By Jeff Hardy, LEAD for Policy, Regulatory and Market Enablers for Local Energy Systems, The Grantham Institute, Imperial College, London
Originally published in LinkedIn
I’m recently back from a two-week trip to New Zealand and Australia. Out there I was representing EnergyREV, particularly our work on the governance of smart local energy systems. Governance was certainly a big theme of my conversations, but the discuss ranged far wider. In this blog, I’m trying to piece together the jigsaw of this journey.
An unexpected party
- Tuesday – spent the day with Vector (the electricity distributor in Auckland) talking with their senior leadership team and giving a lecture to staff
- Wednesday – attended day 1 of the International Association of Energy Economists 7th IAEE Asia-Oceania Conference
- Thursday – spent a brilliant day with the New Zealand Electricity Authority giving public and internal talks and meeting with key staff
- Friday – breakfasted with Flick Energy (a retailer that does half-hourly settled pass through tariffs) and spent the day with the Commerce Commission, including giving a talk to staff
- Saturday (!) – gave a keynote at the IAEE conference and then went to Waiheke Island for networking (e.g. wine tasting)
- Monday – gave a talk to the five offices of the Australian Energy Regulator
- Tuesday – met with Local Volts and gave a talk at an Ausgrid (electricity distributor of Sydney and surrounding area)
- Wednesday and Thursday – Gave a keynote and chaired an amazing panel at the Energy Consumers Australia Foresighting Forum 2020
- Friday – flew home.
A blow-by-blow account of the above would be novel, not a blog. Here I pick out a few themes that caught my interest and that are relevant to our net-zero journey in the UK.
What are we paying for?
Many of you will know Laura Sandys. She is the driving force and thought leader behind our reports on Reshaping- and Redesigning Regulation. She was also the chair of the Energy Data Taskforce. You may not know that the final instalment of the trilogy is just getting going – Recosting Energy. There is a question at the heart of this – in a net-zero energy system, what are we (consumers) paying for and how?
This question chimed with thinking in New Zealand and Australia. In a future where carbon is eradicated from energy and variable output renewables comprise a significant proportion of the energy mix, the price of the commodity may be low if not zero. Getting energy from A to B free from constraints (but without overbuilding the grid) and activating the demand-side to suck up energy when it is plentiful and avoid consuming when it is scarce, become more important. In the future ‘optimal’ energy system it may make sense to consume more energy in order to pay less. This tallies with my experiments on Octopus Energy’s Agile tariff (see this Twitter thread).
This was explored in scenario work commissioned by Energy Consumers Australia and carried out by Matt Finch. In the “Plenty” scenario, Australian agricultural land has been rendered unproductive by climate change. It is repurposed to farm the sun and the wind and Australia becomes a net energy exporter to the Asia Pacific region via Sun Cables. However, in this scenario, domestic energy prices remain high because exports dominate.
As an aside, we heard a tale of mixed messages during the recent heatwaves in Australia. Government and health services recommended citizens stay inside and stay cool. At the same time, the energy system was under stress and asking customers to turn down demand (such as air-con). It isn’t always about price and what is best for one system.
Resilience in a net-zero energy system
Strongly related to the above theme, resilience came up numerous times over the course of my trip. This was particularly evident in Sydney, where after the terrible bush fires, a succession of storms and extremely heavy rain brought down trees onto power lines causing 160,000 customers to be off power. Energy system resilience in the face of increasingly extreme weather due to climate change is also an issue in New Zealand where rainfall has been in short supply over summer. Given that the energy system contains a high proportion of hydropower, dry years cause higher prices. Here in the UK are working our way through the alphabet of storms, cruelly timed to coincide with the weekend it seems. Resilience to climate change is a key challenge for all energy systems.
The meaning of resilience in transforming energy systems was also a key theme. Today resilience is strongly linked with security of supply of an essential service. In futures where consumers are able to satisfy some or nearly all of their energy needs (for example, more than 30% of Australian homes have solar panels, and an increasing number have batteries), does the grid become an insurance policy? And if so, how is it paid for?
Finally, Mark Bryne of the (Australia-based) Total Environment Centre provoked us all to think about the meaning of resilience. Resilience can mean harden, almost make unbreakable, or it can mean make flexible, adaptable. It feels to me like we are moving from the former to the latter definition in energy systems. And the faster we decarbonise, the more important the latter becomes.
“Why should consumers bend to what the energy systems wants?”
This was one of my favourite quotes from my journey. It was from Rosemary Sinclair, the most magnificent outgoing CEO of Energy Consumers Australia. Her point was simple, the energy system tries to impose behaviours on consumers – please adjust your consumption and energy habits for the benefit of the system. In other facets of lifestyle, businesses and sectors place the consumer in the centre of their product- and business-model design thinking rather than impose behaviours upon them. Consumers are not some amorphous mass to be steered.
Dr Jelena Dodic presented new research at the Foresighting Forum on the consumer vision of the future. This powerful work demonstrates that people have differing engagements with energy at different life-stages. The desire for engagement is there but must fit alongside other life priorities. The ability to engage is also contingent upon circumstances, like whether consumers own a property and transient phases such as becoming vulnerable (divorce, illness, etc). Professor Cameron Tomkinwise, an expert in design thinking made it clear that user-centred design involves businesses living and breathing proposition development with their customers. Don’t let the software designers design the software…
Net-zero visions and a social compact
Throughout my trip, there was great interest in the UK net-zero target and our vision for a net-zero future. Repeatedly I was asked whether we have a vision of the future.
My answer was no.
In the UK we have a target and we have expert advice from the Committee on Climate Change on carbon budgets and the scope of action required in meeting them. We do not have a shared vision of what the future is and what it means for the UK economy, citizens and businesses.
There was huge interest in the UK Climate Assembly, which brings together people from all walks of life to discuss how the UK should meet this target. The outcomes of these Assemblies will be presented to six Select Committees in Parliament who “will use them as a basis for detailed work on implementing the assembly’s recommendations, which will also be debated in the House of Commons”.
More often than not, conversations on my trip turned to the question of whether a social contract or compact, is needed. In Australia, there is growing momentum behind a New Energy Compact, an initiative of The Australian Council of Social Services (ACOSS) and the Total Environment Centre (TEC) with the support of Energy Consumers Australia (ECA). Its purpose is to instil a new vision and principles that reflect the values of people, is future-focused and is used by decision-makers to guide policy and reform for an inclusive, affordable, dependable and clean energy system.
It struck me that the principles outlined in this compact mirror to some extent those outlined in UKERC’s research into Public Values, Attitudes and Acceptability in the context of transforming energy systems. I wonder whether the findings of the UK Climate Assembly, together with research, could begin to form the basis of a social contract and a shared vision between the public, government and business for the net-zero journey? This could provide the basis for all to proceed confidently into the future.
Role and responsibilities in net-zero futures
My final theme is around who is responsible for what in the net-zero future.
In part this a debate that mirrors the Distribution System Operator debate in the UK. The trend in New Zealand and Australia is for more ‘action’ at the local network level – distributed generation, electric vehicles, electric heating and cooling. Thus, does the local network operator need to become more ‘hands-on’ or should the electricity system operator reach down into local networks, taking responsibility for whole system operation? Or should we source all such services in markets, with new platforms emerging to take on responsibilities? Or do we take humans out of the equations and allow machines to control the system? These are familiar topics to UK energy stakeholders.
In addition, there was an interesting theme on who should be responsible for rolling out new energy infrastructure. For example, in New Zealand, there is a debate on whether distribution network operators be allowed to build and operate electric vehicle infrastructure and distribution connected batteries. It could accelerate rollout, but risks market power issues.
Alongside this, there was a live debate on the roles of emerging actors in the system. For example, communities and community energy. Lynne Gallagher, acting CEO of Energy Consumers Australia summed it up nicely stating “energy services only exist in the context of communities”. Should the energy system bend to what communities and citizens want? I take from this the possibility of an uncomfortable, but perhaps better future where energy businesses live with their consumers as they develop propositions – messier rapid prototyping and trying stuff, less traditional approaches to product development.
Ending on this note, it is encouraging to see Ofgem (the GB energy regulator) take a step into this messy, more customer-centric future. My ex-colleague, Neil Barnes recently penned a blog where Ofgem commits to allowing more energy market experimentation and trialling. This includes the ability to create more space for innovation and potential for more local (community) propositions to come forward. This is terrific news for the Prospering from the Energy Revolution programme and our work in EnergyREV.
Perhaps we are finally on the cusp of the future.