Transitioning to a net zero energy system: smart systems & flexibility plan 2021

The Government has published its updated Smart Systems & Flexibility Plan (SSFP). A comprehensive list of commitments includes:

• £100 mn from the Net Zero Innovation Portfolio for energy storage and flexibility innovation programmes.
• A smart systems Skills gap analysis to be conducted this year.
• Development of a flexibility monitoring framework by setting out indicators and data sources with industry
• A consultation in 2022 on an appropriate regulatory approach for flexibility service providers and other organisations controlling load along the principles of interoperability, data privacy, grid stability and cyber security.
• Buildings: Build smart systems into energy efficiency and heat policies – including investigating the role of storage and smart technologies as part of Future Homes and Future Building Standards and consider how treated in the Standard Assessment Procedure (SAP) and existing and future heat subsidy  schemes.
• Electric Vehicles: Ofgem to publish a regulatory strategy later in 2021 to support EV rollout and maximise consumer benefits. Plus see EV-to-grid consultation below.
• Storage:  Government will use primary legislation, when parliamentary time allows, to define storage as a distinct subset of generation, as well as update the Planning Practice Guidance, and amend energy national policy statements by the end of 2021.
• Ofgem and Government to work to address barriers to co-location of storage, including within the CfD.
• Large-scale and long-duration electricity storage: See Call for Evidence below on de-risking investment for large-scale and long-duration storage. A separate consultation on inclusion on the Capacity Market will also be included.
• Domestic and small scale electricity storage:  government and Ofgem will work to develop a system to prevent double charging of final consumption levies on electricity that is re-exported by domestic storage and vehicle-to grid.
• Government will work with the industry-led storage health and safety governance group to implement, where appropriate, recommendations from an independent gap analysis.
• Rewarding Flexibility: The ESO, by March 2023, will develop and publish a plan, based on the lessons learned from its pathfinder projects and its  Early Competition Plan, to implement regular, dependable, bankable markets for solutions to stability, voltage and thermal  constraints.
• Distribution networks will deliver and adopt a standardised approach to procuring flexibility and managing connections across  all GB distribution networks by 2023.
• Networks and the system operator will, through the ENA Open Networks project, deliver a step up in alignment between distribution flexibility services and ESO balancing and ancillary services.
• Networks and the system operator will develop consistent methodologies for carbon reporting and monitoring of their actions and markets.
• Ofgem will improve price signals for flexible network usage through network charging reform.

Initial REA view

The SSFP 2021 updates the governments priorities in this area from its previously published 2017 plan. It is good to see that government have recognised a number of market barriers, in many cases parroting the issues the REA have been highlighting for some time. SSPF particularly emphasise the benefits of the smart flexible system, highlighting £10bn of systems cost savings by 2050 and potential for  up to 10,000 jobs. We will continue to work with Government on the final stages of the SSFP implementation and are well aware that the challenges will be in the detail – we will continue to keep advocated for all forms of energy storage at all scales and duration.

Digitalising our energy system for net zero: strategy and action plan

• Government & Ofgem are considering options for a framework for localised planning and mapping for energy decarbonisation
• Innovate UK will review how to provide greater visibility and learning from its funded projects
• Government is working with EnergyRev & Energy Systems Catapult to provide a view of energy digital & data projects to improve sector engagement – this will be called ‘Catalogue of projects on energy data’ and a prototype will be published in summer 2021
• Government & Ofgem & Innovate UK will review their own processes against the Energy Data Best Practice Guidance (recently published by Ofgem)
• ENA are procuring a National Energy Systems map, with a concept due in winter 21/22
• Icebreaker 1’s beta-phase platform for a common data architecture across the sector is to be delivered this summer
• An Energy Data Visibility Project (to help standardize meta-data) will deliver an alpha-phase prototype by summer
• Ofgem will conduct a ‘holistic review’ of new and existing data & digital monopolies in the sector
• Government will work with industry to ‘simplify data collection by streamlining small-scale asset registration processes’. A receipt of notification process will be set up for consumers by the end of 2021.

Initial REA viewREA is receptive to these developments and views them positively, however we will take a view on different elements of the strategy as more concrete plans and proposals emerge. Many of the actions outlined are already public, while others are new but not yet outlined in detailed.

Role of vehicle-to-X technologies in a net zero energy system: Call for Evidence

The Department for Business, Energy and Industrial Strategy have published a call for evidence on V2X. The scope of this call for evidence encompasses bi-directional power transfer between battery electric vehicles (BEVs) and the grid (V2G), homes (V2H) and businesses (V2B). Key topics that BEIS are seeking evidence on includes:

• What role should V2X play in the wider energy system?
• How can/should V2X be best deployed?
• What is the business case for V2X?
• How can consumers be encouraged to adopt V2X technology?
• What are the technical, data and system barriers to the uptake of V2X?

Facilitating the deployment of large-scale and long-duration electricity storage: Call for Evidence

The Government has published this Call for Evidence to help:

• determine whether their understanding of LLES (Large-scale, long-duration Electricity Storage) is correct and whether industry agrees with the benefits outlined;
• establish the need for large-scale, long-duration storage on the future power system;
• collect evidence on the potential pipeline of storage projects;
• determine whether there is a case for intervention;
• consider what sort of mechanism would be most appropriate;
• identify appropriate and cost-effective mechanisms for intervention and associated risks

For the basis of this call for evidence, the Government expects that ‘LLES projects would need to be able to store and discharge energy for over 4 hours, and up to days, weeks, and months, and deliver power of at least 100MW when required’.

The Government believe that a reformed Capacity Market or a Cap and Floor mechanism would be the most viable options for a mechanism. It notes that a Cap and Floor mechanism could be beneficial for a future hydrogen storage market.

The Government will soon publish a Call for Evidence on reforms to the Capacity Market, which would explore how to facilitate the participation of new build projects that have construction lead in times longer than the time between the main capacity auction and delivery (c. 4 years) and on how the CM can better align with Net Zero commitments.

The consultation on Long-Duration Electricity Storage closes on 28^th September.

Initial REA view

This Call for Evidence is very welcome – REA & members asked for this Call for Evidence in a report earlier this year – and so too is this statement of acknowledgement from the Government that there are significant barriers to deployment and that a market support mechanism may be required. REA’s position thus far has been that an Income Floor could be the most appropriate mechanism, closely followed by a Regulated Asset Base model. We will consult with members on this issue but think that there is a risk the 100MW+ parameter proposed could encourage market distortions.

Government & Ofgem Consultation on a Future System Operator

The consultation proposal is for the Future System Operator (‘FSO’) to conduct strategic network planning, long-term forecasting, and market strategy functions in gas system and assume all the current National Grid Electricity System Operator (ESO) roles and functions.

The new body’s structure could be as follows, either:

A standalone privately owned organisation independent of energy sector interests;
A highly independent corporate body model classified within the public sector, but with operational independence from government.

The consultation seeks further views on the new roles and functions an independent FSO could potentially fulfil, including in network planning and independent advice.  It is intended that there be a phased implementation of the FSO, founded on the existing capabilities of National Grid ESO and where appropriate National Grid Gas, therefore no concrete dates are given as to final implementation.

Views are sought until the 28^th September 2021.

Initial REA View

This has been long trailed as a potential move by BEIS, most recently in the Energy White Paper.  The ESO is taking bold, welcome steps to ensure the system is ready for Net Zero and generally seems to be performing well, but having clarity on this important area should be good news for all energy sector stakeholders and help to prevent any accusations or concerns over perceived conflicts of interest in the future.

Government & Ofgem Consultation on Grid Code Governance reforms

This is the latest iteration of a process that started in 2019 and follows a consultation held that year – designed to explore new options for the management and governance of the GB electricity and gas grid codes. This covers all 12 current codes and a  number of Engineering Standards for the system, as well as the delivery bodies, as such the earliest date for this process to start to be implemented is 2024 or 2026.

The aim is a “governance framework that is forward-looking, agile, easy to understand, and able to accommodate a growing number of market participants.”   They have developed the two governance frameworks that were believed to be capable of delivering this outcome and are consulting on a preferred option whereby Ofgem would be the ‘strategic body’ over the energy codes, with separate ‘code managers’ for individual codes. Ofgem would develop and annually publish a strategic direction for codes, ensure it is delivered by code managers, decide whether to approve material code changes and, under some circumstances, lead code changes itself. There would be more power for Code Managers but new stakeholder advisory groups too.

The consultation closes on 28^th September 2021.

Initial REA View

This is something the REA has long advocated for and been involved in the discussions on – fundamental reform of how grid code changes are made will help to speed up decarbonisation and prevent unfair advantages for certain ‘incumbents’ in the market in our view, so while this has been and will continue to be, a lengthy process, we believe it is vitally important for the sector.   Such an incredibly wide ranging reform (covering tens of thousands of code rules) will need a long implementation phase and the tricky parts will be in the detail – we think it is vital the renewables and clean tech industry have a maintained and enhanced role in setting the rules.