Utility Week

Utility Week 6th February 2015

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10 | 6th - 12th February 2015 | utILIty WeeK Interview benefits are harder to put your finger on. "Just from combined heat and power pro- jects there's 5GW embedded, which is quite a lot. But it's just quietly running," Rotheray explains. Herein lies the problem: so much of what makes decentralised energy an appealing user-led solution also makes it difficult to quantify. Rotheray is matter-of-fact: "It's invisible at a central scale, so it's invisible if you are the government depart- ment or National Grid. "But if you're an MP and your local school is saying 'you know what, we've cut 30 per cent from our electri- city bills and those old damp classrooms are now dry and warm' – you'd be interested in that. In someone's constituency you can always find something. Always." So what are some of the local stories worth paying attention to? It is at this point that Rotheray struggles to keep his enthusiasm in check. His o-cited favourite example is of the Royal Free Hospital in north London, which has used CHP to achieve ends that appeal both economically and on a human level. "Their CHP plant and their overarching efficiency measures have reduced their bills enough to employ an extra 64 nurses. But yes, it's also reducing carbon emis- sions, it's making energy more secure. There are multiple benefits – I love that," Rotheray says. In addition, the hospital has installed a heat extrac- tor to take surplus heat "over the wall to a load of social housing where we could supply them with heat for less than they are paying for it, creating an extra million pound income stream for the hospital". "But that also means that if people's bills are more affordable they'll be able to heat their homes properly, which means they are less likely to develop respiratory illnesses, which reduces the impact on the hospital. "That's really cool – how can anyone not be excited by that?" Rotheray says. Decentralised energy solutions clearly present an opportunity to empower communities to develop the bespoke systems that address their needs directly, with multi-benefit results. In addition, they rise above the need to pick favourites among technologies – including biomass, gas-heating, and renewables – because they simply don't have to in order to meet the goals of decar- bonising, energy security and affordability. So why then is the road ahead for this sector still full of hurdles? "Its obviousness and its appeal is actually a limiting factor," Rotheray says. "The real problem on this is that people think it's an obvious thing. Yes, it does already happen, but it's being strangled. It could do more. "On the one hand, business and large industrial users are still oen caught in a paradigm that dictates that pro- duction is king. It's not always easy to convince a pro- duction plant that turning its power off for half an hour in peak demand periods could be more lucrative than what it produces in that same time. "So it's not all on government – there needs to be a partnership. And it needs to start in the commercial and industrial sector. That's not to say that households aren't part of this – they are – but if we're starting from this centralised system, let's not jump all the way to a super decentralised system, let's work our way down," he says. But unsurprisingly, the biggest shi in thinking towards a decentralised model needs to come from those most immersed in a centralised viewpoint, Rotheray adds. "Policy detail is worked out within the department through that centralised way of thinking. So the challenge is how to get the policy detail to work." Fresh in the minds of the demand-side industry is the UK's recent capacity market auction, which came under strong criticism for favouring a centralised approach to balancing supply and demand. Those offering demand-side response were offered a maximum one-year contract, while new-build power stations could apply for 15 years of support. "There are two really important things which have undermined the effectiveness of the capacity market for the demand side. The first thing is that the capacity mar- ket was designed through the lens of power stations – so when it was decided by the coalition to have a capacity mechanism, it was interpreted as 'we need to build more power stations', not 'we need to keep the lights on at the lowest cost'," Rotheray says. "The second is one of 'additionality'. Policy makers are wary of handing out money to projects which might go ahead anyway, and so tend to support projects which would definitely not happen without government help – thus legitimising the spend. "So in the government's additionality test: 'did every pound spent make a difference', the answer is yes for projects on the far end of the cost curve. But hang on, if you'd given a tenth of that to a whole lot of projects on the nearer end of the curve you'd have had more carbon savings. Of course there is a concern about giving money to something that would have happened anyway, but we have to find a way around this," he says. "The way we are choosing to decarbonise the energy system is by no means least cost – we're not on the low- est cost pathway to do it. That is really bad for the users but it's also really bad for producers because there's lots of money for fewer projects instead of lots of money for lots of projects. It's just the raw mathematics of it, the economics of it, that say, 'hang on, this is not sensible'." One way the ADE intends to shi mindsets around the use of energy efficiency and decentralised genera- tion is by shiing the frame of reference within its own argument. "I think we need to talk more about how wasteful the energy system is rather than about efficiency – waste is a bad thing and it must stop. More heat in the UK is lost by power stations than is used by the total housing stock each year. That is something that we should be embar- rassed about. Wasting that energy is security of supply, it's carbon and it's affordability." This is where the case for a decentralised approach is perhaps at its strongest – while from a centralised per- spective the conflict and tension in trying to achieve the three elements of the UK's energy trilemma too oen tear the debate apart. By decentralising energy, Rotheray sees another way: "You can pull these goals together and have the user at the centre." Ultimately, Rotheray argues that decentralising energy is very much of the moment. There can be little doubt that the regional devolution of political powers is a process unlikely to reverse. Similarly, as consumer criticism of the UK's centralised energy system reaches fever pitch, a radical new approach seems increasingly appealing. If Rotheray is right, the tide is set to turn. And decentralised entities are reclaiming power. "The real problem is that people think [decentralised energy] is an obvious thing. Yes, it does already happen, but it's being strangled"

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