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The Topic: Funding decarbonisation UTILITY WEEK | 16TH - 22ND SEPTEMBER 2016 | 9 WHAT'S IN THIS ARTICLE? l The role of DSR, p9 l CfDs and the capacity market, p10 l The EIB and GIB, p11 l Decarbonising the water sector, p12 l Does the UK need Hinkley? p14 l Funding energy efficiency, p14 W e need to move to a low carbon economy and the timing must be as soon as is practical, but the question is who will pay for it? The traditional model of large generation plant is rapidly changing. With the advent of storage, cheaper embedded generation and demand-side response (DSR), that change will only accelerate in the next few years. Yes, we will still have large plant, but embedded genera- tion, DSR and storage will be critical to balancing the system at all levels. Clearly, creating a market for energy to be turned down or up when needed and thereby putting a price on this flexibility makes sense, especially when it can reduce costs for the customer and avoid building expensive, high carbon, peaking plant. Unfortunately, the press don't always see it like this, and instead reach for their standard response of "National Grid paying customers to turn down due to risks from blackouts". Others have been faster to latch on to this market, with many new aggregators entering the market looking to help customers benefit. From the customer side, it has been led by those who already have assets, such as hospitals with backup generation or large energy-aware consumers such as Sainsbury's, who can make relatively small adjustments to their energy management systems at critical times and save money. But increasingly DSR is reaching down to customers including the local swim- ming pool, ice rink and refrigeration units at middle- sized businesses. Some estimate that the DSR market in the UK has the potential to reach 4GW by 2030. However, currently actual DSR is a fraction of what it should be and while BEIS/Ofgem and National Grid have made progress, much more needs to be done to promote this market and to encourage accessibility for customers. Examples of this are that under the capacity mechanism you are limited to very short-term contracts for DSR, but these may be too short to underpin the investment needed. By offering a range of longer-term contracts that relate to the capex and capacity released it opens the market to new customers and lower over- all prices. The ability to turn up or turn down energy use makes sense where the incremental cost of adjusting your plant is small. However, as the cost in capex or in disrupting your underlying business increases, then DSR becomes less attractive. One potential disrupter to this is the arrival of storage, which is becoming cheaper and cheaper, as evidenced by National Grid's recent tender for enhanced frequency reserve, which contracted for 201MW at an average price of £9.44/MWh. Storage could be a further game change. Paul Massara, North Star Solar chief executive and former Npower chief executive This is an extract of the full column by Paul Massara. To read the full piece, visit: www.utilityweek.co.uk Comment: Demand-side response has a big role to play In order to meet climate change targets, more than £330 billion is required to green the UK's economy. The eight pages of this week's Topic look at the different ways in which decarboni- sation in the UK is being funded in order to bridge the low-carbon investment gap and help the UK meet its the 2008 Climate Change Act targets. "China's participation is much more than £6bn of inward investment. It brings the benefits of a 30-year partnership between EDF and CGN in nuclear construction in China, a country with the largest civil nuclear programme in the world." • Vincent de Rivaz, chief executive, EDF Energy EU funding backs Welsh wave scheme A new £5.8 million scheme to generate energy from sea waves off the Pembrokeshire coast will be launched aer securing £4 million in EU funding through the Welsh government. The funding has been awarded to wave technology company Wave-tricity to assist its development and testing of a new device called the Ocean Wave Rower. The company will put forward £1.8 million of its own capital to help fund the two- year project. SUMMARY OF LIFECYCLE GREENHOUSE GAS EMISSIONS INTENSITY Source: WNA Technology Mean Low High tonnes CO 2 e/GWh Lignite 1,054 790 1,372 Coal 888 756 1,310 Oil 733 547 935 Natural gas 799 362 891 Photovoltaic 85 13 731 Biomass 45 10 101 Nuclear 29 2 130 Hydro electric 26 2 237 Wind 26 6 124 1990 1996 2002 2008 2014 Reduction in emissions mainly due to decrease in use of coal for electricity generation Total greenhouse gas emissions Total carbon dioxide emissions 1,000 800 600 400 200 0 GHG emissions (MtCO 2 e) UK GREENHOUSE GAS EMISSIONS FOR 2014 AT RECORD LOW 2013-14 % change 8% 9% 35% 29% 1990-2014 % change