Jacopo Torriti submission published by Environmental Audit Committee (Community Energy publications)

This evidence is submitted by Professor Jacopo Torriti from the School of Construction Management and Engineering at the University of Reading, an expert on energy policy.

1. My evidence for the Technological Innovations and Climate Change: Community Energy inquiry looks at how an understanding of ‘demand-side’ energy is hugely beneficial in adopting energy technology to tackle climate change.
2. Demand-side energy considerations look at how much energy is drawn from a power grid, who uses it and what for. There are clear benefits from an understanding of demand, including reducing the peak power generation needed, and better utilising renewable energy systems and battery storage.
3. I will discuss demand side flexibility and how it will be critical in order make sure the UK minimise the costs of balancing demand and supply from renewables.
4. As we better understand where flexibility can and should come from (residential sector, heating demand, electric vehicles), I highlight a growing market opportunity for ‘load shifting’, in which energy use is rescheduled outside of peak demand times with financial incentives, and how regulatory reform of tariffs stands to bring about estimated bill savings for UK residential customers of between £1.6bn-£4.5bn from 2021 to 2045, and a total saving in the UK of £8bn. I will also highlight some key considerations about adopting this for consumers.

‘Demand-side’

5. Demand-side energy looks at the end users and means of distribution of energy, whether that is household consumers boiling a kettle, charging an electric vehicle; or a business powering their offices, server rooms, or manufacturing processes.
6. It is important to understand how energy is used when considering how to change the energy system to make it environmentally sustainable. As well as developing increased share of energy from renewable sources, and improving the efficiency of systems, we need to reduce the burden of energy generation.
7. I have been looking at how we reduce the need for energy production to cope with peaks of use. As the risk of peak demand exceeding supply is so undesirable, there are two ways to tackle the issue. Increase peak production, or reduce peak demand. Alongside other energy experts[i], I argue that in order to achieve a net zero carbon emission energy system in the UK, we must do both.

Demand-side flexibility

8. One way to reduce the impact of demand on our energy system is through ‘Demand-side flexibility’. What demand-side flexibility looks like in practice is the smoothing out of peak demands for energy, also called load shifting. This reduces the pressure for energy generation by taking away peaks. It also creates a market in which energy customers are financially rewarded for using energy outside of peak times.
9. Demand-side flexibility crucially enables an energy system with increased mix of renewable energy to better cope with fluctuations in supply as well as demand. This flexibility, along with solutions for battery storage, will enable renewable energy to provide the bulk of UK energy even though some renewable sources such as solar and wind are more contingent factors such as the weather.
10. The power of demand-side flexibility is in the creation of market incentives for electricity use during lower demand times. This has already been trialled [ii] in the commercial sector with great success, such as in 2017 where around 2.7GW which is equivalent to two large power stations was estimated to have taken part in a trial.
11. A Carbon Trust and Imperial College report suggests that adopting would save the UK between £17bn and £40bn [iii] by 2050, “by reducing the required expenditure in low carbon generation, peaking plant and network reinforcement.”
12. The UK Government’s Clean Growth Strategy recognises the need for a flexible energy system, and is outlined in Ofgem’s Smart Systems and Flexibility Plan [iv]. Some of their plans to create a ‘smart and flexible’ system have been achieved through the widespread adoption of smart meters. However, while 23.6 million [v] have been installed, it is the accompanying demand-side flexibility that will enable consumers to financially benefit by making energy use at certain times more financially attractive [vi].
13. In addition, the Clean Growth Strategy is unambitious in adopting demand-side response (DSR), and I have argued [vii] that a more radical approach to flexibility is needed to ensure that the UK is able to have a market and regulatory system that matches our ambitions for renewable energy mix.

Impacts for consumers

14. The benefits of employing DSR include making electricity cheaper at times where supply exceeds predicted demand, as well as decarbonising the energy sector and reducing public spending leading to better health and economic benefits for society.
15. The idea within flexibility of ‘load shifting’ has been adopted at a commercial level, but not currently with residential customers, which accounted for 34% [viii] of electricity use in 2019. Given the changing nature of work following the Covid-19 pandemic, this figure is likely to be significantly higher as more people work from home.
16. However, no such large-scale trials of consumer DSR have been implemented in the UK and currently our understanding of how households would adopt it are theoretical or based on equivalent models from industry.
17. In my recent research [ix], I have looked at what any adoption of a ‘Time of Use’ tariff as part of increasing DSR for household electricity users would mean for different demographic groups based on certain domestic tasks. I found that adopting household flexibility will need to be done carefully in order to not penalise lower socioeconomic households where time scarcity is a major factor in domestic chores requiring electricity.
18. I give an example of a single parent working as a nurse, who is time poor as well as potentially on a low income and is less able to flexibly use electricity outside of peak times. This demonstrates that adopting flexible tariffs for consumers needs to be carefully thought out to ensure that those who can’t benefit from such adoption are not further penalised.
19. Overall, across all sectors, increasing flexibility of electricity demand (that is, reducing consumption at specific times of the day) would yield savings in the UK in the order of £8bn per year up to 2030 [x] and allow progress towards a zero-carbon electricity system; and regulatory reform of tariffs bringing about estimated bill savings for UK residential customers of between £1.6bn and £4.6bn from 2021 to 2045 [xi].

Recommendations

20. In considering future incentives for community energy collectives for generation or distribution, attention should be paid to how communities (in both a residential sense as well as collective organisations) can support demand-side flexibility.
21. Call on Government to promote demand-side solutions to reach Net Zero targets.
22. Introduce plans for residential demand-side flexibility that promote fairness.
23. Consider plans for ensuring that the benefits of demand-side flexibility are passed on to community energy collectives.

March 2021

References:
[i]  https://www.creds.ac.uk/wp-content/pdfs/CREDS-Shifting-the-focus-July2019.pdf p61
[ii] Grunewald, P. and Torriti, J. (2013) ‘Demand response from the non-domestic sector: Early UK experiences and future opportunities’. Energy Policy, 61. pp. 423–429. doi: https://doi.org/10.1016/j.enpol.2013.06.051
[iii] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/568982/An_analysis_of_electricity_flexibility_for_Great_Britain.pdf
[iv] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/633442/upgrading-our-energy-system-july-2017.pdf
[v] https://www.smart-energy.com/industry-sectors/smart-meters/23-6-million-smart-meters-in-gb-but-one-fifth-not-operating-smart/
[vi] Torriti, J. (2020). Appraising the economics of smart meters: Costs and benefits. Routledge
[vii] https://www.creds.ac.uk/wp-content/pdfs/CREDS-Shifting-the-focus-July2019.pdf p63, p65
[viii] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/904805/DUKES_2020_Chapter_5.pdf p.2
[ix] Torriti, J., & Yunusov, T. (2020). It’s only a matter of time: Flexibility, activities and time of use tariffs in the United Kingdom Energy Research & Social Science, 69, 101697. https://doi.org/10.1016/j.erss.2020.101697
[x] Ibid
[xi] https://www.ofgem.gov.uk/system/files/docs/2020/06/mhhs_draft_impact_assessment_consultation_-_final_-_published_17_june_2020.pdf