Energy and Climate ChangeWritten evidence submitted by The Institution of Engineering and Technology

IET’s Key Messages:

1. The efficient operation and future proofing of the whole energy system is the main focus of the IET’s evidence.

2. As with all energy issues, strategy for medium-sized local energy projects needs to be considered in the context of the UK’s whole energy system.

3. A whole energy system perspective includes generation of electricity, use of heat, small scale energy storage, local renewables, smart networks, energy efficiency, use of energy for transportation and integration with the built environment. There are some very good examples such as Ashton Hayes, which are often very dependent on local circumstances and key individuals—often retired engineers.

4. The IET recognises the potential of new technologies at medium scale to open up new opportunities such as projects owned by community groups, co-operatives, local authorities and commercial organisations. As well as providing potential new sources of investment and local engagement, this may also be helpful in widening the public understanding of energy and assist “energy engagement”that we believe is vital to the success of Local Energy.

Questions

Question 1: What contribution could medium-sized energy projects (5–50MW) make to the UK’s climate change, energy security and energy affordability objectives?

Contribution to climate change:

5. When viewed from system perspective, local CHP generation can be lower in emissions than generating electricity and producing heat separately, and through facilitating the development of heat networks also create a flexible infrastructure that can be further exploited over time, for example using large scale heat pumps to harvest energy from sources such as rivers. Fuel for CHP generation could be gas or low carbon alternatives such as biogas or biomass, depending on the local context. With a heat distribution network in place, other options also start to open up, such as inter-seasonal heat energy storage at large scale in underground aquifers.

6. Medium size renewable energy projects (mainly wind, potentially solar PV) can also maximise the harvesting of local renewable energy resources, and their small scale potentially makes them open to a wider range of developer and investor than large utility scale projects. Where output from these energy resources is closely matched to power consumption at nearby premises they can also reduce the amount of power that needs to be supplied by the local distribution network and so help reduce power system electrical losses. However such projects need to be judged on their individual merits and we would caution against policies that created artificial advantages for projects simply on account of their size.

7. Community scale energy projects also build awareness of energy issues within communities, which is likely to facilitate consumer engagement and potentially improve the effectiveness of initiatives such as smart metering, tariffs that vary by time of day and perhaps dynamically through the day and year, and issues such as accepting control of timing of electric vehicle charging via a smart grid.

Contribution to energy security

8. Diversity of energy sources:—some types of energy are necessarily smaller scale and local. Medium size projects could make a positive contribution and may save upgrading the grid if they feed into areas of current high demand, providing they can demonstrate the level of reliability and predictability required for support to the power network at local or national level. This would help security by increasing diversity of supply.

9. Flexibility: It is important to note that some medium size electricity generation is controllable (eg biomass) so can have an important role in load balancing and control of the power grid. There are also opportunities in an appropriately designed CHP plant to reduce heat production and increase electricity production at times of high electricity demand. Thermal inertia would mean consumers would not feel an impact from the reduced heat production for some time, thus creating much needed short term flexibility.

10. Energy storage: industrial-scale developments are now coming forward and this technology could be a natural, local, off-set of generation variability or generation being produced when demand is low.

11. Short Term Operating Reserve (STOR): There is a strong commercial opportunity here for controllable distributed generation, perhaps linked by the services of Aggregators, to provide Short Term Operating Reserve (STOR) to the GB Transmission System Operator (TSO). This is an attractive area to explore as the STOR market is worth some £600 million per annum. An example of a new company operating in this market is Peakgen.1 In the future this could perhaps be extended to local grid balancing. The concept of creating Distribution System Operators (DSOs) in addition to the TSO has been mooted.

12. Local supply security: Local energy sources do not usually contribute to local supply security. Specifically, if the supply from the national grid or the regional distribution company is lost, a local energy source cannot operate as a “power island”. This is because once the energy source is disconnected from the grid (which is currently necessary for safety reasons when supply is lost) it would be necessary to then continuously balance generation and demand within the power island. This in turn would require close matching of generation capacity with local demand and sophisticated control systems to ensure stable operation. The exception to this is where generation is specifically installed for such a purpose, in which case it can, for example, supply a specific building. The exception to this is where generation is specifically installed for such a purpose, in which case it can, for example, supply a specific building. However, looking to the longer term and noting the concerns being identified by The Treasury for Critical National Infrastructure, it would be possible in principle to progressively redesign the GB grid such that it had “soft failure modes” and was able to operate intentionally as power islands under extreme conditions. This would be possible where there was sufficient local generation and/or storage. It would be very demanding to achieve in the short term, but with the advent of smart grid technologies and demand control this could be a credible future strategy for making GB electricity supplies resilient in the face of climate extremes or, indeed, malicious attack.

Contribution to affordability

13. High input fuel costs and high carbon costs will tend to drive fuel and carbon efficient solutions, of which CHP is a prime example. However the associated up-front infrastructure costs will be high. This challenges initial affordability. Moving to a fully smart and integrated solution with local storage, smart demand and a prominent role for renewable energy will again have significant upfront costs, with benefits to be found in the longer term through reduced emissions and fuel costs. We would strongly encourage continuing investment in pilot programmes to prove these concepts further.

14. There are also examples (eg Delabole wind farm by Good Energy in Cornwall)2 where communities hosting a wind turbine receive lower electricity costs.

15. Employment: a technology that employs local (or even UK) manufacturing and installation skills will contribute more to the economy than one that is largely imported such as solar PV panels.

Greater public awareness of energy issues

16. Whatever transpires, energy is going to be higher up on the public agenda in the future. Understanding the issues is important given the changes ahead. Industrial scale plants and collaborative community projects (for wind, PV, CHP, hydro, or possibly even ground source heat pumps) can assist with diversity of supply, if planned as part of a systems engineering approach, integrated with the local distribution system. They also encourage more people to be more energy conscious and to consider timing of placing energy demands (where they have flexibility to do so).

17. Cornwall County Council is exploring a “smart grid Cornwall” project and have set up a trading company for this. A company working in this area, and the South West of England, leading on monitoring and visualisation of energy use, is Argand Solutions Ltd3.

Contribution to Energy Efficiency (and hence also affordability, low carbon and security)

18. Energy efficiency projects, especially in the built environment, need to be undertaken at the point of end use, and therefore are typically small and medium scale. Medium scale energy supply projects therefore have greater potential to link to demand side projects (for example on the efficient use of heat and electricity or even the recharging of electric vehicles). There is evidence that many of the successful community projects are doing this.

19. Ashton Hayes4, which has received backing from Ofgem’s Low Carbon Network Fund (LCNF) is a prime example. The objectives of the Ashton Hayes Smart Village Project are: to facilitate the connection of various micro generation technologies; to improve the accuracy and granularity of total electricity consumption measurement by installing additional metering on the network at secondary substation feeder level and at renewable energy source(s) providing measurement of the gross generation embedded within the community; and, to introduce innovative and new techniques to introduce demand side management capabilities aimed at assisting change in energy use related behaviours within residential homes and public properties.

20. Some community owned wind farms use a small fraction of revenues to support energy saving activities in their local communities. Examples are Westmill Co-operative5 and Baywind.6

21. Some community projects seek to combine work on smaller scale renewable energy projects with support for energy efficiency, behaviour change and even with arts and education projects designed to change attitudes to energy and sustainability. (See for example the work of some of the communities supported under the Low Carbon Communities Challenge.7

Question 4: Why are community-owned energy projects more prevalent in countries like Germany and Denmark than they are in the UK?

22. While community-owned projects were developing in Germany and Denmark, the availability of North Sea oil and gas meant that the UK had no incentive or motivation to get to grips with the issue.

23. Patterns of ownership are very different in Denmark and Germany. The explanations seem to lie partly in different cultural and government traditions, things like the prevalence of rural cooperatives and greater powers of local government. These are things that are difficult to change quickly.

24. 50% of renewable generation in Germany comes from individuals or farmers so there is voter support in favour of generous FITs. But it is costing the customer money (German consumers are getting concerned about the prices). Renewables capacity in Germany is owned as follows:

Private individuals	40
Farmers	11
Other	1.5
Manufacturing companies	9
Project companies	14
Finance sector	11
Major energy suppliers	6.5
Other energy suppliers	7
Total	100

(Source: German Renewable Energy Federation 2012).

25. Local authorities and communities in the Netherlands are willing to engage in energy projects because a) it’s a vote winner for local politicians -, it’s something the public is very positive about, and b) that it is not long ago that many municipalities had responsibility for energy at the local level; so there is a raised level of understanding and interest still available. An example is PowerMatching City,8 a living lab demonstration of the future energy system, located in Hoogkerk near Groningen in The Netherlands.

Question 10: How effective are current Government policies in encouraging local and medium-sized energy projects? Could they be improved in any way?

26. Anecdotal evidence suggests that the complexity of the current arrangements cause difficulties and frustration to small industrial and community energy projects. However, when you consider the range of different contributions that local energy can provide, if appropriately matched to local conditions, it is self-evident that knowing what to support and how best to do so is not a simple matter. Support therefore needs to address organisational capacity as well as finance and technology. Community Energy Scotland is a good example.

27. Projects need to be judged on their individual merits and we would caution against policies that create artificial advantages for projects simply on account of their size. The following broad components of a joined up approach to policy for local energy would seem sensible:

Heat : supporting DECC’s policy aims here and the further analysis required.

Local authority engagement: for example, district heating will need DCLG engagement.

Community engagement. There are good examples available including projects under the Low Carbon Networks Fund such as Ashton Hayes.

At a larger scale, the need for council etc development plans to understand the energy implications of their district plans.

Engagement activities between Distribution Network Owners and communities: Local energy availability and the cost break-points for strengthening a local network, need to be far better understood and monitored if there is to be holistic and cost-effective thinking between communities and regional developments.

Systems thinking:—within DECC this crosses a lot of boundaries (smart metering, smart grids, heat, bioenergy, gas, networks.)

About the IET

28. The Institution of Engineering and Technology (IET) is one of the world’s leading professional bodies for the engineering and technology community and, as a charity, is technically informed but independent. This submission has been prepared on behalf of the Board of Trustees by the IET’s Energy Policy Panel and takes into account inputs received from the wider membership.

April 2013