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A Smart Power Revolution could save consumers £8 billion a year

04 March 2016

The National Infrastructure Commission published its first report, aiming towards an electricity market where prices are reflective of costs to the overall system.

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In October 2015, the National Infrastructure Commission was asked to consider how the UK can better balance supply and demand, today (Friday 4 March), the Commission publishes that analysis.

The Commission’s central finding is that smart power – principally built around three innovations, interconnection, storage, and demand flexibility – could save consumers up to £8 billion a year by 2030, help the UK meet its 2050 carbon targets, and secure the UK’s energy supply for generations. 

‘Smart power’ makes practical recommendations to this end - not new subsidies or substantial public spending - but towards the creation of a level playing field and a better managed network: 

• government should pursue additional interconnectors with other European countries where the benefits are most significant.
• the UK should become a world leader in electricity storage systems. Two steps are required: a review of the regulatory and legal status of storage, removing outdated barriers to be completed by Spring 2017 and implemented as soon as possible, and Ofgem should encourage network owners to use storage.
• the UK should make full use of demand flexibility by improving regulation, informing the public of its benefits and piloting business models.

Lord Adonis said:

“Quality infrastructure is fundamental to our quality of life. Better decision making, clearer planning, and more efficient and timely delivery can help create the world class infrastructure this country needs to succeed.

To radically improve, we have to do more than simply adapt to a changing world - we must shape that change to our advantage. The developments in our electricity sector are a case in point.

Our existing power stations are closing down and their replacements will be radically different as we decarbonise supply to reduce emissions. This represents an enormous challenge, but it also leaves the UK uniquely placed to benefit from three exciting innovations set to transform the global electricity market – interconnection, storage and demand flexibility.

The UK can lead the world in harnessing these innovations, bringing jobs and investment into the country and cutting bills for consumers. The National Infrastructure Commission report, Smart Power, makes a series of strategic recommendations to help do exactly that.

We do not call for new subsidies or significant public spending, but rather a level playing field through fairer regulation and a better managed network to allow these exciting new technologies to compete.

If we get this right a smart power revolution could save consumers £8 billion a year.”

Dr Jenifer Baxter, Head of Energy and Environment at the Institution of Mechanical Engineers, said in response to the National Infrastructure Commission’s report on Smart Energy:

“This report makes some welcome recommendations, for example highlighting the importance of electricity storage and associated regulations, however recommendations that mean the UK to has to rely more on electricity imports from other countries brings a number of risks.

“Firstly, UK electricity supplies may be subject to electricity prices outside of the UK and competition from other European countries also looking to reduce their generating capacity. For example, power outages in Eastern Europe could lead to soaring European power prices, which may have a knock-on effect on the electricity prices we pay in the UK. In addition, there is a risk that if demand is very high in the country generating the power, the UK’s power demands won’t be prioritised. The UK’s electricity supply, as well as the prices we pay, would be subject to energy policy and markets outside of the UK. This may be further affected by the results of the EU referendum.

“The greater use of interconnectors would risk UK job losses and the long-term loss of vital power engineering skills. There would be less demand for UK to construct or replace power plants, which could be devastating for communities that rely on local power plants and upstream supply chains to provide jobs and investment. If the UK stops constructing new electricity infrastructure there is also the real danger that the country could lose the ability to develop these skills for generations to come. It is vital that the power sector is able to inspire the next generation of engineers to be creative and innovative and to feel they can have confidence in the continuation of the sector.

“The proposed role of flexible demand systems and smart power is more welcome and should play a part in the future energy management system. However we do not yet know enough to make this happen.  With any new innovation there is a time and cost associated with connecting to incumbent infrastructure, including the development of new skills, supply chains and the transition to smart devices. Specifically there is a need for further research into the security of internet managed energy systems where resilience is essential.

“Most importantly it is far from clear how future changes in our transport and heating systems will impact on the electricity market. These two sectors currently consume four times as much energy as we have in total in our entire electricity system. The potential for disruption is clear.

“Overall the Smart Power report usefully widens the debate around the continued development of the UK power generation sector.  Unfortunately, it may be found to raise more questions than answers and thereby risks reducing investor confidence further.”

Click here to read the full ‘Smart Power’ report.

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