Give consumers not 'Big Brother' control over demand response

Consumers can and surely will control when their dishwashers, washing machines and electric cars will be able to run under proposals for 'demand response', not 'big brother' as reported in today's press. However, plans to achieve this have not been thought out properly yet by the powers that be at both UK and EU level.

The idea behind proposals to fit sensors to various types of electrical appliances is to increase the ability of the Natonal Grid to respond ('demand response') to fluctuating supplies of wind power, solar power and other renewable energy sources. Electricity-using equipment at the industrial, commercial and domestic levels can and will be enrolled in a system to match electricity supply with demand, without loss of service to the consumer.

The plans are in response to legislation going through the EU legislative machinery that have been proposed by the recently established 'European Network Transmission System Operator' for Electricity (ENTSO-E). They are now the subject of public consultation. But the demand response system needs to be designed so that, in the domestic sector at least, consumers have control over when they can use appliances like washing equipment, when their heaters can give out heat and when they can drive their cars. People should have a choice, through pre-set automated preferences, over the sort of trade-offs they want between time of use and price paid for energy.

It is quite possible to fit the right meters to ensure that consumers can set machines automatically. Hence they can use them according to their preferences, which will include them automaticaly running (or charging car batteries) when the electricity prices are low (when there is plenty of renewable power), and using them less when electricity prices are high (when renewable power is scarce).

But, as I explained in a previous blog current regulatory arrangements will only allow a 'top-down' system of controlling demand response. The sort of 'smart meters' being rolled out at the moment are the wrong sort that will not allow consumer control of demand response. In addition the way the electricity supply is currently regulated creates perverse incentives that creates barriers for a 'bottom-up' system of consumer control. It will be both cheaper and also much more consumer-friendly if the right types of meters are installed and the right sort of electricity regulation is established.   David Hirst has described the right type of meters as 'flow-cost' meters. See my earlier blog for more on this at
http://realfeed-intariffs.blogspot.co.uk/2013/03/how-electricity-balancing-mechanism-is.html

At the moment the usual 'top down' attitude of the British industrial 'we know best' establishment says this is not possible. This is the same estblishment whose experts brought us they idea of 'cheap' nuclear power - until it collided with reality of course. Well, a bottom-up system of control of demand response is very possible. Indeed California, which is more advanced in establishing demand response systems than we are, is discussing precisely such a 'bottom-up' consumer controlled demand response system at the moment. See the website of the California Public Utility Commission at:
http://www.cpuc.ca.gov/PUC/energy/Demand+Response/benefits.htm

Some fantasy figures of costs of doing this have been passed around, but really a microchip in new electrical appliances will cost very little extra, and there is no reason to suppose that the right type of smart meter will cost any more than the smart meters that are being rolled out at the moment.

The point here is that to maximise the amount of demand shifting you need to have the consumer making these decisions for some appliances at least (not fridges, though, which are in use all of the time) - otherwise electricity use will continue to be used more at sub-optimal times out of sync with the availability of renewable energy. There will be a financial incentive here for the consumer in that if they can do this, then they will be able to reduce their bills by scheduling use of appliances (eg washing equipment) when the electricity prices are lower - this will be when there is more renewable energy available, and so it will help make us of more renewable energy - it will also to the opposite and take consumption away from times when there is little renewable energy, so reducing the need for so-called 'back up' power stations. Currently the meters do not allow this and there is going to be nothing more than a basic night time rate which itself does not necessaily correlate with the availability of variable renewable energy supplies. As can be seen above in the link to California PUC, California is consulting about such a system at the moment.

renewable targets will make solar and offshore wind much cheaper

The Leonardo Energy Institute has published a report arguing that carbon emissions will be reduced much more cheaply with post 2020 mandatory targets for renewable energy rather than relying on a decarbonisation target on its own. This is because short term promotion of natural gas will delay cost reductions in renewable energy technologies leading to a higher cost of emission reduction later on. You can see the report on:

http://www.leonardo-energy.org/sites/leonardo-energy/files/documents-and-links/Cu0186-restargets.pdf

Indeed much of the logic behind this position is fairly obvious. Solar pv prices have tumbled in recent years because of the creation of larger and larger markets around the world. It has been estimated that for every doubling of production of pv cells there will be a 20 per cent costs reduction, and this theory seems to be borne out by the evidence.

Much the same argument can be applied to offshore wind. Indeed, cost reductions will be in the offing for succeeding generations of offshore wind farms even if the cost of wind turbines did not come down at all (which they are likely to anyway). This is because the offshore windfarms being installed in the future include the costs of the infrastructure (foundation, electrical connections) that can be used by turbines that replace existing ones when they wear out. The costs of the infrastructure makes up around 40 per cent of the total 'levelised' cost of the offshore wind projects. See for example, the report by UKERC at: http://www.ukerc.ac.uk/support/Great+Expectations%3A+The+cost+of+offshore+wind+in+UK+waters
 There is a good argument that offshore wind developers should be paid extra now so that the infrastructure that is built is built larger than what is needed for the initial turbines so that future 'repowering' can be done with much bigger machines that are likely to be cost-effectively developed in the future.

Of course this discussion also highlights the folly of giving in to EDF's demands for 35 or 40 year contracts since options to repower existing offshore wind installations after the initial premium price contracts of 15 years will squeezed as large volumes of subsidies continue to prop up the proposed Hinkley C and other nuclear developments. Offshore wind is already cheaper than nuclear power since it will not need 35 year contracts and its costs 'underwritten' by the Government. Offshore wind will be clearly be cheaper after the first 15 years simply because opportunities for 'repowering' emerge at much lower prices than the initial wind turbines.

Indeed, when these wind turbines are needed (and when the number of offshore windfarms is expanded still further) the price of the turbines themselves are likely to be much lower than at present. A recent study by the Lawrence Berkely Laboratory in the US has indicated how wind turbines are once again becoming cheaper through improved design and better efficiencies. Spiking steel prices interupted this process for a while, but the underlying downward trend has been regained since 2009. See http://eetd.lbl.gov/ea/ems/reports/wind-energy-costs-2-2012.pdf

Those who argue for the promotion of natural gas ahead of renewable energy are very short-sighted. With nuclear power proving too expensive to build, without renewables a higher and higher proportion of electricity supplies will come from natural gas. The UK clearly needs much greater diversity than this scenario, in the short term never mind the long term, even before the pressing issue of carbon dioxide reduction comes into play. In short there is an urgent case to be made for specific renewable energy targets. We should be supporting the adoption of a post 2020 EU Renewables target as well as binding targets for member states.

We need a renewables target not a carbon floor price

The vultures are circling above the Treasury's plan to increase the carbon floor price - and a good thing too. We should be demanding that the money be precisely targeted at renewable energy and energy efficiency instead. The carbon floor price gives revenue to the Treasury (that's the best argument for it!) but is unlikely to lead to ANY new investment in either renewable energy or energy efficiency, or, indeed, nuclear power. If they are to risk their money investors and banks are going to need a lot more than tenuous government commitments to keep up and continue raising taxation levels. Investors in green energy need legally binding contracts. Instead, under a carbon floor price, a large part of the increase in energy prices that the carbon floor price generates goes straight into the pockets of EDF who run the (old) nuclear power stations in the UK.

The carbon floor price is currently being targeted by an anti-green energy subsidy lobby along with money being spent to support renewable energy and energy efficiency schemes. They want these things scrapped, or reduced. We must defend the renewable energy and energy efficiency support schemes, but let's hang loose on the carbon floor price. Not only is it hardly worth saving, but the increase in prices that it generates would be much, much, better spent on direct support for renewable energy and energy efficiency schemes. Let us put our efforts into demanding targets to be set for the achievement of specific objectives - renewable energy and energy efficiency - not see consumers money frittered away into corners that do little or nothing to advance green energy objectives.

A now much quoted critique of the carbon floor price is Reg Platt's report published by the IPPR: 'Hot Air: The carbon price floor in the UK', see http://www.ippr.org/publications/55/7629/hot-air-the-carbon-price-floor-in-the-uk . Indeed, I wrote to the Guardian on this theme in June 2010 when the proposals were being mooted: http://www.guardian.co.uk/environment/2010/jun/17/true-costs-nuclear-power?INTCMP=SRCH

Ironically, in their pre-election energy policy statement, the Conservatives said, of their carbon floor price proposals,

'We intend that this reform should provide incentives primarily for

future generating capacity, rather than penalise existing

capacity (page 16).

See http://www.conservatives.com/~/media/Files/Green%20Papers/Rebuilding-Security.ashx

So why are the Government persisting with this device? Well, partly it is because the carbon floor price is a revenue generator for the Treasury. It does appear that the conservative establishment  at DECC effectively did a deal with the Treasury at the time of the General Election that the Treasury could have the carbon price tax revenue so long as DECC could have nuclear power subsidies through the ‘contracts for differences’ (CfD) arrangements. The carbon floor price would be a good cover for nuclear power which would, in effect,(or so they thought)  require no net subsidies from the CfD arrangements. This was to be the justification for the Government’s story that there would be no ‘subsidy’ for nuclear power. However, this story has, as we know, become unstuck.

 The expectation, I have been told, was that nuclear power would be no more expensive than the wholesale electricity price produced after the imposition of the full level of the carbon floor price. Only renewable schemes which were cheaper than nuclear power (not very many, they thought) would be, in effect, allowed. Of course the establishment were drunk on their own perennially over-optimistic hopes of finding the elusive holy grail of ‘cheap’ nuclear power. Now we know, of course, that most forms of renewable energy are actually cheaper than nuclear power.

 Green campaigners have recently been focussing their efforts on getting the Government to build in a decarbonisation target to the Energy Bill. Now, I support such efforts, but I doubt if they are substitutes for specific targets for renewable energy and energy efficiency. The UK is reducing its carbon consumption anyway with use of more natural gas and (in current and recent times) non-existent economic growth (to be maintained in future, no doubt, by oil price spikes). So if we are going to see increases in installation of real green energy equipment, such as wind power or solar power or external wall insulation, or more fuel efficient motor vehicles, new low energy buildings etc etc we need specific targets, regulations  and funding programmes to achieve improvements over and above what otherwise will be made.

 The EU is discussing setting a EU-wide renewable energy target of 30 per cent by 2030. We ought to be supporting such plans. Currently there is no renewable energy target for the UK beyond 2020. Farcically, many of our leading scientists and institutions are still clinging to the idea that after 2020 nuclear power will provide the main increase in low carbon energy supplies. It is time that the green movement fight off this nonsense and campaigned for renewable energy targets instead of the carbon price support mechanism.