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UK takes next step towards 'smart, flexible energy system'

Energy regulations must be updated to deliver a smarter energy system in the UK, an energy law expert has said.

Ian McCarlie of Pinsent Masons, the law firm behind Out-Law.com, welcomed a new consultation launched jointly by the UK government and Ofgem which seeks industry and wider stakeholder input on how to deliver a "smart, flexible energy system" in the UK (104-page / 1.28MB PDF).

McCarlie identified changes in regulations as particularly necessary to help spur the development and use of new energy storage technologies.

The joint Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem call for evidence raised a number of issues relating to smart energy regulation and energy storage in particular. According to the document, the UK government is looking to ensure that planning rules do not serve as a barrier to energy storage projects, and "a more technology neutral flexibility licence model" for electricity storage schemes is also under consideration.

"Enabling new and existing forms of flexibility to compete efficiently within the energy market is key to ensuring that we will have a dynamic and responsive energy system which works for consumers and supports low carbon generation," the BEIS and Ofgem document said. "We want a policy and regulatory framework that ensures that barriers are not hindering their development."

McCarlie said the rapid advance of energy storage technology, particularly battery storage, and recognition of the contribution it could make to the UK’s energy mix, brings the need for appropriate regulation into "sharp focus".

"Current regulations which stem from the Electricity Act 1989 are outdated and not adaptable to the pace of technological change within the energy markets," McCarlie said. "This can result in storage projects being charged twice by the grid operator which puts this technology at a potential economic disadvantage."

"This quirk of outdated regulation clearly needs to be addressed to ensure energy storage can realise its full potential as the UK seeks to enhance its indigenous energy supply infrastructure to meet changing patterns in energy markets. At a very basic level, storage has the potential to create a more stable and balanced energy supply in the UK, reduce unplanned outages and alleviate pressure on the grid at times of peak demand so how this sector is regulated going forward is crucial," he said.

Earlier this autumn National Grid unveiled eight successful battery storage projects following its first ever 'enhanced frequency response' (EFR) tender. The initiative will see the storage projects provide sub-second power to the grid at times of peak demand.

McCarlie said: "The EFR process is a big endorsement of energy storage technologies. However, now the bids have been secured, we need to see further proposals from government to provide the level of support needed to make these and other planned projects a valued part of the energy industry. Stability of policy and clearly defined parameters enshrined in legislation will be the key to attracting much needed investment into an industry that has the potential to be genuinely transformational."

Energy secretary Greg Clark said the UK energy system faces "new demands", from the rise of electric cars to the need to "manage renewable energy sources". This makes it "essential" for the UK to enhance its energy system capabilities, he said.

"The age of exclusive control by big energy companies and central government is over; we must maximise the ability of consumers to play an active role in managing their energy needs," Clark said. With a smart system we can go further and faster in breaking down barriers to competition – allowing the widest possible range of innovative products and services to prove themselves in the market place. To make the most of a smart system we need smart policy and smart regulation."

Energy law expert Nick Shenken of Pinsent Masons described the call for evidence as "good news", but said the outputs from it are unlikely to be seen in detail before spring 2017.  

"Storage costs are falling and the EFR tender has resulted in projects that now need to be delivered," Shenken said. "The financial models for those projects will have made assumptions about the regulatory difficulties for storage being resolved so the pace of change needs to keep up with the proposed pace of project delivery or the delivery itself is at risk."

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