Memorandum submitted by RLtec
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 £991 million 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 ~ £991 million.
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
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