Utility Week

UTILITY WEEK | 20TH - 26TH JULY 2018 | 19 Finance & Investment tiative, with respondents rating its impact on investment, confidence and pace of change at 6.8 out of a possible 10. Within this, sup- pliers and traders were the most positive, giving it 7.5 out of 10, and generators the least positive at just 6 out of 10. Of the pol- icy and regulatory developments we asked our respondents about, the most impactful was seen to be Ofgem's review of network charging. This was rated at 7.2 out of 10 for its impact on investment, confidence and the pace of change, with generators and aggregators markedly enthusiastic as 8.2 and 8 respectively. The review began in late 2017, with a final consultation expected later this year. There was little enthusiasm, however, for professor Dieter Helm's government commis- sioned review of the energy system, which set out a vision of wide ranging reform in 2017. This was rated at just 3.6 on average, with no single rating higher than 4.3. Produced in association with: Market views Regulators and policymakers are behind the curve with flexibility, according to attendees at the Utility Week/CGI work- ing group on flexibility. As a result, regu- lation is oen based on assumption and not fact – and this creates problems. "We're in danger of creating imaginary regulations that bear no relevance to the market, as they were conceived theo- retically and too far in advance," said Dr Alastair Martin, chief strategy officer of Flexitricity. Attendees also questioned whether Ofgem has enough resources to move quickly on flexibility, and noted that Brexit is an ongoing distraction for BEIS and the rest of Whitehall. They asked whether instead of regulators defining a market structure for everyone to work within, they could let the industry advance and catch up with appropriate measures as and when required? Aggregators at the event agreed there are three institutions that have the potential to create frequent barriers to aggregator participation in a flexible energy system (and in some cases do) – these being Ofgem, National Grid as system operator and BEIS. Their conduct is crucial to achieving an indus- try working at its optimum capability. Those three aside, it was discussed that emerging barriers oen occur at the grid edge – but centralisation is not seen as the answer. T his year's research is perhaps the most challenging so far. When we set out this programme with Utility Week in 2015, it was about producing some quantitative data to inform the debate about what has come to be referred to as the "smart, flexible energy system" – oh, and of course, identify the perceived barriers to achieving that goal. But back in 2015, this thinking was nascent. Our first piece of research was commissioned before the National Infrastructure Commission published its Smart Power report and just aer the Committee on Climate Change's 5th Carbon Budget identified the need to improve flexibility in the power sector. While previous years' research provided insights and helped to put some quantitative data behind what people were talking about, the results weren't surprising. However, this year's research has begun to show some contradictions, they have started to diverge from previous years and identify greater differences between the perspectives of different parts of the sector. The most significant barriers to demand-side flexibility are identified as the lack of a commercial or market framework, closely followed by the inability to stack value. But perhaps the most tell- ing statistic is that the number of respondents reporting not seeing barriers to their demand-side flexibility projects has almost halved from 18 per cent in 2017 to 9.4 cent in this year's research. This is undoubtedly reflective of the growing experience in the market. While economic and regulatory barriers remain high, they have fallen since 2017. The fact that technical and customer-side barriers have increased this year arguably supports the growing practical experience across the sector. Customer-side barriers (identified by 46.9 per cent) are seen as a significant barrier to demand-side flex- ibility projects, only just behind the economic barriers (50 per cent). These customer-side barriers are predominated by lack and low levels of customer awareness (identified by 86.7 per cent). The second rated customer-side barrier is the pace of adop- tion of the technologies that will deliver demand-side flexibility. Even the most optimistic group, the suppliers and traders, identify connected home technologies taking a further 4.1 years to reach economic viability. It's not surprising they are the most optimistic. They are eyeing the opportunities that flexibility provides as means of improving customer experience and retention (8.7), the basis of customer propositions (8.6), efficient management of their energy portfolio (8.0) and new business opportunities (7.8). So what does this tell us about the areas of focus to accelerate our transition a smart, flexible energy system? Raise consumers' awareness of the opportunities for them in selecting low carbon and connected home tech when choosing their next home or refurbishing their existing one. Identify the techni- cal challenges that are emerging for the projects and address them, including getting the EV charging infrastructure in place in time to support EVs becoming mainstream. Deliver a market framework that enables value to be stacked and a market infrastructure that under- pins that framework, enabling the cash to flow. From this year's research it is clear there is a tipping point around 2023 when there is a step change in the level of opportunities from flexibility. If we are to get the market framework and enabling capa- bilities into place by 2023, then time is short. Commentary Rich Hampshire Vice President Utilities A tipping point is approaching in the level of opportunity afforded by system flexibility.

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