ELECTRIC CARS AS DSR

IN 2013 THERE WERE 3,500 electric cars (EVs) in the UK; by last July there were 107,000. Growth predictions vary between 85% of the market by 2035 and one third by 2040.

In face of this, government has little option but to legislate and it promises the Automated and Electric Vehicles Bill (unpublished) to empower it to mandate installation of charge-points and charge-point standards.

Even this first piece of legislation is not just about the ability to charge up a car. It is also (and it is equally) about the ability to dis-charge a car. Electricity charge-points form part of the government’s ‘new’ Smart Networks Policy (see next page) for increasing demand-side response (DSR). They are described as a “DSR and vehicle-to-grid” technology.

The previous version of the Bill (the Vehicle Technology and Aviation Bill) lapsed as a result of the snap election. Until the new bill is published, the change in title of the Bill will be a subject of guess, but the new title fits the old Bill better than the old title. In any event, the substantive pro-visions in the old Bill are likely to remain.

There are three provisions that are of interest.

First: a charge point must have a two-way function:

a device intended for charging a vehicle that is capable of being propelled by electrical power derived from a storage battery (or for discharging electricity stored in such a vehicle)”.

So EV owners are to be able to buy electricity to charge their batteries and to sell the electricity stored in them. Why? Because it’s needed for the network as the Smart Networks Policy says:

The involvement of electric vehicles in providing DSR and storage will help minimise the amount of new generation and network investment that will be needed.

Second:

a charge point … is a “public charging point” if it is pro-vided for use by members of the general public.

This “general public” is not defined. But what we mean by it is anyone who isn’t a member of any body, group, etc. That should mean, for example, you or me or anyone else, no matter which club we are in—or no matter which particular company supplies us with electricity.

Third:

“Regulations … may require operators … to co-operate with each other for the purposes of a requirement im-posed by the regulations (for example, by sharing facilities or information);

At present, there are supplier-dedicated charge points, some of which are one-way (they charge but they don’t dis-charge) and they are definitely not “public” charge-points. The third provision above gives government the power to change that by requiring sharing.

Does this mean that those who now provide suchcharge-points should re-think their strategy? Perhaps; but there is in the Bill at present the possibility of there being charge points and public charge points and there may be room for the two in the regulations.

It’s worth taking a step back.

Domestic consumers cannot be tied in to given suppliers, unless for this market segment all previous regulatory change is to be ignored—and we know it won’t be. EV charging/discharging is to be a key part of making DSR work in the domestic electricity market (see page 4 for other ways).

So tied, one-way charging is a measure with a life span that will begin to end as regulations flowing from the Bill are introduced.

IN MARCH 2016 the National Infrastructure Commission report ‘Smart Power’ was published and wholeheartedly embraced by government in the budget:

The government will implement the commission’s recommendations, and will work with Ofgem to remove regulatory and policy barriers, … [for] flexibility and smart technologies, including electricity storage.

What government had just accepted was:

 

  • The need for storage on an unprecedented scale.
  • The need to make demand-side response (turning off consumption) work as a saleable product.
  • Active and joined-up management of the networks.

Over the summer BEIS and Ofgem jointly published a document outlining the policy for a major energy-market re-vamp (Upgrading Our Energy System: Smart Systems and Flexibility Plan).

This is the government’s new ‘Smart Networks Policy’, even though a fair bit of it is an account of changes al-ready made or underway. The whole adds up to a plan to implement the recommendations of the National Infra-structure Commission, with a little bit more (e.g., electric cars) thrown in.

The Means of Change

The changes are to be implemented by changes across all industry arrangements.

By modifications to industry documents. Industry has power to amend market arrangements, subject to Ofgem approval, which has signalled what it wants: it now expects industry to deliver a number of changes. Key are:

  • making room in the balancing mechanism for aggrega-tors, the main DSR buyers in the market; and
  • modifying the charging arrangements so that storage, not being an end-user, won’t pay consumption levies.

By the network companies, who are working together on the detail of:

  • how to change a DNO into a DSO (an active distribution network operator);
  • sorting out how the SO and new DSOs are to work together;
  • how to speed-up connections for storage and for embedded plant;
  • Changes to engineering standards.

By the SO, which is charged with:

  • enabling DSR to compete on an equal basis with generation;
  • enabling sellers of DSR to stack value across services or markets;
  • Making ancillary services transparent, creating an equal playing field for access and get value of these services right.

By legislation:

  • storage is to become a specific form of generation. (Don’t be misled into thinking batteries might be classed as any old storage for planning purposes.
  • Incentivising DSR by simpler metering and changes in Capacity Market rules

By regulation:

  • A new licence to reduce systems costs for storage
  • Guidance on co-locating storage and subsidised gener-ation to avoid loss of subsidy
  • Planning rules for storage to encourage development
  • Mandatory half-hour settlement, combined with smart meters, smart appliances and new time-of-use tariffs

 

RENEWABLES GROWTH STALLED?

AS SUBSIDIES ARE PHASED OUT or scaled down (or it just becomes much harder to obtain one at a known rate or at a time that fits a construction programme) so the claims that the growth of renewables is at an end intensify.

For the purposes of argument, let’s just take it as a datum that no renewables technology can yet be built at grid parity (that claim is now being challenged by developers, so it really is just for the purposes of argument).

Are the claims that growth in renewables is/will be stalled justified?

Overall the BEIS “Duke’s” figures show an increase in renewables at a fairly steady, if rather slow, rate. For 2016, the most-recent year of collation, the figures for renewable are those below.

  • Electricity: 5% of all electricity generated was renew-able—a reduction from 2015 of 0.2%, caused by a fall of 14% in hydro output due to lower rainfall and a fall in off-shore wind of 5.8% /onshore wind of 8.4% caused by low-er wind speeds. By contrast, solar output rose by 38%.
  • Heat: 2% of heat generated was renewable. This was an increase of 12%,.
  • Generation Schemes: At the end of December 2016 The number of renewable schemes (excluding co-firing) was 917,488. No figures are available for 2015 to compare.

It is clear that there is growth (even if slow) in generation from renewables and, consequently, there must be an in-crease in the number of renewable energy schemes.

But the picture is changing as the Smart Networks Policy gets rolled out. It is changed, at a stroke, by storage.

Much new storage capacity is locating close to existing renewables schemes to maximise returns to each. They can share infrastructure costs and trade output in ways not open to an individual scheme.

These things together are signals for rather more serious growth in renewables—but with a bit of a difference.

The first solar power farm in the UK to have been built with-out subsidy has been hailed as a ‘landmark’. The ‘landmark’ in question is a 10MW solar farm, sharing a connection with a battery scheme and located close to another (subsidised) solar scheme. (Cleared by Ofgem as a result of the Smart Networks Policy.)

In the past the value of a renewables scheme lay wholly in the price it could attract for its output.

If without subsidy that income wasn’t sufficient to fund construction, it wasn’t built. But if co-location can reduce costs and facilitate new ways of selling, what wasn’t viable suddenly becomes a possibility.

So renewables are growing as the figures show and can continue to grow with the emergence of co-located storage, despite the fall in subsidies and assuming grid parity isn’t imminent. Each scheme has to be conceived of in a slightly new way, as part of a complex.

There is a downside to this ‘landmark’ scheme. It has the potential to impact on the ways BEIS undertakes any state-aid analysis.

The most basic rule in state aid is that an entity that is per-mitted to benefit from it must need exactly and no more than it receives.

Hitherto, assessing the need for supporting for a scheme has been an assessment of something self-contained.

If the view is taken that new renewables schemes ought to be co-located with storage (it’s a perfectly rational view to take), even without being able to give a numeric value to co-location, the cost of building and running a scheme is less than if it were self-contained. Ergo, such a scheme would need less subsidy.

REDUCING THE COSTS OF network infrastructure and avoiding the need for new generation plant requires con-sumers to cut back use of electricity at peak periods.

This is old news; nothing has made it work. The Smart Net-works Policy aims to have another go with a pay-for-use tariff. This is to be done in two stages.

Stage One

Smart meters is Stage One of the Policy. Every household /business will have a smart meter by the end of 2020.

Well, that was the policy. It has now become discretionary: we can all choose to have a smart meter. Why the change? Smart-meter roll-out is a mess.

There are different kinds of meter, owned by different enti-ties that lease them to suppliers, sometimes at high rents. If you change your supplier and have a smart meter, your new supplier may change it, may put in place something that isn’t smart or just put in something different.

That’s one kind of problem. A second kind is the absence of sufficient smart meters. A third is that the technology has been bedevilled by charging errors, which in turn have hampered the supply chain.

The upshot is that there will be smart meters for some end-users at some point. Not a good start.

Stage Two

Stage Two of the plan is enabling suppliers to charge for electricity at different rates at different times of the day, so introducing a ‘time-of-use’ tariff.

The intention is to persuade consumers to reduce their consumption at peak periods, with the carrot of lower bills.

The Smart Networks Policy needs this to work for domes-tic consumers.

Whether it could be made to work obviously depends on the size of the carrot. At present, most domestic consum-ers are in profile class 1: the usage of all households is aggregated and charges per kilowatt hour are set against the aggregated amount.

The result is that domestic consumers pay per kilowatt hour the same amount—with the total amount payable by each depending on how much is used rather than on when it’s used.

And yet time of use is more important to overall system and network costs, with peak periods being the most ex-pensive. If consumers could buy outside peak periods and pay a cost-reflective price, the system would benefit hugely and so should they.

What is envisaged is that supply companies will have a time-of-use tariff for use with smart meters. If that’s to work, the costs to the consumer of using electricity in a high-price period has to be seriously high, high enough to deter usage, and the price outside those periods has to be substantially lower than they would otherwise pay.

Aggregators

An alternative is to allow consumers to sell their DSR to aggregators, having bought their electricity from their sup-plier. It’s clear why this might work: the aggregator would pay cash to the consumer and the distrust that consumers have for suppliers wouldn’t be a factor in their decisions.

This option isn’t being considered seriously at the moment because sorting out the balancing risk the supplier runs and factoring that into a normal supply contract is too hard. It will come at the point this particular policy fails to work.

This is an information-only publication and is not intended and should not be taken as providing or offering legal ad-vice. For more information, see the contact details below.

 

 

 

Energy Law at Lansdown Chambers

22 Upper Camden Place Bath BA1 5HX +44 (0) 7958 463 213

Contact Sally.barrett-williams@energylawuk.com www.energylawuk.com

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