The creation of a low-carbon economy requires a new way of thinking about our energy system. The expansion of renewable energy will entail a greater number of generators connecting to Britain's networks, ranging in size from roof-top solar panels to large offshore wind farms. These sources of generation cannot respond to fluctuations in energy demand in the way households have been accustomed. At the same time, consumers' demand for electricity could increase as a result of the electrification of the transport and heating sectors. The only way Britain can respond cost-effectively to these challenges is by applying a smarter approach to managing the energy system. This could occur in a range of waysfrom the household level with the use of smart meters to manage customers' energy consumption, through to the high voltage transmission network where generators may need to develop methods of sharing access to the grid.
The existing regulatory and policy framework, and industrial structure, is a product of the fossil fuel economy of the twentieth century. This Report examines the issues that will be integral to the development of a smart grid that is able to meet Britain's future needs. We note the progress the Government has made in developing a vision for the smart grid, and argue that it should take account of the following principles:
- The need to avoid locking the UK into a particular outcome for the future energy mix at an early stage;
- Integration and management of energy demand within the energy system;
- Minimisation of regulatory and policy uncertainty for network companies who must invest in network assets; and
- The possibility of a new industrial structure emerging over time.
Achieving a smart grid will have implications for the high voltage transmission network. We call for the Government to investigate the potential to make better use of the existing network, whilst acknowledging too that greater and more strategic investment is necessary in the coming years. We also recommend further work to develop a fair and open transmission access and charging regime. For the lower voltage distribution networks we welcome recent initiatives to improve innovation and call for these to be extended over time if there is demand. We also express concern at proposed changes to the network charging regime for small generators at a time when the Government hopes distributed generation will play a greater role in the future energy mix. Finally, we call on network companies and the regulator to do more to ensure the industry has the skills it needs to meet the future challenges posed by the smart grid.