Securing the frontier: the importance of regulation in innovative times

The UK is exploring new frontiers of the energy landscape. The lines between generators, suppliers and consumers are blurring. It’s an exciting time, ripe for innovation with new technology and new ways of doing things. Take up of electric vehicles is on the advance, as is reliance on green technologies. But newness has to be managed in order to protect our industry from unforeseen consequences. That’s where regulation comes in, balancing the advancement of new technology with the protection of the end user.


Encouraging innovation

Nowadays homes and businesses can generate and, to an extent, store their own electricity with battery, solar panels and wind turbines. Small generators can use the electricity they produce themselves, reducing energy bills, or sell it to the grid, earning new revenue.

This aligns with the government strategy to help the UK on its journey to a more sustainable, low-carbon future. With this in mind, Ofgem is reviewing existing regulation which can prevent people realising the full value of connecting battery storage to the electricity network and transmission systems*. Times are changing and regulations must evolve with them, managing our transition to the new world.

 

A fine balance

National Grid has produced innovation of its own. Demand Side Response (DSR) offers large energy users (like your organisation) incentives to help National Grid balance the system – by reducing power or coming off the grid and onto a backup generator at certain times, for instance. The Grid now offers a number of DSR schemes to reward those who help them stay balanced.

The commitment involved in DSR can be daunting to some organisations. In response, ‘aggregator’ businesses have appeared. These let groups of organisations share the commitment, making it less onerous for each individual organisation. Ofgem published their current view on the design of arrangements to accommodate independent aggregators in energy markets in July.

Over the last few years we’ve witnessed the rapid growth of Electric Vehicles, which are set to significantly impact our energy system. Amongst the general excitement at this low carbon solution there’s also concern that if not managed properly they could put a strain on the Grid.

Even as we embrace these new schemes, there are a myriad other new products, services and types of business being developed (smart kettles anyone?). It’s therefore Ofgem’s job to develop a thorough understanding of how they operate and what, if any, safeguards should be in place around them. The pace and excitement of innovation can sometimes leads to people getting left behind – often the most vulnerable, least represented groups. One of Ofgem’s responsibilities is to represent vulnerable energy customers, reminding the industry that the time for innovation isn’t over until the new ways of working work for everyone.

 

Futureproofing our smart rollout

Smart metering is another innovation that promises detailed, up-to-the-minute data on demand and energy users more control over their consumption. And the connectivity required for smart metering opens up yet more opportunities for innovation. For instance, our own Blue Lab is developing smart appliances to give domestic customers more control over their energy use.

The UK government is committed to the smart rollout and it’s the role of the regulator to make sure the industry considers potential negative consequences in mind, such as data hacking and puts appropriate measures in place as far in advance as possible. Ofgem has been extremely aware of this responsibility since 2011, when smart meters first started rolling out and security has been a key design element of smart meters from the beginning. The regulator has been a close adviser to the government on this ever since. In 2013 it reviewed and approved the Smart Meter Installation Code of Practice, which includes protections for vulnerable customers. And its remit has expanded to cover the new Data and Communications Company, which will be in charge of providing smart meter data to network operators.

 

Keeping pace with change

Distributed generation, demand side response, aggregators, smart metering, electrification – things are changing fast, and it can be hard to keep track of the possible new opportunities for your business, let alone the new and changing regulations around them.

If you’re not sure how best your business can benefit from the changing landscape, your energy supplier or broker will be able to advise you, and you can always contact the regulator directly.

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Posted by Martin Pearce

Energy Policy Advisor, Customers Policy and Regulation, Strategy and Corporate Affairs

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