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Workshop warms to smart energy

14 August 2014

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The smart approach to solving our energy problems and decarbonising the economy was the subject of a recent workshop hosted by the …

The smart approach to solving our energy problems and decarbonising the economy was the subject of a recent workshop hosted by the Energy Policy Research Group, which is based at Cambridge Judge Business School.

Smart energyThe Distributed Generation and Smart Connections workshop, held in partnership with UK Power Networks, brought together academics, practitioners and network operators to look at the future of smarter energy connections.

Distributed generation refers to small scale generating units connected to the electricity distribution network or to the customer’s side of the meter – such as wind and solar farms, or solar roof units. It is also known as decentralised generation, dispersed generation or embedded generation.

The workshop was responding to UK government objectives and targets for de-carbonising the economy, which are putting the onus on distribution network operators to develop smart solutions, including smart grids, to promote distributed generation from all types of generating technologies, including wind and solar power.

James Veaney, Head of Distribution Policy for OFGEM, and Henning Parbo, Chief Economist of Denmark’s Energinet, started the four sessions by looking at the role of regulation, and how it is playing an important part in establishing rules and guidelines for the energy industry to work within.

Veaney said: “Distributed generation has massive advantages and the UK government has a number of stimulus packages in place to encourage people to connect renewables to the network. Our role as regulator is to make sure that the process through which they get connected is fair, reasonable, and enables them to get a decent level of service, but also protects the interests of all consumers who are connected to the Network.”

Parbo spoke about the importance of wind power in Denmark: “Just twenty years ago 100 per cent of our energy in Denmark came from central fossil fuel units. Nowadays, wind power amounts to something like 40 per cent of the energy production. Local Combined Heat and Power (CHP) is around 20 per cent, and then we have solar, biomass and so on. Less than 50 per cent is now in the hands of the old generating units. We will probably see the old business model more or less disappear within ten years or so. In my view regulation has been crucial to this development.”

In Denmark, too much power was now sometimes the problem! Parbo continued: “We now have huge amounts of wind power meaning that when it really blows in this country we have too much, so a new regulatory scheme has been put into place whereby generators (offshore wind) do not receive any support if there is too much wind.”

He then spoke of the consensus among politicians of all parties that was making it easier for companies to plan their futures:

One of the most interesting lessons is the consensus that exists in our country starting with the political parties. There are no objections to this green conversion as it is called in Denmark, the voters like it, and we are all working towards the same goal. To have this commitment from all the parties is crucial.

The second session focused on the move to smarter connections. Sotiris Georgiopoulos, a Low Carbon Senior Project Manager at UK Power Networks, spoke of their innovative Flexible Plug and Play demonstration project that is hoping to cut the costs of connecting distributed generation. It is being tested in East Anglia between Peterborough and March.

Georgiopoulos said: “This is one of the first areas that has exhibited a high input of generation both from wind and solar. We are developing interruptible connections so that we will be able to offer additional connections from the Network without the need for extensive upgrades”.

Dr Michael Pollitt Assistant Director of the EPRG – Energy Policy Research Group, and Reader in Business Economics at Cambridge Judge spoke at the third session on business competition and the economics of connecting distributed generation. He said that the economics of Smart Connections do add up:

“If you offer the Smart Connection alternative, which involves giving people a much cheaper connection offer but subject to the caveat that they will not be guaranteed the export of 100 per cent of their capacity, they will see that it does add up. They may have to accept some curtailment of their output but when they do the cost benefit analysis, they will see that the savings are so great on connection and the losses are really quite small in terms of lost energy sales, so they will then take the Smart Connection offer.”

Pollitt said they had been studying the March Grid area that UK Power Networks was trialling and that smarter connections worked out economically, but some groups gained more than others:

“We looked at three basic groups in society, the distributed generators themselves, who are getting the direct benefits of faster connection; the distribution network operators who may be getting some payments for making the connections, and the suppliers and consumers who are getting some savings in terms of reduced losses or reduced CO2 emissions”.

What we found was that actually out of the total sum of those costs and benefits, it was the distributed generators who were walking off with most of the total societal benefit.

“The consumer is not benefitting from the smarter connection option, and also worryingly the distribution network operator is also not benefitting significantly.”

He said that new solutions were needed to tackle this inequality: “What we suggest is that there should be a new smart connection fee, which the distributed generators pay to the distribution network operators, in order to incentivise this smarter connection.”

The fourth and last session of the day looked at distributed generation opportunities and future challenges, and heard from a number of speakers including Duncan Burt, Head of Commercial Operation of National Grid; Euan Norris Senior Project Manager of SP Energy Networks; Ben Wilson Director of Strategy and Regulation and Chief Financial Officer, of UK Power Networks; and Zoltan Zavody Head of Grid at RenewableUK.

Wilson said: “I think we are at the start of something very exciting over the next five to ten years, we are going to see a complete transformation of what it means to be a distribution network operator. The really exciting thing about this is that it is customer led, it is our connection customers that are demanding that we do this, so it is a very exciting customer led revolution.”

A last word goes to Michael Pollitt:

In the future I think we will all be a lot more conscious of the fact that more of our electricity is being generated closer to where we live and work. I think the exciting thing is that the cost of distributed generation is coming down. We all know about solar PV on roof tops but it is also true that single wind turbines are becoming cheaper and I hope that the cost will come down sufficiently and that locally renewable resources will be something that many people are familiar with. I am a technology optimist.