Memorandum Submitted By RLtec (FBEN 8)

RLtec are a British venture-capital backed (Low Carbon Accelerator) start-up based in London with six employees. We are a technology company with innovations in the sphere of electricity grid management. Electricity grid balancing is currently forecast to cost the UK £991m in 2009/10 and a government-commissioned report estimates that our technology could help reduce carbon emissions from UK grid balancing on the order of 1.7 million tonnes per year. At a very high level, our technology is based on the principle that intelligently managing electricity "demand" can produce significant efficiencies over current methods of grid balancing, namely managing electricity "supply" (generation). We are writing to offer our perspective as a small British start-up company, we have five points to make, and we have included the text of the question that you ask alongside each relevant point.

1. The Government's vision for Britain's electricity networks

What should the Government's vision be for Britain's electricity networks, if it is to meet the EU 2020 renewables target, and longer-term security of energy supply and climate change goals?

A single entity should be in charge of the vision for Britain's electricity networks. Today National Grid are largely responsible for ensuring that the "lights stay on" and therefore they are best placed to take on this largely technical role. Ofgem and government policy can be the check and balance as a regulator. It is in everyone's best interest if there is one body responsible for coordinating and delivering this vision.

Specifically the vision should include a network where intelligent demand side management plays a key role in addition to all new innovative solutions. We note that National Grid is required by their license to deliver services economically and efficiently without reference to carbon emissions in the UK. Prior to achieving 100% auctioning of ETS carbon it may be necessary to establish some ground rules to ensure a level playing field amongst all services in the electricity markets to facilitate National Grid's selection of the services with the lowest CO2 emissions in tandem with existing economic selection criteria.

2. Regulatory framework flexibility

How do we ensure the regulatory framework is flexible enough to cope with uncertainty over the future generation mix?

RLtec note that some parts of the regulatory framework have infrequent reviews, for example five year periods between price control reviews. Increasing flexibility to allow decisions regarding new technologies or innovations arising between such reviews would be helpful.

3. Increased use of renewables

What are the issues the Government and regulator must address to establish a cost-effective offshore transmission regime?

During the Renewable Energy Strategy Consultation, BERR commissioned a number of independent consultants' reports on the impact of wind and other renewables on the network. These consultants indicated as much as a five-fold increase in balancing costs. National Grid's current annual budget for this service in 2009/10 is ~£991m.

4. Encouraging innovation

How can the regulatory framework encourage network operators to innovate, and what is the potential of smart grid technologies?

It has been suggested that 70% of innovation comes from small companies. Network operators are large companies. A scheme such as the Innovation Funding Initiative could be extended to other regulated services such as BSUoS. New innovations typically do not have significant economies of scale, and require "pump priming". Allowances in the regulations giving flexibility from rigid economic criteria will encourage more innovation.

RLtec offered the following answer to question 36 of the government's Renewable Energy Strategy consultation, regarding Innovation.

'We are developing and bringing to market a new innovation that allows demand side devices to provide electricity balancing (ancillary) service. The company has been initially funded by the inventor in 1999 and received seed VC finance in 2006. The technology is dynamic demand and is widely reported in several government reports including the renewable strategy. This technology is unique to the UK and offers a global opportunity for a UK "start-up" company to gain revenues and create employment.

The evidence to date shows we have received no government money. We have made applications for grant aided research through several of the agencies tasked by government with funding low carbon research and have made applications for investment support, through Carbon Trust, the Technology Strategy Board, and the Regional Development Agency route.

While it is recognised that one example does not necessarily illustrate a systemic problem with UK Government funding, the evidence and experience our management team has gained through seeking government support does offer interesting insight to both the processes, results and reasons for refusal of the various agencies and organisations we have submitted applications. If the experiences of RLtec were typical, then there is clearly a major issue for UK start-up businesses accessing government financial support in the UK.'

5. Learning from other countries

What can the UK learn from the experience of other countries' management of their electricity networks?

RLtec note that the state of California has legislated that demand side services receive priority in the loading order (see link below), and that this has been an effective means of encouraging innovation in electricity network management.

http://www.energy.ca.gov/2005publications/CEC-400-2005-043/CEC-400-2005-043.PDF

 

March 2009