69
Welcome and Introduction – Simon Hobday (Osborne Clarke) (14:00 - 14:15)
Beyond the national: how delivering net zero could affect people and
places - Jim Skea (Chair of Scottish Just Transition Commission and Co-Chair of
IPCC Working Group III) (14:15 - 14:35)
Beyond the incumbents: building the markets for net zero - Chaired by
James Watson (Osborne Clarke) (14:35 - 15:20)
Elizabeth Allkins (Ovo Energy) - Domestic flexibility: Opportunities, barriers and
benefits
John Twomey (National Grid ESO) – Enabling new market opportunities
Kyle Martin (LCP) – How the power market will change in a net zero world
James Johnston (Piclo) - The future of DSO flexibility
Break (15:20 - 15:30)
Beyond the current system: new innovations to deliver net zero - Chaired by
Caroline Bragg (ADE) (15:30 - 16:10)
Javier Cavada (Highview Power) - The role of long duration cryogenic energy
storage
Chris Cox (Cenex) - The emerging role of transport in local energy systems
Claire Addison (Flexitricity) - Boosting real-time flexibility in the system
Launch of ADE report "Let’s talk about Flex: Unlocking domestic energy
flexibility“ - Rick Parfett (ADE) (16:10 - 16:20)
Closing Remarks - Ian Calvert (ADE Director) (16:20 - 16:30)
Jim Skea
Keynote address
Smart Energy Conference 2020
Delivering Net Zero without
Breaking the Bank
29 April 2020
For the next two-three years, everything will be seen though one lens:
How will it contribute to economic recovery from the current crisis?
How fair will that recovery be?
Structure
• How a “just transition” can contribute to the net zero goal
• How to apply the concept of just transition in practice
• Specific implications for energy efficiency/decentralised energy
• Nothing on balancing mechanisms/flexibility markets (I can’t do that!)
Why a “just” transition?
• Net zero implies “rapid, far-reaching and unprecedented changes in all aspects of society”
• This won’t happen without social consent
• The transition must be, and must be perceived to be, fair
The Scottish Just Transition Commission
“The imperative of a just transition is that
Governments design policies in a way that
ensures the benefits of climate change
action are shared widely, while the costs do
not unfairly burden those least able to pay,
or whose livelihoods are directly or indirectly
at risk as the economy shifts and changes”
Interim Report, February 2020
The Commission is to…
Provide practical, realistic, affordable recommendations that will support Scottish Ministers to take action that will:
• Maximise the economic and social opportunities that the move to a carbon-neutral economy by 2050 offers
• Build on Scotland’s existing strengths and assets
• Understand and mitigate risks that could arise in relation to regional cohesion, equalities, poverty (including fuel poverty), and a sustainable and inclusive labour market
Scottish Trades Union CongressProspect Union
WWF ScotlandEnergy Action Scotland
Spring Rise (industrial consultancy)SSE (utility)
Oil and Gas Technology Centre
2050 Climate Group/Pale Dot Energy
Quality Meat ScotlandUniversities of Strathclyde and Heriot-Watt
The Commissioners come from:
The Commission sees the application of just transition principles extending to:
• people as consumers
• communities - and the importance of “place“
Not just about the supply side
Today’s world has its own injustices, and there are opportunities for a just transition to address these:
Not just about future injustices
• Energy poverty
• Fair work
• Land tenure
• The need for clear planning
• Engagement and society’s expectations
• Building equity into all climate policies from the start
Emerging themes
• Guests at Commission meetings
• Stakeholder workshops
• Town-hall events
• Focus Groups
• Seminars
• Public consultation
Engagement
What does it mean for decentralised
energy?
Ingredients of net zero
• Decarbonization of power √
• Energy efficiency X
• Electrification of demand….. X
…. and carbon removal X
15
Energy prices don’t help – should electricity
consumers cover all decarbonisation costs?
16
Skills, supply chains and labour markets
• Incremental housing improvements won’t do
• Energy efficiency and electrification imply deep retrofits
• Not just counting jobs – the supply side of the labour market matters…
….skills, training, building up supply chains and trusted suppliers
05/05/202017
Fairness to consumers
• Those in rural areas (a transport issue)!
• Those using electricity for heating
• Those in inefficient homes
• Less credit-worthy consumers who can’t raise capital or must use
pre-payment tariffs
05/05/202018
Conclusions
• There will be a need for economic stimulus and investment in
infrastructure for the long-term
• Climate action has a role to play in economic recovery
• The experience of, and recovery from, COVID-19 is likely to
amplify concerns for planning, cooperation and fairness
• But beware the fallout from high levels of public debt
05/05/202019
Panel 1 - Beyond the incumbents: building the markets for net zero
DOMESTIC FLEXIBILITY:
OPPORTUNITIES, BENEFITS AND
BARRIERS
ELIZABETH ALLKINS - OVO GROUP
OVO GROUP
CONSUMER
B2C ENERGY
SERVICES
+
5m
CUSTOMERS
BUSINESS
B2B TECHNOLOGY PLATFORMS
22
OVO RETAIL BRAND KALUZA
THE CHALLENGE
PEAK THREAT
REQUIRES MITIGATION
GETTING READY FOR A
DECARBONISED GRID
The transition to a distributed energy
network is happening
The utilisation rate
of renewable energy must be improved
Flexibility and storage is proving to
improve network management
Addition of EVs, smart heating and home
energy storage
Flexible & smart home technologies
can empower customers to be part
of a democratised system
Source:
National Grid Future Energy
Scenario 2019
2020 2050
104GW peak
2020 peak
59GW Other44GW
Transport24GW
Heating36GW
64GW
84GW Dispatchablegeneration
THE ROLE OF THE DOMESTIC
CONSUMER
Consumer tariffs
are simple and
clear to understand
CUSTOMER PROPOSITIONS
KALUZA |
KALUZA’S APP GIVES CUSTOMERS CONTROL
KALUZA |
KALUZA’S FLEXIBILITY PLATFORM
INTELLIGENT ENERGY PLATFORM
WHOLESALE MARKET DISTRIBUTION
NETWORK
TSO
DISTRIBUTED
GENERATIONCO2
JOINING THE DOTS
The Kaluza platform responds to real-time market signals and customer schedules
- optimising EV charging on a minute-by-minute basis
THE
OPPORTUNITY
RESIDENTIAL FLEXIBILITY ALONE COULD SAVE
UP TO £7BN/YEAR
FLEXIBILITY FIRST
Residential flexibility will create
whole system cost savings of
£6.9bn.
Electrification and decarbonisation
will save £206 per household per
year.
Intelligent charging of electric
vehicles will save up to £3.5bn.
Source:
● 25g/ kWh
● 25m EVS
● 21m electrically
heated homes
-£6.9bn
KALUZA |
DEMAND TURN DOWN
FROM RESIDENTIAL BATTERIES
31
IN PRACTICE
-1,000
-2,000
2,000
1,000
0
0%
100%
50%
Power
(W)
State of
charge (%)
18th Feb 2020
WPD Flexible Power
Power
State of charge
00:00 04:00 08:00 12:00 16:00 20:00 00:00
@Kaluza_tech
THE
HURDLES
KEY MARKET ENABLERS
FOR DOMESTIC FLEXIBILITY
SMART METERING AND HHS
● Smart metering and HH settlement expose all
customers to price signals, incentivising
domestic flexibility
● Market-wide HHS levels the playing field for
consumers and suppliers
JOINING THE DOTS
PRICE SIGNALS FOR FLEXIBILITY
● Price signals incentivise flexibility for smart
device owners, enabled by smart metering and
HHS
● Strong, locational, real-time signals, reflecting
network costs & constraints
● TCR reform has weakened price signals,
hindering flexibility
● Access SCR developing & implementing price
signals that encourage and reward domestic
flexibility
FLEXIBILITY MARKETS
● Direct procurement of flexibility provides
certainty for DSOs and TSOs when it’s
needed
● Corrects imbalance or constraints left after
price signal optimisation
● Requirements of emerging DSO markets
limit opportunities for domestic
participants
Smart charging, enabled by HHS, optimises against both network price signals and flexibility markets
— creating value for consumers, while reducing costly investments to grid infrastructure
John Twomey
Market Development
Manager
National Grid ESO enabling new market opportunities
36
A vision for the future
• In April 2019, National Grid Electricity System
Operator announced it will be able to fully operate the
electricity system with zero carbon by 2025
• A whole system strategy that supports our ambitious
target
• Competition everywhere
• The ESO is a trusted partner
We will be leading the change to a greener and cleaner energy future!
37
Overview of Electricity Markets
Capacity Market
50-55 GW
£400m - 1bn annually
Participants paid a capacity fee to be available at times of system stress.
Volume purchased through pay as clear annual auction for prequalified
participants. Majority of volume bought 4 years ahead (T-4) Top up
volume 1 year ahead (T-1)
CM auction administered by ESO
Wholesale Market
1000 TWh traded, 300 TWh delivered annually
Total traded value approx. £55bn
Participants trade standard products either bilaterally or via exchanges.
Liquidity and granularity of products tend to increase closer to real time.
ESO trades 4-5 TWh annually but does not have a role in administrating
wholesale market
Balancing Mechanism
£450-500m annually
The ESO uses the Balancing Mechanism (BM) to keep supply and
demand in balance by accepting offers to increase or bids to decrease
energy. The mechanism is pay as bid and the actions taken are used to
set the System Imbalance Price. Traditionally participants have been
large transmission connected generators but more small distribution
connected assets are entering the market. This will increase further in
December with the introduction of Wider Access to the BM.
Ancillary Services
£450m annually
The ESO procures services to balance demand and supply and to ensure
the security and quality of electricity supply. These include
Response: Firm Frequency Response, Mandatory Frequency Response
Reserve: STOR, Fast Reserve, Replacement Reserves (from June 2020)
Operability: Black Start; Reactive Power, Intertrips, Constraint Management
Traditionally procured bilaterally or via pay as bid tender. Moving to close to
real time pay as clear auctions
38
Infrastructure to support efficient market outcomes
Enhanced Customer
support
• Support for new
market entrants.
• More diverse training /
guidance available.
Timely and machine
readable data
• Open and readily
available information
to drive commercial
decisions
• Tool for innovation
Agile and simplistic licencing
and code landscape
• Obligations are easily
digestible
• The pace of change meets
the expectation of market
participants.
Harmonised planning across
T & D
• Coordinated decisions that
drive whole system impacts.
• Consumer outcomes at the
heart of decisions.
Transparent &
coordinated priorities
• Priorities governed by
long term strategic intent
• Coordinated decisions
that enables strong
market liquidity.
39
The vision for a 2030 market
Mature commercial and operational model that allows stacking of services
Procurement of system products close to real time where decisions are
underpinned by readily available market data. No bilateral deals.
Integrated DSO / TSO model that serves both national and local markets
System products can be traded within a European market given our
enhanced interconnection with Europe.
New operational services underpinned by competitive markets – Stability,
Constraint Management & reactive.
Enhanced data to connect decisions between the market and awareness
with consumers – i.e. Carbon data reporting ESO App
40
ESO Forward Plan
Scan the QR Code below to go straight to the
Forward Plan Website!
nationalgrideso.com
National Grid ESO, Faraday House, Warwick Technology Park,
Gallows Hill, Warwick, CV346DA
April 2020
How the power market will change in a Net Zero world
43
Who we are
We advise half of the FTSE100 firms
• Financial services consultancy, based in
London
• 700 staff and partners
• LCP Energy Analytics focuses on the GB
and Irish electricity markets
• Combination of energy market expertise,
mathematical modelling and new
technological approaches
• Work closely with industry and decision
makers
• Provide a range of services, from
modelling support to market insight
44
LCP Energy Analytics
We have provided the modelling framework for a number of decision makers.
• We designed, developed and maintain
BEIS’ primary forecasting tool, the
Dynamic Dispatch Model, used in all long
term forecasting and policy impact
analysis
• Ofgem uses our modelling to assess
network charging reforms, including
embedded benefits/TCR
• National Grid uses our modelling to
support the annual capacity requirement
recommendation, calculate EFCs and
derating factors
• The LCCC uses our modelling to
calculate the costs of the CfD framework,
and to set the interim levy rate and total
reserve amount.
How the capacity and generation mix will change in a Net Zero world
For this presentation LCP has used the
Committee on Climate Change’s (CCC’s)
Further Ambition scenario as the starting
point to base our analysis.
The first graph shows installed capacity
will grow to over 360GW with a de-rated
capacity of nearly 160GW to meet the
peak demand in the CCC’s Further
Ambition scenario.
The second graph shows the amount of
power produced by each technology with
renewables producing over half with
CCS and nuclear making up the majority
of the other generation.
Although there is a significant amount of
‘other flexible’ capacity on the system
these are only proving a small amount of
power.
Possible 2050 capacity and generation mix
46
How the energy system is changing
6%
As we transition to Net Zero
there will be changes in how we
use energy across sectors.
These graphs show the system
with low demand and high
renewable output. In 2019 we
already see times when there is
excess low carbon generation
without enough demand to use
all the power, resulting in some
units being curtailed.
By 2050 we can see this
problem is much bigger with
over 120GW of renewables
needing to be curtailed in some
periods.
Low demand and high renewables
47
How the energy system is changing
High demand and low renewables
48
How the energy system is changing
These graphs show the system
with high demand and low
renewable output. In 2019 the
majority of the demand is met
by thermal power stations.
By 2050 traditional thermal
won’t be able to operate on the
system and this will need to be
replaced by other technologies
such as CCS or other flexible
generation, which could be
made up of gas/hydrogen,
peakers, DSR, batteries and
other technologies.
The demand profile under the
CCC’s Further Ambition
scenario has peak demand
around 150GW due to heavy
electrification.
Opportunities under future market structures
An electricity system where the
majority of generation comes
from intermittent renewables
means markets are likely to
change in shape and size in the
future.
When modelling Net Zero we
see long periods where the
wholesale price is <=0£/MWh.
The graph shows an example
of this already happening on 20
April 2020.
Support schemes (RO/FiT/CfD)
coming to an end and the
deployment of long duration
storage/hydrogen technologies
could reduce the length/severity
of low/zero price periods.
The impact of Net Zero on the wholesale market
50
Market Structure
Low renewable/high demand events
will mean that firm capacity needs to
be dispatched. These units have a
higher generation price than
renewables because they have fuel +
carbon costs leading to a higher
wholesale price.
The frequency/magnitude of these
periods will reduce in the future as low
carbon plant make up the majority of
generation and carbon prices have
no/little impact on a Net Zero power
system.
On 4th March a lack of available plant
led to a system price of £2,242/MWh.
Although scarcity pricing will make up
revenue for firm capacity it’s unlikely
projects will be financed on a
merchant basis in the future.
The impact of Net Zero on the wholesale market
51
Market Structure
Firm capacity
needed to
meet demand
Opportunities
52
Market Structure
* Periods where net demand peaks for 3 hours or less
• Low Carbon - A Net Zero power system requires significant amounts of low carbon power to be
built. In order to secure financing it is envisaged that market stabilisation contracts (or similar) will be
needed.
• Capacity – As a result of having significant amounts of renewable generation on the system there
will be a need for firm capacity to provide security of supply. In order to secure financing it is
envisaged that Capacity Market agreements (or similar) will be needed.
• Flexibility – Ramping and peaking* periods are set to increase as the impacts of renewables
become more significant.
• Ancillary Services - Increased need for response, reserve, headroom/footroom, inertia, etc will
drive value in ancillary services. These services will also need to come from new technologies as
thermal units close.
• Reducing Curtailment - Flexible assets such as interconnection & and battery storage can
alleviate this but there is an opportunity for longer-duration storage or demand turn-up services.
• Resolving Imbalances - Imbalance volumes are set to increase by 2050 due to renewable
penetration but improvements in forecasting improvements will limit the growth of this market.
Conclusions
• Significant amounts of new generation will need to be built to meet the capacity
requirement needed for a Net Zero power system.
• Opportunities for flexible assets will grow as the level of renewable generation increases.
• The challenges of low renewable/high demand and high demand/low renewable
scenarios need to be addressed by policy makers and industry.
• There will be new opportunities to provide services for a Net Zero power system but
cannibalisation of shallow markets will remain an issue.
• A fundamentals driven approach should be used to assess value across markets.
Key issues for moving to a Net Zero power system
54
Summary and conclusions
At LCP we combine in-depth knowledge of the
energy sector with modelling expertise to help our
clients make informed decisions.
Our products and consultancy services have
developed over many years of close engagement
with government and industry, and are used by policy
makers, strategists, investors, operators and traders
in the UK and Ireland
ADE Smart Energy Conference 2020
The future of DSO flexibility
Introducing the Piclo Flex marketplace
● Supporting UK Distribution System Operators (DSOs) procure flexibility to manage their networks
● Over 1.39GW of flexibility needs advertised in 2019 (worth approx £30m)
● £0.6m successfully awarded in the UK’s first DSO auctions
● 300 flex providers are members and have registered over 6.6GW of assets
Commercial & industrial
flex assets
Household flex assets
DSO flexibility in a nutshell
Time of day
Cap
aci
ty (
MW
)
Network limit
Flexibility services
Service window
Load profile
Value of DSO flexibility markets in Net Zero
Hot off the press! Two new white papers
White Papers accessible here: https://piclo.energy/about#whitepaper
Net Zero scenario demonstrates that peak network demand could increase by 50%
Peak day profile from the Baseline scenario, in which demand reaches
91GW
Basic Flexibility could reduce peak demand from 91GW of 75GW
Peak day profile from the Basic Flexibility scenario, in which peak demand is reduced from 91GW to 75GW
Basic Flexibility can reduce annual system cost by £4.55bn per year
System Cost Analysis
Role of independent marketplaces in Net
Zero
Transparent and fair
competitions✓ Efficient contract stacking✓Market visibility✓
Independent marketplaces are essential for net zero
Market visibility
Transparent and fair competitions
Efficient contract stacking
