Beyond the national: how delivering net zero could affect people and - - PowerPoint PPT Presentation

Welcome and Introduction – Simon Hobday (Osborne Clarke) (14:00 - 14:15) Beyond the national: how delivering net zero could affect people and places - Jim Skea (Chair of Scottish Just Transition Commission and Co-Chair of IPCC Working Group III) (14:15 - 14:35) Beyond the incumbents: building the markets for net zero - Chaired by James Watson (Osborne Clarke) (14:35 - 15:20) Elizabeth Allkins (Ovo Energy) - Domestic flexibility: Opportunities, barriers and benefits John Twomey (National Grid ESO) – Enabling new market opportunities Kyle Martin (LCP) – How the power market will change in a net zero world James Johnston (Piclo) - The future of DSO flexibility

Break (15:20 - 15:30) Beyond the current system: new innovations to deliver net zero - Chaired by Caroline Bragg (ADE) (15:30 - 16:10) Javier Cavada (Highview Power) - The role of long duration cryogenic energy storage Chris Cox (Cenex) - The emerging role of transport in local energy systems Claire Addison (Flexitricity) - Boosting real-time flexibility in the system Launch of ADE report "Let’s talk about Flex: Unlocking domestic energy flexibility“ - Rick Parfett (ADE) (16:10 - 16:20) Closing Remarks - Ian Calvert (ADE Director) (16:20 - 16:30)

Jim Skea Keynote address Smart Energy Conference 2020

Delivering Net Zero without Breaking the Bank 29 April 2020

For the next two-three years, everything will be seen though one lens:

How will it contribute to economic recovery from the current crisis? How fair will that recovery be?

Structure

• How a “just transition” can contribute to the net zero goal
• How to apply the concept of just transition in practice
• Specific implications for energy efficiency/decentralised energy
• Nothing on balancing mechanisms/flexibility markets

(I can’t do that!)

Why a “just” transition?

• Net zero implies “rapid, far-

reaching and unprecedented changes in all aspects of society”

• This won’t happen without social

consent

• The transition must be, and must

be perceived to be, fair

The Scottish Just Transition Commission

“The imperative of a just transition is that Governments design policies in a way that ensures the benefits of climate change action are shared widely, while the costs do not unfairly burden those least able to pay,

• r whose livelihoods are directly or indirectly

at risk as the economy shifts and changes” Interim Report, February 2020

The Commission is to…

Provide practical, realistic, affordable recommendations that will support Scottish Ministers to take action that will:

• Maximise the economic and social opportunities that the move

to a carbon-neutral economy by 2050 offers

• Build on Scotland’s existing strengths and assets
• Understand and mitigate risks that could arise in relation to

regional cohesion, equalities, poverty (including fuel poverty), and a sustainable and inclusive labour market

Scottish Trades Union Congress Prospect Union WWF Scotland Energy Action Scotland Spring Rise (industrial consultancy) SSE (utility) Oil and Gas Technology Centre 2050 Climate Group/Pale Dot Energy Quality Meat Scotland Universities of Strathclyde and Heriot-Watt

The Commissioners come from:

The Commission sees the application of just transition principles extending to:

• people as consumers
• communities - and the importance of

“place“

Not just about the supply side

Today’s world has its own injustices, and there are

• pportunities for a just transition to address these:

Not just about future injustices

• Energy poverty
• Fair work
• Land tenure

• The need for clear planning
• Engagement and society’s expectations
• Building equity into all climate policies from the start

Emerging themes

• Guests at Commission meetings
• Stakeholder workshops
• Town-hall events
• Focus Groups
• Seminars
• Public consultation

Engagement

What does it mean for decentralised energy? Ingredients of net zero

• Decarbonization of power

√

• Energy efficiency

X

• Electrification of demand…..

X

…. and carbon removal

X

15

Energy prices don’t help – should electricity consumers cover all decarbonisation costs?

16

Skills, supply chains and labour markets

• Incremental housing improvements won’t do
• Energy efficiency and electrification imply deep retrofits
• Not just counting jobs – the supply side of the labour market

matters… ….skills, training, building up supply chains and trusted suppliers

05/05/2020 17

Fairness to consumers

• Those in rural areas (a transport issue)!
• Those using electricity for heating
• Those in inefficient homes
• Less credit-worthy consumers who can’t raise capital or must use

pre-payment tariffs

05/05/2020 18

Conclusions

• There will be a need for economic stimulus and investment in

infrastructure for the long-term

• Climate action has a role to play in economic recovery
• The experience of, and recovery from, COVID-19 is likely to

amplify concerns for planning, cooperation and fairness

• But beware the fallout from high levels of public debt

05/05/2020 19

Panel 1 - Beyond the incumbents: building the markets for net zero

DOMESTIC FLEXIBILITY: OPPORTUNITIES, BENEFITS AND BARRIERS

ELIZABETH ALLKINS - OVO GROUP

OVO GROUP

CONSUMER B2C ENERGY SERVICES + 5m CUSTOMERS BUSINESS B2B TECHNOLOGY PLATFORMS

22

OVO RETAIL BRAND KALUZA

THE CHALLENGE

PEAK THREAT REQUIRES MITIGATION

GETTING READY FOR A DECARBONISED GRID

The transition to a distributed energy network is happening The utilisation rate

• f renewable energy must be improved

Flexibility and storage is proving to improve network management

Addition of EVs, smart heating and home energy storage

Flexible & smart home technologies can empower customers to be part

• f a democratised system

Source: National Grid Future Energy Scenario 2019

2020 2050

104GW peak

2020 peak 59GW Other 44GW Transport 24GW Heating 36GW

64GW 84GW Dispatchable generation

THE ROLE OF THE DOMESTIC CONSUMER

Consumer tariffs are simple and clear to understand

CUSTOMER PROPOSITIONS

KALUZA |

KALUZA’S APP GIVES CUSTOMERS CONTROL

KALUZA |

KALUZA’S FLEXIBILITY PLATFORM

INTELLIGENT ENERGY PLATFORM

WHOLESALE MARKET DISTRIBUTION NETWORK TSO DISTRIBUTED GENERATION CO2

JOINING THE DOTS

The Kaluza platform responds to real-time market signals and customer schedules

• optimising EV charging on a minute-by-minute basis

THE OPPORTUNITY

RESIDENTIAL FLEXIBILITY ALONE COULD SAVE UP TO £7BN/YEAR

FLEXIBILITY FIRST

Residential flexibility will create whole system cost savings of £6.9bn. Electrification and decarbonisation will save £206 per household per year. Intelligent charging of electric vehicles will save up to £3.5bn.

Source:

• 25g/ kWh
• 25m EVS
• 21m electrically

heated homes

• £6.9bn

KALUZA |

DEMAND TURN DOWN FROM RESIDENTIAL BATTERIES

31

IN PRACTICE

• 1,000
• 2,000

2,000 1,000 0% 100% 50% Power (W) State of charge (%)

18th Feb 2020

WPD Flexible Power

Power State of charge 00:00 04:00 08:00 12:00 16:00 20:00 00:00

@Kaluza_tech

THE HURDLES

KEY MARKET ENABLERS FOR DOMESTIC FLEXIBILITY

SMART METERING AND HHS

• Smart metering and HH settlement expose all

customers to price signals, incentivising domestic flexibility

• Market-wide HHS levels the playing field for

consumers and suppliers

JOINING THE DOTS

PRICE SIGNALS FOR FLEXIBILITY

• Price signals incentivise flexibility for smart

device owners, enabled by smart metering and HHS

• Strong, locational, real-time signals, reflecting

network costs & constraints

• TCR reform has weakened price signals,

hindering flexibility

• Access SCR developing & implementing price

signals that encourage and reward domestic flexibility

FLEXIBILITY MARKETS

• Direct procurement of flexibility provides

certainty for DSOs and TSOs when it’s needed

• Corrects imbalance or constraints left after

price signal optimisation

• Requirements of emerging DSO markets

limit opportunities for domestic participants

Smart charging, enabled by HHS, optimises against both network price signals and flexibility markets — creating value for consumers, while reducing costly investments to grid infrastructure

THANK YOU!

Kaluza.com

elizabeth.allkins@ovoenergy.com

@Kaluza_tech Search ‘Kaluza’

John Twomey Market Development Manager

National Grid ESO enabling new market

• pportunities

36

A vision for the future

• In April 2019, National Grid Electricity System

Operator announced it will be able to fully operate the electricity system with zero carbon by 2025

• A whole system strategy that supports our ambitious

target

• Competition everywhere
• The ESO is a trusted partner

We will be leading the change to a greener and cleaner energy future!

37

Overview of Electricity Markets

Capacity Market 50-55 GW £400m - 1bn annually

Participants paid a capacity fee to be available at times of system stress. Volume purchased through pay as clear annual auction for prequalified

• participants. Majority of volume bought 4 years ahead (T-4) Top up

volume 1 year ahead (T-1) CM auction administered by ESO

Wholesale Market 1000 TWh traded, 300 TWh delivered annually Total traded value approx. £55bn

Participants trade standard products either bilaterally or via exchanges. Liquidity and granularity of products tend to increase closer to real time. ESO trades 4-5 TWh annually but does not have a role in administrating wholesale market

Balancing Mechanism £450-500m annually

The ESO uses the Balancing Mechanism (BM) to keep supply and demand in balance by accepting offers to increase or bids to decrease

• energy. The mechanism is pay as bid and the actions taken are used to

set the System Imbalance Price. Traditionally participants have been large transmission connected generators but more small distribution connected assets are entering the market. This will increase further in December with the introduction of Wider Access to the BM.

Ancillary Services £450m annually

The ESO procures services to balance demand and supply and to ensure the security and quality of electricity supply. These include Response: Firm Frequency Response, Mandatory Frequency Response Reserve: STOR, Fast Reserve, Replacement Reserves (from June 2020) Operability: Black Start; Reactive Power, Intertrips, Constraint Management Traditionally procured bilaterally or via pay as bid tender. Moving to close to real time pay as clear auctions

38

Infrastructure to support efficient market outcomes

Enhanced Customer support

• Support for new

market entrants.

• More diverse training /

guidance available. Timely and machine readable data

• Open and readily

available information to drive commercial decisions

• Tool for innovation

Agile and simplistic licencing and code landscape

• Obligations are easily

digestible

• The pace of change meets

the expectation of market participants. Harmonised planning across T & D

• Coordinated decisions that

drive whole system impacts.

• Consumer outcomes at the

heart of decisions. Transparent & coordinated priorities

• Priorities governed by

long term strategic intent

• Coordinated decisions

that enables strong market liquidity.

39

The vision for a 2030 market

Mature commercial and operational model that allows stacking of services Procurement of system products close to real time where decisions are underpinned by readily available market data. No bilateral deals. Integrated DSO / TSO model that serves both national and local markets System products can be traded within a European market given our enhanced interconnection with Europe. New operational services underpinned by competitive markets – Stability, Constraint Management & reactive. Enhanced data to connect decisions between the market and awareness with consumers – i.e. Carbon data reporting ESO App

40

ESO Forward Plan

Scan the QR Code below to go straight to the Forward Plan Website!

nationalgrideso.com National Grid ESO, Faraday House, Warwick Technology Park, Gallows Hill, Warwick, CV346DA

April 2020

How the power market will change in a Net Zero world

43

Who we are

We advise half of the FTSE100 firms

• Financial services consultancy, based in

London

• 700 staff and partners
• LCP Energy Analytics focuses on the GB

and Irish electricity markets

• Combination of energy market expertise,

mathematical modelling and new technological approaches

• Work closely with industry and decision

makers

• Provide a range of services, from

modelling support to market insight

44

LCP Energy Analytics

We have provided the modelling framework for a number of decision makers.

• We designed, developed and maintain

BEIS’ primary forecasting tool, the Dynamic Dispatch Model, used in all long term forecasting and policy impact analysis

• Ofgem uses our modelling to assess

network charging reforms, including embedded benefits/TCR

• National Grid uses our modelling to

support the annual capacity requirement recommendation, calculate EFCs and derating factors

• The LCCC uses our modelling to

calculate the costs of the CfD framework, and to set the interim levy rate and total reserve amount.

How the capacity and generation mix will change in a Net Zero world

For this presentation LCP has used the Committee on Climate Change’s (CCC’s) Further Ambition scenario as the starting point to base our analysis. The first graph shows installed capacity will grow to over 360GW with a de-rated capacity of nearly 160GW to meet the peak demand in the CCC’s Further Ambition scenario. The second graph shows the amount of power produced by each technology with renewables producing over half with CCS and nuclear making up the majority

• f the other generation.

Although there is a significant amount of ‘other flexible’ capacity on the system these are only proving a small amount of power.

Possible 2050 capacity and generation mix

46

How the energy system is changing

6%

As we transition to Net Zero there will be changes in how we use energy across sectors. These graphs show the system with low demand and high renewable output. In 2019 we already see times when there is excess low carbon generation without enough demand to use all the power, resulting in some units being curtailed. By 2050 we can see this problem is much bigger with

• ver 120GW of renewables

needing to be curtailed in some periods.

Low demand and high renewables

47

How the energy system is changing

High demand and low renewables

48

How the energy system is changing

These graphs show the system with high demand and low renewable output. In 2019 the majority of the demand is met by thermal power stations. By 2050 traditional thermal won’t be able to operate on the system and this will need to be replaced by other technologies such as CCS or other flexible generation, which could be made up of gas/hydrogen, peakers, DSR, batteries and

• ther technologies.

The demand profile under the CCC’s Further Ambition scenario has peak demand around 150GW due to heavy electrification.

Opportunities under future market structures

An electricity system where the majority of generation comes from intermittent renewables means markets are likely to change in shape and size in the future. When modelling Net Zero we see long periods where the wholesale price is <=0£/MWh. The graph shows an example

• f this already happening on 20

April 2020. Support schemes (RO/FiT/CfD) coming to an end and the deployment of long duration storage/hydrogen technologies could reduce the length/severity

• f low/zero price periods.

The impact of Net Zero on the wholesale market

50

Market Structure

Low renewable/high demand events will mean that firm capacity needs to be dispatched. These units have a higher generation price than renewables because they have fuel + carbon costs leading to a higher wholesale price. The frequency/magnitude of these periods will reduce in the future as low carbon plant make up the majority of generation and carbon prices have no/little impact on a Net Zero power system. On 4th March a lack of available plant led to a system price of £2,242/MWh. Although scarcity pricing will make up revenue for firm capacity it’s unlikely projects will be financed on a merchant basis in the future.

The impact of Net Zero on the wholesale market

51

Market Structure

Firm capacity needed to meet demand

Opportunities

52

Market Structure

* Periods where net demand peaks for 3 hours or less

• Low Carbon - A Net Zero power system requires significant amounts of low carbon power to be
• built. In order to secure financing it is envisaged that market stabilisation contracts (or similar) will be

needed.

• Capacity – As a result of having significant amounts of renewable generation on the system there

will be a need for firm capacity to provide security of supply. In order to secure financing it is envisaged that Capacity Market agreements (or similar) will be needed.

• Flexibility – Ramping and peaking* periods are set to increase as the impacts of renewables

become more significant.

• Ancillary Services - Increased need for response, reserve, headroom/footroom, inertia, etc will

drive value in ancillary services. These services will also need to come from new technologies as thermal units close.

• Reducing Curtailment - Flexible assets such as interconnection & and battery storage can

alleviate this but there is an opportunity for longer-duration storage or demand turn-up services.

• Resolving Imbalances - Imbalance volumes are set to increase by 2050 due to renewable

penetration but improvements in forecasting improvements will limit the growth of this market.

Conclusions

• Significant amounts of new generation will need to be built to meet the capacity

requirement needed for a Net Zero power system.

• Opportunities for flexible assets will grow as the level of renewable generation increases.
• The challenges of low renewable/high demand and high demand/low renewable

scenarios need to be addressed by policy makers and industry.

• There will be new opportunities to provide services for a Net Zero power system but

cannibalisation of shallow markets will remain an issue.

• A fundamentals driven approach should be used to assess value across markets.

Key issues for moving to a Net Zero power system

54

Summary and conclusions

At LCP we combine in-depth knowledge of the energy sector with modelling expertise to help our clients make informed decisions. Our products and consultancy services have developed over many years of close engagement with government and industry, and are used by policy makers, strategists, investors, operators and traders in the UK and Ireland

Kyle.Martin@lcp.uk.com

ADE Smart Energy Conference 2020

The future of DSO flexibility

Introducing the Piclo Flex marketplace

• Supporting UK Distribution System Operators (DSOs) procure flexibility to manage their networks
• Over 1.39GW of flexibility needs advertised in 2019 (worth approx £30m)
• £0.6m successfully awarded in the UK’s first DSO auctions
• 300 flex providers are members and have registered over 6.6GW of assets

Commercial & industrial flex assets Household flex assets

DSO flexibility in a nutshell

Time of day Capacity (MW) Network limit Flexibility services Service window Load profile

Value of DSO flexibility markets in Net Zero

Hot off the press! Two new white papers

White Papers accessible here: https://piclo.energy/about#whitepaper

Net Zero scenario demonstrates that peak network demand could increase by 50%

Peak day profile from the Baseline scenario, in which demand reaches 91GW

Basic Flexibility could reduce peak demand from 91GW of 75GW

Peak day profile from the Basic Flexibility scenario, in which peak demand is reduced from 91GW to 75GW

Basic Flexibility can reduce annual system cost by £4.55bn per year

System Cost Analysis

Role of independent marketplaces in Net Zero

Transparent and fair competitions

✓

Efficient contract stacking

✓

Market visibility

✓

Independent marketplaces are essential for net zero

Market visibility

Transparent and fair competitions

Efficient contract stacking

James Johnston

CEO and co-founder james@piclo.energy +44 7880 603 378

Thank you