Utility Week

UTILITY Week 30th October 2015

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8 | 30TH OCTOBER - 5TH NOVEMBER 2015 | UTILITY WEEK Interview But, along with a flat Earth and other cer- tainties of yesteryear, that line of thinking is now redundant, says Winser, for two reasons. First, because using large chunks of relatively mature low-carbon technology would "as far as we can see today" lead to increasing customer bills, and second, more positively, because of "the reality of community and con- sumer engagement in energy, distributed gen- eration, lots of solar, the economics of solar PV changing, the capability of demand-side response, the likely development of electric vehicles, the economics and potential of smart homes and smart grids". This reality is "going to change everything, right across our energy system" over the next 25-30 years, says Winser, a prospect he finds exciting and compelling. Consequently when he found himself considering how he might keep contributing to the energy sector in a life post-Grid and was approached by Innovate UK to chair a new Innovation Hub with responsibility for optimising the UK's approach to decarbonisation from a whole sys- tem perspective – incorporating heat and gas concerns as well as electricity – Winser leapt at the chance. "It was the easiest decision I've ever made," he states – but it will not be the easiest responsibility to fulfil. The Energy Systems Catapult, as well as encourag- ing the piloting of technologies to solve the UK's energy decarbonisation challenges, helping new ideas bridge the "valley of death" in mid-stage technology readiness levels, has a big remit to support economic growth. By 2030 it has therefore committed to creating 9,000 new UK jobs and £6 billion of economic value-add by accel- erating technologies to market that will not only serve a purpose in the UK, but also in key export markets. Realising this goal relies heavily on the engagement of the UK's utility companies, especially its regulated networks, in collaborative innovation programmes with a community of agile and entrepreneurial technology innovators – large and small – as well as universities. Working in such an environment of fast-paced, open ideation and rapid prototyping – with commercial intent – is not what regulated utilities are famed for. So is Winser concerned about the industry's ability to buy in and keep up? Yes and no. Winser readily recognises the strides that have been made by the networks to bring for- ward novel responses to developing challenges – inter- acting with local and high-tech solutions in a way that he says would not have been common ten years ago. At the same time, however, he sees a "case-by-case approach" in the sector to approving innovation projects and endorsing their outcomes as cumbersome. It remains a barrier, he believes, to achieving a more general frame- work for innovation that reduces time to market and is accessible to a wider range of players. Winser links both the progress and the barriers to the introduction of RIIO. The regulatory regime he helped to shape put innovation front and centre of network settlement negotiations, and made funds available to incentivise focus on smart technology and ways of work- ing. But "it is still based on the premise of asking the network operators to come forward with ideas", Winser observes. "With so many players [in a decentralised energy scenario], I think there is an argument which isn't only about the utilities coming forward with good ideas, but is about creating an overall framework in which the industry together can see reward for bringing forward innovation – wherever it has come from, whether that be a university or an SME [small and medium sized enterprise] or a new player coming into the market or a telecoms provider coming in." If such a framework could be developed, it would reduce the timescales for bringing innovation forward, make the industry more flexible and open the door much wider to new players. "It would bring those disruptive technolo- gies and business models to bear that could create the blend between pan-European integration of our energy systems, the national systems, local and home – all of those four things being able to work seam- lessly together, not just in electricity, but across electric- ity, combustible gases, heat…" Winser pauses for breath, apparently newly boggled by the enormity of this vision, although it must be bread and butter to him now. Shaking his head he returns to consideration of RIIO and the challenge of creating a yet more friendly environ- ment for innovation in the UK energy sector. "RIIO was a massive step forward for encouragement of innovation. And it massively moved forward regulation of utilities. But I am sure there will be good debate about what will be fit for purpose as you see the emerging picture of all these different dimensions of change, right across the energy system." But what about the need for regulatory stability, a favourite mantra in the energy community? "Change is just part of the evolutionary process," says Winser thoughtfully. "We all need to be ready to see the model evolve in a sensible way to reflect the changing views of the transformation of the energy system." Will the Catapult play an active part in nurturing this evolution? Absolutely. "We would not be doing our job if we did not put forward a strong view about the best way to bring forward all this new technology that we need," says Winser. And it seems likely this "strong view" will include urging Ofgem to act swily on the outcomes of its consultation on regulation for non-traditional busi- ness models, due to be revealed at the end of this year, since Winser opines that "there is a need to think posi- tively about reforming business models and market structures. We are going to need those kinds of reforms if we are going to have all these [distributed] technolo- gies come through, because they will require very many different players to work together with broad-based incentives. They don't lend themselves very well to case- by-case intervention." More specifically, says Winser, referencing his partici- pation in a recent debate at Utility Week Congress in Bir- mingham (see p27), reform of market structures needs to look afresh at the way in which network revenues from new balancing and network management services are treated. "One of your speakers explained how there is no normal market premium return for being innovative in regulated utilities. If you put up the speculative cash and it turns out you're right, you still get the same return. If you put up the cash and you're wrong, you eat the down- side – there's no upside." Winser allows that "this is difficult stuff " and that he doesn't hold the answers to the conundrum faced by the regulator in creating the ideal framework for innova- tion. But while it is working it out, he says firmly, and with only a hint of PR-conscious mischief, the best thing that could happen to create momentum in energy sector innovation and promote its application is the creation of the Energy Systems Catapult. "Let's not delude ourselves that the storage on the system is just at Dinorwig and a few gas caverns. Our whole fossil fuel system is one based on huge inherent energy storage"

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