Utility Week

22 | 3RD - 9TH AUGUST 2018 | UTILITY WEEK Operations & Assets Roundtable Creating Infrastructure Policy in an Uncertain World 5 July, Charlotte Street, London The pillars of policy How do you create infrastructure policy in an uncertain world? A recent roundtable discussion hosted by Network and National Grid sought to find out. Tom Grimwood was there. T here was once a time when you could be reasonably certain about where the energy industry was headed. Sure, there were changes, but they happened rela- tively slowly and were usually signposted well in advance. The same is not true today. Driven by the need to decarbonise, the energy system is undergoing unprecedented transformation, which leaves a big question mark over its ultimate destiny. There is no silver bullet for the challenges the industry faces, but there are now many potential solutions on offer. This uncertainty is a big problem for poli- cymakers and regulators. How do you create policy and a regulatory framework with suf- ficient stability to enable long-term invest- ment, while also ensuring it has enough flexibility to help, rather than hinder, innovation? Mulling over the problem at a recent roundtable discussion hosted by Network magazine (a sister title to Utility Week) and National Grid, industry leaders began by setting out some of the specific sources of uncertainty with which the industry is beset. Decarbonisation First on the list was decarbonisation. Attend- ees agreed there is a reasonable level of certainty over the broad direction of travel within the power sector, but less certainty over the pace. They said the same is true for the trans- port sector, where there is now a consensus that battery electric vehicles will be the "go to" replacement for petrol and diesel cars. What is less clear is when we will reach the tipping point at which EVs become the cheaper option and mass adoption quickly ensues. The greatest uncertainty, however, con- cerns the future of heating. The government is still the best part of a decade away from deciding between the two main options of electrification and hydrogen gas grids. A huge section of the industry is le unsure whether they have any long-term future at all. Decentralisation and digitalisation Next came the other two of the so-called three Ds – decentralisation and digitalisation. The future energy system is definitely going to be more decentralised than it is now, but it is uncertain as to what degree. According to National Grid's latest Future Energy Scenarios, anywhere from 38 per cent to 65 per cent of generation capacity will be local by the time we hit the middle of the century, compared with 27 per cent today. One attendee suggested it is also likely to become more diversified, with different solutions in different parts of the country depending on the available resources. There is also the question of the relation- ship between the local and the national. Will there merely be more interactions between distribution and transmission, or will there be a more fundamental change, with the energy system balanced from the bottom up? Likewise, the future energy system is undoubtedly going to be more digitalised. But given the pace of technological change, what exactly this will look like is anyone's guess. Could this finally provide a solution to the long-running problem of customer disen- gagement as many are hoping? One participant pointed to the issue of cyber-security in particular, which he said inherently involves a high level of uncer- tainty. In the cat-and-mouse game between attackers and defenders, one sure-fire way to lose is to become predictable. Democratisation and disruption The attendees added a few more Ds to the list, the fourth being democratisation. With Labour calling for renationalisa- tion of the energy networks, who owns and governs the energy system is up for debate in a way that hasn't been the case since privatisation. Many local authorities are also returning their attention to the energy sphere follow- ing a long hiatus, whether it be through com- munity energy and district heating schemes or the rollout of EV charging infrastructure. The fih D is disruption. Wherever you look in the industry the old order is being upended. There were various suggestions as to what will be the single biggest source of disruption – from innovative business mod- els and affordable long-range storage to arti- ficial intelligence and the Internet of Things. The conversation then moved on to how to deal with this uncertainty. Having had lit- tle difficulty in identifying the problems the industry faces, attendees understandably found it harder to come up with solutions. There was agreement that regulations are failing to keep up with the pace of change, with several attendees arguing that this has become an inevitability. They said regulators should not try to get ahead of new develop- ments for risk of stifling innovation, and should instead seek to be as agile as possible – reacting quickly to problems as they arise. Some called for the creation of a multi- utility regulator to reflect the move towards whole-system thinking. Among the more radical proposals was to create competition between multiple regulators which consum- ers could choose between. There was also broad consensus that pol- icy-makers and regulators should be prag- matic – focusing on the ends rather than the means. Protecting consumers Everyone agreed consumers should be cen- tral to decision-making. They pay the bills and will have to live with the results. There were calls for more public debate

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