Sustainable Development Advisory Group minutes June 2015

Publication date
16th October 2015
Information type
Policy area

This is a record of Ofgem’s Sustainable Development Advisory Group meeting, held 25 June 2015.

1. Attendance and apologies

1.1 See annex for attendance and apologies for the meeting.

2. Updates and agreement of minutes

2.1 The Chair welcomed SDAG members and highlighted that this would be the last SDAG meeting attended by Sarah Harrison, who would soon be leaving Ofgem to commence her role as Chief Executive for the Gambling Commission.

2.2 No comments were raised about the minutes of the previous meeting.

3. Overview of responses to recent consultations on Non-Traditional Business Models (NTBMs) and quicker and more efficient distribution connections

3.1 Natasha Smith (Consumers and Sustainability) gave an overview of the responses received to the NTBMs consultation.

3.2 A total of 59 responses were received from a variety of stakeholders. From preliminary analysis of these responses, key emerging themes are: local energy, the role of the demand side, innovation and consumer protection/risk in a changing energy system.

3.3 It was noted that a summary of the NTBM consultation responses is expected to be published later in the summer.

3.4 SDAG members displayed considerable interest in the analysis of the NTBM consultation responses. Specific comments / questions from members included:

  • The relative number of consumers who obtain energy from NTBMs as opposed to traditional models;
  • If any contrasting perceptions were evident in the responses from NTBMs compared with traditional models;
  • The scope for ‘Guinea-pig’ schemes to help inform the level of change which exists between NTBMs and traditional models.

3.5 The work on NTBMs also fed into the quicker and more efficient distribution connections consultation, which received 56 responses.

4. Update on Ofgem’s Flexibility project

4.1 Sam Cope (Smarter Grids and Governance) provided an update on Ofgem’s Flexibility project; this project looks at demand side flexibility in both domestic and non-domestic markets.

4.2 There is an increasing volume of intermittent generation connected to the system and some generation is becoming more localised. New sources of flexibility (such as DSR, storage and distributed generation) are likely to be required to deal with the changing operation of the system.

4.3 The flexibility project has links with many ongoing projects within Ofgem, including NTBMs and Grid Connections.

4.4 Members discussed the issues highlighted in the presentation, including:

  • The scope for ‘quick wins’ that this project could deliver in the near future; eg profile class changes would be a big enabler.
  • The appetite that for domestic consumers to change their demand during the afternoon peak with the ongoing roll-out of smart meters.
  • The potential policy interest in flexibility from DECC was highlighted.

4.5 Next steps: Ofgem plans to publish a report later in the summer which will set out Ofgem’s role in facilitating the development of a flexible energy system. A flexibility workshop will also be held in September.

5. How can the energy network respond to the increasing deployment of Distributed Generation

5.1 James Veaney (Smarter Grids and Governance) presented the main agenda item, on how energy networks can respond to the increasing deployment of Distributed Generation (DG).

5.2 This presentation discussed a range of issues which have arisen from the recent rapid deployment of DG on the electricity system. The mix of DG varies by region (eg high deployment of DG from solar PV in the south, higher deployment of DG from wind in the North). In some areas, the rapid growth in DG has caused network constraints which create barriers preventing new generators from connecting to the grid. This has been observed in a number of regions in the UK; one example discussed was the rapid increase of solar PV farms leading to constraints issues in the South-West of England.

5.3 The discussion outlined other impacts that have been observed, and may continue to occur with increasing deployment of DG. The growth of DG may be contributing to the occurrence of negative spot prices on wholesale power markets; this may impact the competitiveness of conventional generators and have security of supply implications. Additionally, the growth in DG may be disproportionately benefiting certain groups of consumers. Financially vulnerable consumers in many areas are less likely to experience the benefits which DG can bring.

5.4 Ofgem is considering a tactical response to these issues in the short-term, and also the longer-term strategic issues. The focus for this meeting was the latter.

5.5 Specific questions for discussion which were put to SDAG members included:

  • Should we allow price signals/subsidy to determine location and take up of DG? Or, should there be investment in new grid capacity – paid for by all consumers?;
  • How should the system operate to encompass DG?; and
  • What type of DG is preferred – small, many and locally owned or large, few and owned by commercial investors?

5.6 Members raised a number of points during the discussion of these questions, including:

  • Engagement going forward needs to be different as there are now different players entering the market; the Big 6 are less relevant. One member noted there may be benefit in engaging more closely with organisations such as the CLA and NFU on this issue.
  • Significant concentration on the South-West constraints issue. Care should be taken to avoid imposing a nation-wide response to this – the response should be regional in reflection of different regional solutions.
  • It was noted that the prevalence of solar is currently 8-9 years ahead of forecasts, highlighting the inaccuracy of forecasts / predictions from all parties.
  • Despite the rapid rise of solar PV there are still no incentives for generators to adjust their load. We shouldn’t stop incentivising people to invest in solar, but we should be incentivising them to do it better, eg through behind the meter storage or consumption. One member suggested that peak shifting could be incentivised, which may be a partial solution to constraints issues, and more cost effective than grid reinforcements.
  • One member asked what trajectory are we on to achieve our plans in grid connections, and questioned if this was an issue of ‘getting back on track’ or an issue of ‘never being on track’. Is a central planner needed?
  • In response David noted that central planning has a poor track-record; local mechanisms may be better suited to resolving these issues. Sarah pointed out choices around sharper pricing, and government support (ie beyond regulatory measures).
  • The point was made that negative pricing tends to occur on Sundays, when the less experienced forecasters are in duty.
  • Socket parity has been achieved in a number of other countries, including the Netherlands. We need to think about the right solutions for GB and what will work for our system.
  • DECC cautioned there is no room for new subsides.
  • Communities are not good at managing risk; larger developers are much better placed to do this. A solution for communities should create a safe space for them to start schemes, and buy back the ownership.
  • There was some discussion on squeezing out more capacity through a) improving the quality of the queue, b) non-firm connections, and c) collaborations.
  • It was noted that a recurring theme of SDAG discussions was that we’ve inherited a system not suited to a more radical future. What is easier isn’t necessarily for the best. Aggregators may be a big part of the solution.
  • DECC noted the heart of the decarbonisation challenge was how to provide for the winter peak and deal with increasing DG. It was agreed that behaviours and habits are very hard to shift – key to success will be a strong price signal.

6. AOB

6.1 The chair thanked Sarah Harrison for her contribution to Ofgem and SDAG over the years and wished her well on her future career, and thanked the SDAG members for their ongoing support.

7. Date of next meeting

7.1 The next meeting will be on 1 Oct 2015, from 10am to 12pm.

8. Annex – Attendance and apologies

8.1 Those in attendance were:

Chair

David Gray (Gas and Electricity Markets Authority)

SD Advisory Group members / deputies

David Sigsworth (SEPA)

Doug Parr (Greenpeace)

Jenny Saunders (National Energy Action)

Juliet Davenport (Good Energy)

Dr Nina Skorupska (Renewable Energy Association)

Gordon Patterson (Scottish Government)

Matthew Quinn (Welsh Government)

David Capper (DECC)

Will Dawson (Forum for the Future)

Josh Barnett (Northern PowerGrid)

Ofgem Staff

Sarah Harrison

Philip Cullum

Stephen Bass

Natasha Smith

James Veaney

Katherine Thompson

8.2 Apologies:

Chris Stark (Scottish Government)

Giles Bristow (Forum for the Future)

Phil Jones (Northern PowerGrid)

John Feinnes (DECC)

Derek Likorish (Fuel Poverty Advisory Group)

Jeremy Nicholson (Energy Intensive Users Group)

Paul Ekins (UCL)

Nick Eyre (Oxford University)

Audrey Gallacher (Citizens Advice)