Network

NETWORK / 8 / DECEMBER 2016/JANUARY 2017 "T he age of exclusive control by big energy companies and central government is over," says the secretary of state for business, energy and industrial strategy, Greg Clark, in his ministerial foreword to the long-awaited call for evidence for a smart, flexible energy system. Industry has waited far longer than expected for this moment; the catalyst for technological innovation and the end of the energy system as we know it. In reality Ofgem has been consulting on the future for some time, issuing a position paper on flexibility last year and consulting on the transformative potential of non- traditional business models and the challenges, risks and opportunities they can create before that. Now the focus is on where regulatory change or space for innovation is needed. It identifies four main areas of work necessary to achieve a system capable of cultivating innovation and meeting the changing demands of customers. These are removing barriers to storage and demand-side response, improving price signals to allow more flexibility, catalysing innovation, and assessing changes to roles and responsibilities in the energy system. Clark says that in the paper, both the government and Ofgem "ask open questions about these strategic choices", though Ofgem has ignored calls to allow DNOs into the storage arena, instead pushing forward a vision of competition (see opposite) despite voices of doubt from within the industry on whether a truly competitive market for storage is possible. Little in the call for evidence is a revelation – as expected, energy storage sees the full range of known barriers addressed with potential solutions given – but some lesser-discussed areas have also been singled out for attention, such as the role of aggregators, low-emission vehicles and cyber security. Previous work undertaken by Ofgem has identified a number of barriers preventing aggregators from delivering smart technology and processes, which the consultation aims to address. These include selling services to the system operator and accessing the balancing mechanism. There could be some further potential issues including cross-party impacts in the energy market, aggregated actions that affect the secure operation of a local or national system, and issues in relation to consumer protection risks. The paper also recognises the potential risks of allowing the ultra-low emission vehicle market to evolve without some guidance. Ultra-low emission vehicles, such as electric and hydrogen fuel cell, are critical to meeting carbon reduction targets and tackling air pollution. But the paper states that "without any intervention, there is a risk that electricity demand to support these vehicles could add to existing demand peaks, triggering expensive network reinforcements and a need for additional peak generation capacity". It says there is the "opportunity to help shape norms, expectations and markets so that electric vehicles are integrated" in the most cost- effective way possible. The government has said little before this on the potential role it could play in the development of this important sector, but is now calling for views on the roles it, and industry, should play in bringing forward smart charging propositions for consumers. A smart system inevitably means a more interconnected and digital system, opening the door to security issues. The paper makes it clear that building in security into any solution will be a fundamental priority, potentially be the first time the energy system will receive major guidance on how to implement cyber security. The consultation can expect a wave of input from all corners of an industry which, due to delays, has had plenty of opportunity to gather its thoughts. Now that the call is out, though, the window of opportunity is short with a January deadline for all submissions. Ofgem will respond in spring 2017. N Smart SyStemS The fiNal plaN (expecTed SpriNg 2017) will SeT ouT implemeNTaTioN TaSkS aNd TimeliNeS for: l Any further measures to make it easier for storage to connect to the network l  A decision on the regulatory definition  for storage and whether a new licence is required l A decision on whether to create a new route for independent aggregators to access the balancing mechanism l Ofgem's view on future distribution charging reform l Proposals for changes to how the charging regime applies to storage l  A decision on how final consumption  levies should apply to storage l A decision on whether additional consumer protections are needed l Direction on any further changes to roles and market arrangements to support system co-ordination and support appropriate valuation of flexibility  l  Flexibility trading/optimisation  platforms identified for government  smart innovation funding l  Specific government smart innovation  programmes l Proposals for future funding and governance of Ofgem's Network Innovation Competitions QueSTioNS aSked iN The call for evideNce l  Have we identified and correctly  assessed the main policy and regulatory barriers to the development of storage? l  Do you agree that flexible connection  agreements could help address storage and network charging issues? l Are there any circumstances in which network firms should own storage? l Do you agree with our assessment of the risks to system stability if aggregators' systems are not robust and secure? l What types of enablers do you think could make accessing flexibility easier  in future? "With a smart system we can go further and faster in breaking down barriers to competition – allowing the widest possible range of innovative products and services to prove themselves in the marketplace. To make the most of a smart system we need smart policy and smart regulation." GREG ClARK, sECRETARY Of sTATE fOR BUsINEss, ENERGY AND INDUsTRIAl sTRATEGY

• Cover