you have any thoughts on the insights gained on this role(s) in each of the Worlds? 12. Do you have any comments on the insights drawn on any of the other roles described? 13. If you do not feel represented by any of the actors, how do you believe we should capture your role?

7 10. N/A 11. N/A 12. Non-physical actors are not considered. The ESC notes that non-physical actors are not considered in the summary models. For example, non-physical traders generally inject some liquidity into traded markets but are excluded. 13. N/A Section 6 Questions 14. Do you agree with the proposed approach and timescales for delivering the assessment? Are there any improvements you would suggest? 15. Do you agree with the proposed assessment criteria and allocation into cases? What further development would you suggest to the criteria (e.g. any additional criteria) or structure and content of the Impact Assessment? 16. Is there any data you could provide or suggest we collect to support the assessment? 17. Do you believe that there are any tensions between different criteria and if so how should priority be built into the assessment? 18. Are there any functions/roles that need to be considered as a priority area for assessment? 19. We are considering forming a sub-group to assist with the collation of data for the Impact Assessment; do you think this would be worthwhile and if so would you volunteer to be part of the sub-group? 14. The assessment period seems short to assess the feedback from this consultation. The ESC recommends that sufficient time is allowed to properly incorporate feedback from this process. Two weeks seems short particularly if any of the feedback requires further conversation. It would seem appropriate to consider the outcomes of other projects/programmes such as Ofgem s recent consultation: Getting more out of our electricity networks by reforming access and forwardlooking charging arrangements (published on 23 rd July 2018). 15. The criteria seem to be described at the highest level. We are not sure sufficient detail has been provided to be able to provide comments on the criteria. For example, for the item described as Facilitates decarbonisation of electricity generation: ability of

8 each world to support the decarbonisation of electricity generation. It is difficult to understand how each World will be assessed? What will be considered to make this assessment? How flexibility is purchased might impact: 1. The uptake of a particular low-carbon technology 2. The type of generation that is favoured to be built (and how much carbon it emits) 3. The dispatch priorities of different technologies to manage system inertia, dispatchability etc. 4. The operation of equipment across multiple vectors (e.g. different incentives and price signals might mean that hybrid vehicles or heating solutions run on one vector versus another) The ESC recommends publishing the criteria for comment whenever possible. This will boost transparency and give confidence that bias is minimised wherever possible. 16. We have some capability which may be helpful in this area. The ESC recommends that simulation of future possibilities is a potential way to be able to demonstrate the impact of possible decisions. The ESC has been developing a capability to do this work for the Energy Technologies Institute (ETI) called EnergyPath Operations and would be happy to discuss with the ENA how this could help the assessment process. 17. There are tensions that should be considered. Current methods of procuring generation drive to the lowest cost (see the capacity market auctions) and that doesn t necessarily deliver the best outcome for decarbonisation. In the first instance we believe that focus should be placed on individual assessments against the criteria but a weighting against the criteria will allow for prioritising conflicts. 18. N/A 19. The ESC is happy to support where it can.

9 Section 7 Questions 20. This is the list of key enablers that we have identified: Regulatory changes, Organisational changes, Communications infrastructure, IT systems, Network visibility and control, Market engagement, Contract requirements, Funding. Are there more key enablers that we should be considering? 21. Do you agree with our short-term investment priorities relating to the key enablers of: communications, IT and network visibility & control? 22. Given our short-term priorities, what actions do you consider need to be taken now to address them? 23. Considering the different DSO model Worlds that Workstream 3 has considered, do you think the key enablers differ materially between the Future Worlds? 20. N/A 21. N/A 22. N/A 23. World E looks to require significantly more organisational and regulatory change Following assessment of the worlds it should be possible to weigh up impact against complexity of implementation. A bigger change might be desirable if it brings greater benefits.

10 Section 8 Questions 24. Do you agree with the proposed next steps? 25. The Open Networks Project is prioritising areas of least regrets to deliver the benefits of a smart grid as soon as possible. Is there a specific activity within the functions that we have prioritised that you would like us to focus on for short-term delivery? 26. Is there any additional work that we need to undertake? 24. The dangers of pursuing least regrets There is always an issue that the pursuit of least regrets means that common areas are pursued first, rather than areas which have the greatest impact. Additionally, some benefits will only be realised once multiple changes have been made. Some least regrets work will look less beneficial because some of the other work will be more regrettable and therefore left until later. The ESC recommends a whole-systems approach which seeks to co-create the view of the future world and then develop a pathway to get there. 25. Concentrate on long-lead activities first. Further to the points above, it would make sense to consider the longest lead items for kicking off first. Given the time required to enact policy changes then it might be prudent to understand these in the first instance and then market structure changes. This underlines the importance of first establishing of system-wide, holistic view of the potential system changes. 26. N/A