How smart is the government’s smart power strategy?
The government’s smart power strategy, Upgrading our energy system, unveiled yesterday, is the ultimate under the radar approach. It contains 29 deeply technocratic changes (such as “developing a Balancing and Settlement Code (BSC) modification, P344”), which are combined seamlessly with the neutered language of “removing barriers” and “making markets work”. It looks boring. But don’t be fooled: if it works, this strategy will deliver radical change. But this is a big if.
Green Alliance recently looked at what would be needed to integrate highly popular, people-powered, small scale energy with the big grid and power stations which will continue to provide the majority of the UK’s power. We called for four things:
- active governance of the transition;
- a requirement for distribution networks to optimise the use of EVs, distributed renewables, and batteries to cut carbon emissions and prevent expensive grid upgrades;
- access to the capacity market for these technologies, so they can outcompete fossil fuel power stations; and
- mandating smart charging and appliances, while encouraging aggregators to use them.
If everything in Upgrading our energy system goes to plan, it will deliver the latter three of these. Not only will there be no technical barriers to the smart power utopia within our grasp, but the rules will enable aggregators to use your solar panels to charge your electric car, let you sell your power to your neighbours and balance the grid, without relying on dirty diesel generators. What’s more, they will do so in a way that cuts your energy bill. This is a real victory for everyone who wants a low cost, low carbon transition.
Who is in charge?
But there is a rub: the government didn’t deliver active governance and a clear steer on what it wants. In the plan, many critical future decisions are split across the Department for Business, Energy and Industrial Strategy (BEIS), the Department for Transport, the Office for Low Emission Vehicles, Ofgem, National Grid, local grid operators, existing industry groups, new industry groups convened by government and ‘the market’. BEIS says government will work with all of these, but this carries three risks.
First, with so many groups involved and so little clarity on who is in charge of what, unintended consequences (or outright cock-ups) are more likely.
Second, such complex governance excludes all but the most experienced insiders, and even they will have to do a huge amount of legwork just to talk to all the relevant people, never mind getting them to agree.
Finally, and most importantly, the government says it will work together with everyone. But to what end? Technical decisions have tangible consequences: especially as more of the value of energy is moving to flexibility. Should a householder get paid for the flexibility their electric vehicle (EV) provides to the grid, or should most of the value go to a Big Six supplier, or perhaps to an EV manufacturer? Should a single proprietary algorithm dominate the control of smart refrigerators, washing machines and EV chargers, putting the big energy companies out of business? Google has done this with internet search, and similar dynamics will apply to smart power systems.
There will be politics
At the heart of our People power report was a sense that politics will matter in the smart and distributed energy future. After all, people will own the appliances, batteries, EVs, and distributed renewables that make the grid cheap and low carbon. If the rules about how the system works end up being, or even feeling unfair then people will push back.
Our case study of solar policy in Nevada showed that good technical decisions lead to bad politics if people who own distributed energy feel hard done by. Giving control over big decisions, as well as technical details, to opaque code review bodies shrouded in a web of impenetrable acronyms will require very wise experts to balance competing interests.
Perhaps, faced with potential trade-offs and risks for investors with billions of pounds of assets and a new cohort of millions of small scale owners, the government took the pragmatic decision to sort out the technical and legal barriers, and wait to address the politics. Framing the strategy as ‘smart power’ is clever: it is one of those winning phrases that nobody can be against. Who wants stupid power? But it is a clever political dodge that risks being too clever by half, if the technocrats can’t bring people with them.
Overall, this first big energy strategy document from BEIS is a highly competent integration of low carbon, energy security and low cost goals. It has all the ingredients of success. But, if it is to actually succeed, government will have to sort out who is in charge, and it will have to help ordinary people grasp why smart is good for them.