Sustainability First

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1 Scene Setting Smart meters, household DSR & the GB Electricity Markets Judith Ward Director.. The Smart Electricity Consumer London. 5 November 2014 Views expressed are those of. GB Electricity Demand - realising the resource 1

2 GB Electricity Demand Project Environment think-tank & charity. Three-year multi-partner project to assess : GB electricity demand-side resource - across all sectors of the economy. Scope for (1) demand reduction & (2) demand response incl role of Distributed Gen. Economic value of resource - to both customers & market actors year horizon. Strong practical focus : informed by our project partners (incl LCNF projects). Main focus : customer, consumer, commercial, regulatory and policy. Smart Demand Forum project coordination : Sponsors Northern Powergrid, Scottish Power Energy Networks, UK Power Networks, National Grid, British Gas, E.ON UK, EDF-Energy, Elexon, Vodafone, Siemens (E-Meter), BEAMA, Consumer Futures, Ofgem. Consumer bodies Citizens Advice ; National Energy Action; Which? Energy Intensive Users Group ; DECC 13 in-depth project papers GB Electricity Demand at GB Electricity Demand - realising the resource 2

3 Household Load GB daily household load profile (generic, by month). ~ 25 million customers ~90% of all customers. Distinctive morning & evening peak. Consume ~one-third of annual electricity by volume. Significant contribution to total evening peak (around one-half). = Lights, cooking, electronics. Impact of more new load? Heat? EVs? GB Electricity Demand realising the resource 3

4 Off-peak household load Generic household load profiles - Economy 7 & unrestricted customers : average kw demand by time-of-day. Heat : How a time-related tariff with automation can shift heat-load. Today, only ~2 million households heat with old-style night storage heaters. (So, <5% of households today). GB Electricity Demand realising the resource 4

5 Top priority electricity demand reduction Household electricity demand reduction a clear winner : for customer bills ; electricity system cost savings ; supply security ; carbon. EU product regulation - DECC expects major electricity bill savings (March 2013 document) 2020 : one-half of expected bill-savings (- 167 per customer p.a.) : two-thirds of expected electricity-bill savings (- 137 per customer). This is great if it happens. But, if not, also a major policy risk (non symmetrical). Potential for hike in household electricity bills : the cost-side is already committed (social & environment levies). Electricity demand reduction at peak - may deliver more peak benefit than peak-shifting. Recent studies for DECC suggest household reductions at peak could significantly out-strip likely reductions from DSR today. Capacity Mechanism EDR Pilot : Households? Ideally, yes. For peak savings, concerted focus on : lighting efficiency schemes ; product standards esp fridge-freezer replacement / scrappage. GB Electricity Demand - realising the resource 5

6 Why customer demand-side actions? To deliver cost savings in the electricity system (avoided costs) : Short-run operational spend System balancing. Fuel. Manpower. Long-run capital spend - Generation (peak, mid-merit flexible) ; Networks (T&D) Congestion-related spend today. Peak-related spend in future? All things being equal, we should look for demand-side delivery to cost less than the supply-side alternative (Demand-side costs : equipment, communications, transaction, benefit-share). Customers also need some benefit / reward plus continue to receive a high level of system reliability. Demand-side benefits might flow to an individual customer, to every customer or perhaps, somehow, shared between both. Carbon savings - in general, align w peak- & flexibility savings. GB Electricity Demand - realising the resource 6

7 Customer demand-side actions can take many forms Demand Time-shift load to a different period (lower-priced, reduce network bottleneck) Demand Less Consumption More Microgeneration A net load turndown (imight be from Load, Distributed Generation, output from storage, electricity efficiency) Time Time Demand Time-critical reduction (system stress, critical peak) Demand Load turn-up - when prices are low (incl input to storage) Time Demand Smooth general load shape Source : Adapted from ENA & Energy UK. Discussion paper on Demand Response Time Time GB Electricity Demand - realising the resource

8 Are GB electricity demand-side markets open to households? Once smart meters, no insuperable legal or regulatory barriers to household demand-side participation...(esp. post if half-hourly settlement). Pre-2020 : a key question is how far will half-hourly settlement be needed to measure & validate household customer demand-side actions : Complex dynamic tariffs will need halfhourly settlement. Simple dynamic tariffs may not (e.g. poss critical system peak). Balancing DSR services : need to adequately demonstrate delivery. This may be via metering - which may or may not be sophisticated. Or, may not be via the smart meter. GB Electricity Demand - realising the resource 8

9 Where does value lie in household DSR? (nb illustrative!) GB Electricity Demand - realising the resource 9

10 GB has the technical enablers for household DSR The GB smart meter programme will deliver technical enablers for household DSR from These include : Smart meters : from the outset designed to facilitate : e.g. ToU tariffs, block tariffs, a chosen load limit (eg 3 kw, 5 kw), maximum demand (capacity charges). Supplier software : enables billing for smart tariffs Data access (with customer consent) : for suppliers & for third parties (access to price info ; 10-sec usage data). Universal half hourly settlement - early discussion. Will enable more dynamic retail tariffs. Scope to automate control of load & home appliances via Smart meter-linked auxiliary load control switches & / or Compatible Consumer Access Devices & / or Direct into the home & not linked to smart meter (e.g. smart thermostats). Smart meters not sole route to customer : a plural GB household DSR market. GB Electricity Demand - realising the resource 10

11 But, is there a supplier business case? Today s main driver for suppliers to offer household ToU & other DSR is market differentiation. From 2016-on, supplier commercial drivers may start to change. Smart meters : better customer insight, potential for appliance control etc. So, beyond RMR, may see more bespoke targeting of new retail tariffs. Supply activity will carry more wholesale market price-risk esp if a poor contractmatch betw. wholesale power purchase - & actual customer usage due to : Wind - unpredictable mix of prolonged low-price periods & volatile flexibility prices. Regulatory changes - Cash-Out ; Settlement. If more arms-length generation & supply (possibly, greater within-day wholesale price differentials peak / off-peak?) Hard to know how this developing & uncertain mix for suppliers might shape their future approaches to management of their wholesale price risk and therefore what suppliers approaches to household DSR might be. Arguably, these risks may prompt suppliers (1) to reduce /smooth peaks and (2) beyond 2020, start to seek more by way of firm predictable customer response (so, to de-risk via automation, not voluntary ToU) - or, (3) both GB Electricity Demand - realising the resource 11

12 Today, suppliers have a lead-role in household DSR development Suppliers have : smart meters, direct customer access (supplier hub) plus, initially, control of smart-meter commands (via DCC) to switch large appliances on & off (ALCS). But new DSR actors also need fair access to customers. So, we need to discuss how best to : Give other actors access (if they wish) to DCC critical command arrangements for appliance control (eg access for Distribution Networks, Aggregators)? Enable a simple customer retail offer for a mix of DSR services. Are new DSR frameworks the answer? (Ofgem? Network Shared Services Framework?). All actors need a better forward-view of how the DSR market for households may develop. This is especially true for the innovation supply-chain. (see Paper 11. Household Electricity Demand-Side Innovation - w Frontier Economics) GB Electricity Demand - realising the resource 12

13 But, do household customers want DSR? Customer interest = lower bills Trials suggest that : Some customers are happy to engage (even where bill-benefits are modest). Suppliers could perhaps do more to put toe-in-water on offering basic static ToU tariffs (but care needed, where some customers may be worse off than now). Customer interest in DSR & customer safeguards : a main focus of today s workshop GB Electricity Demand - realising the resource 13

14 Local energy & demand-side what role? Community & Local Energy : much momentum & individual commitment - incl for households. BUT most DSR value / cost-saving potential - not presently at distribution level. Distribution network cost-saving potential from DSR is very location specific : - urban / very rural - & distribution peak - or congestion - related. However, community-level / local schemes important : Offer show-case / test-beds - esp if w DSR & / or storage (thermal, battery) as an offset to local wind / PV. Show how to make the demand-side work in practice commercially & institutionally. Beyond present community-level trials & pilots, successful replication of schemes able to produce better local match of supply & demand will need DECC & Ofgem to tackle in a systematic way key administrative silos & detailed charging arrangements (See Sustainbility First paper 10). GB Electricity Demand - realising the resource 14

15 Household demand side development : six goals & next steps 1. Customer affordability. Electricity demand reduction a concerted drive esp at peak. EU product regulation. Co-ordinated incentive arrangements. Upgrade - & smarten where appropriate : 0.5 million all-electric on-peak homes - & ~2 million Economy 7 customers. 2. Supplier-led toe-in-water for household demand-side e.g. voluntary ToU tariffs BUT - clear, fair & simple. 3. Do more to peak-sculpt cross-industry charges? consider how to incentivise suppliers more to develop customer retail-offers for peak-avoidance. 4. Manufacturers & supply-chain encourage an early market in automated controllable household load (but support what customers want - not what policy-makers think customers want!). If no large controllable loads by early 2020s, system costs will rise. 5. DECC to join-up policies, measures & incentives to smarten household electricity & tackle the silos : electricity reduction, insulation, household DSR, low-cost storage (incl thermal storage), micro-gen. The whole could add-up to so much more than its parts. 6. Local energy schemes continued support. Important show-case & test-bed for household demand-side. GB Electricity Demand - realising the resource 15

16 GB Electricity Demand project papers ( ) : GB Electricity Demand - realising the resource 4

17 GB Electricity Demand project papers ( ) : GB Electricity Demand - realising the resource 17

18 Contact GB Electricity Demand realising the resource Judith Ward Sharon Darcy Jon Bird & Rebekah Phillips, Clare Dudeney & Gill Owen Find all our project papers at Read our blog at : sustainability1st.wordpress.com info@sustainabilityfirst.org.uk GB Electricity Demand - realising the resource 18