Strengthening the UK's demand response flexibility market

Energy has become front-page news, and the debate about its future has never been so important. Understanding what that future might look like is crucial if we are to meet the long-term challenge of providing safe, reliable, and secure energy in a sustainable and affordable way. Of course, we cannot be certain how the energy future will evolve. Factors such as environmental legislation, energy costs, and economic developments will all have a major impact on the future energy landscape.

Generation of thermal electricity in the United Kingdom is coming to an end. A large amount of coal- and oil-fueled generation has and is retiring because of age and environmental legislation, including the European Union’s Large Combustion Plant Directive. Furthermore, challenging economics for gas-fueled generation has resulted in few new power plants being built and many, including units only two years old, being mothballed until the business case for their operation becomes more favourable.

The resulting decline in capacity and generator availability has led to very tight capacity margins—the difference between electricity supply and demand levels that can make the role of the National Grid in matching generation and demand quite challenging. Indeed, spare electric power production in the electricity system is predicted to fall to less than 2% by 2015, increasing the risks of blackouts should an unforeseen operational issue arise or the United Kingdom experience a cold winter.

Today the situation is very different. Increasing contributions from the renewables sector, notably from wind and solar, are both unpredictable and fragmented, spread out across the country. To maximise carbon savings, National Grid needs to make the most of clean sources like these but must also take compensatory actions when they are not available. Expensive stand-by plant has to be called upon when the wind doesn’t blow or the sun doesn’t shine. Additional power must be either taken on to the grid or demand reduced. Large users in industry are increasingly being encouraged to “turn down” and delay their demand until such time as available capacity improves.

This increases the requirement for demand side balancing services, known as demand side response (DSR). These services help the system operator, National Grid, to balance supply and demand at times of system stress, vital to maintaining the UK’s power supplies. DSR could provide an important contribution to managing security of supply and cutting energy consumption. It offers a cheaper and greener alternative to building new generating capacity.

Ofgem estimates that non-domestic buildings (excluding industry) contribute approximately 15GW to peak demands on Great Britain’s national grid. This could rise to around 30-40GW when considering large industrial and manufacturing facilities.

The main routes to enter the demand side market are either by providing services directly to National Grid or by working with one of a growing number of demand aggregators or other third parties. Aggregators and third parties can work closely with an energy user and show them how to maximise their assets in terms of the speed of response they could provide, capacity available, the amount of time that delivery could be sustained for – and the various prices available. In effect, the demand-response aggregator will enable property owners and asset managers to access their assets' untapped revenue sources while meeting energy-saving demands, cutting costs, and contributing to the reduction of carbon emissions.

Pearlstone Energy is a National Grid-approved demand aggregator. We use Honeywell’s proven technology to automatically reduce energy consumption in buildings for a short amount of time during periods when electricity demands exceed availability. These automated energy reduction measures are totally carbon neutral and can create additional revenue streams for participating companies while contributing to broader UK carbon reduction goals.

But there are commercial challenges, especially for new entrants, due to lack of investor certainty and reliance on multiple revenue streams. Therefore, some demand side providers would like to see longer-term contracts. Others suggest that more frequent tenders, a move to regular auctions, and standardisation of products would enable wider market entry, and potentially lower minimum size thresholds.

There have also been some concerns by a number of industry observers that DSR has not received sufficient attention and is disadvantaged compared to generation capacity. In particular, DSR providers can only bid for one-year contracts, whereas new generation can receive capacity agreements of up to 15 years. Evidence from markets in other countries, where equal contract lengths are awarded to both generation and demand capacity, suggests that DSR can make significant contributions, without being at the expense of new generation.

For business customers, it can be confusing to navigate the different products and routes to market. There are cultural, informational and behavioural barriers. Confidence is critical, and can be undermined by conflicting sales messages from demand side providers. Industry standards are needed, and are being developed. For customers, senior buy-in and cross-business commitment is often required. Demand side flexibility should link into the significant opportunities for energy efficiency.

The market expectation is that change will occur. However, if change does not happen quickly enough, there is a risk of discouraging new non-traditional market participants. Likewise, as business customer interest grows, we need to ensure they are able to participate, and do not miss the opportunity. For example, some customers wanted to take part in the transitional auctions but couldn’t respond within the required timescales.

There is a clear tension between changing existing markets to ensure that they are fit for future, and not knowing how markets may develop. But a slow watchful approach may also rule things out. So we need to provide a sense of direction for those coming into the markets and wanting to invest, without being able to offer certainty.

A shared vision of an end-point, or at least the principles for a future market is required, as are the incremental steps to get there. This should be an evolutionary pathway – to ensure that we build on lessons learned and maintain investor confidence in the transition from existing to future arrangements.

Dr Azad Camyab is the founder and CEO of Pearlstone Energy

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Story-telling: making the case for climate action

For two months this year, electricity generation from UK solar eclipsed that from coal. Granted, it was in the summer, but it is nevertheless significant to see the future overtaking the past. To energy policy experts this isn’t surprising: July was sunny, and coal is viewed as a poor investment. But when I mentioned this to a friend over the weekend, her response was one of perfect confusion: “So, why don’t we ever hear the good news about renewables?

Faced with austerity, policy experts and commentators focussed on proving the business case for investment and intervention in the low carbon economy. This should not have been difficult: the sector continued to grow rapidly even after the 2008 crash, turning over £121.7 billion in 2013 and employing 460,600 people. Energy efficiency is a particularly impressive performer in productivity terms – responsible for around 94,200 jobs and a disproportionately high £7.3 billion of Gross Value Added to the wider economy.

We have the hard economic modelling to back this up, showing that ambitious decarbonisation can outperform business as usual in terms of future economic growth (an increase of UK GDP by 1.1% in net terms, with average householders financially better off against business as usual scenarios where little is done to reduce emissions).  With around 45% of all new energy capacity worldwide now renewable, we thought we had spotted an opportunity for the UK to lead the next global industrial revolution – and we thought the numbers more than justified supportive policy and government investment.

In reality, a positive economic narrative alone has failed to get the job done. The Committee on Climate Change recently warned government that there is a growing gap between our commitments on climate change and what government policy will deliver.  Instead, we need to reach people emotionally about what decarbonisation looks like, speaking to their values as well as their wallets – as a more detailed look at energy efficiency policy should tell us.

Investments in energy efficiency offer big returns. Consumers benefit from bill reductions and there are wider social gains, such as a reduction in NHS admissions for respiratory illnesses following the retrofit of the homes of vulnerable people. A mass-retrofit of UK buildings would offer better value for money as an infrastructure commitment than High Speed 2. Yet, shortly after the last general election, subsidies for products and regulatory standards for new homes were scrapped. The indignation of industry, policy experts, and campaigners focussed on the economic short-termism of the cuts. The numbers added up. What more could have been done?  

Well, it’s possible that we were all having the wrong argument – or at least the right argument in the wrong way. Climate change communications tend to be negative, with the solutions often presented as a “loss” rather than a “gain”. For energy efficiency, for example, consumers have been concerned about lost loft space, the cost of installation, or changing ‘the feel’ of their homes. Psychological research has shown that negative or reactive messages can undermine trust in the long-term; not only do negative stereotypes prevent immediate action but they also stick, and undermine the wider case for change.

People with centre-right values are more likely both to believe negative misconceptions about low carbon solutions and to reject overall climate change messaging which they view as “doom-mongering”. The absence of a distinctively centre-right vision for climate change action might go some way to explain why greater doubt exists among Conservative MPs about climate science than for parliamentarians in other parties.

All of this suggests that we need to reach a broader audience, with a language and set of values that work for all voters. Without this, relying on numbers will not be enough to win the argument for rapid decarbonisation. Fortunately, the messages already exist – they have just gone unnoticed, as returning finally to energy efficiency again can illustrate.

As I write this I am sitting in WWF’s headquarters, the Living Planet Centre, in Woking. It is built using the cutting edge of low carbon, energy efficient technology. When we show guests around it, we focus on the business case for the building – we talk about the operational savings that come from switching to a ground source heat pump, or how much energy our solar panels generate on a given day. We talk, too, about some of the building’s secondary impacts, as part of the urban regeneration of Woking, or the improved wellbeing and productivity of our staff.

But what we often forget to do is point out that The Living Planet Centre is just a better building than most new buildings. It is also beautiful, an upturned ship of glass and wood which sits back into the green landscape of canal and heritage Surrey woodland. We should be able to make a case to the British public to say: “The changes we need to make to decarbonise our lives are also changes that will improve our lives - they will be more socially positive, economically beneficial, and (on occasion) more beautiful than sticking with the way we do things now.” We need story-tellers now, as well as economists.

Emma Pinchbeck is Head of Energy and Climate policy at WWF UK

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Why there isn’t time for Green Capitalism

One of Green conservatism’s important themes, it seems to me, is a desire to reconcile individual interests with common interests. In the economy, this dilemma comes powerfully to the fore as businesses strive to reconcile the common interest of social and environmental sustainability with the individual interest of staying profitable and competitive.

The idea of “Green Capitalism” suggests that this dilemma is an illusion. Businesses no longer have to choose. They can do both.

A pioneer of this thinking is business strategy guru Michael Porter. “Static thinking,” he explains, “causes companies to fight environmental standards that actually could enhance their competitiveness. Most distillers of coal tar in the United States, for example, opposed 1991 regulations requiring substantial reductions in benzene emissions. At the time, the only solution was to cover the tar storage tanks with costly gas blankets. But the regulation spurred Aristech Chemical Corporation of Pittsburgh, Pennsylvania, to develop a way to remove benzene from tar in the first processing step, thereby eliminating the need for gas blankets. Instead of suffering a cost increase, Aristech saved itself $3.3 million.”

In this configuration tighter regulations are not businesses’ foe but its friend. Pollution equals inefficiency, so going green means less waste, less cost, higher profits and improved competitiveness. Rather than fight new regulations, businesses are re-framing sustainability though a lens of risk and opportunity.

“Fair enough,” one might say. But how long is all this going to take? A close reading of Porter reveals that his approach turns out to be far too slow. Governments, he cautions, should “develop regulations in sync with other countries or slightly ahead of them. It is important to minimize possible competitive disadvantages relative to foreign companies that are not yet subject to the same standard.” 

Increased regulations, then, can proceed but only at a glacially slow pace. The problem is that climate change and other global problems, moving at a much faster pace, will likely still outstrip them. And it’s here that Green Capitalism runs aground. The dilemma between going green and staying competitive – between individual and common interests - hasn’t gone away because of the factor of time – time we don’t have.

How, then, could governments introduce tough regulations that meet the fast pace of climate change and other global problems, without harming any business’s competitiveness? While business can innovate itself out of some costs, the competitive disadvantages created by a faster pace of regulation could only be avoided if there is a level playing field for all businesses globally: an unprecedented level of international cooperation is required.

Enhanced global cooperation would be far from easy. What seems clear, however, is that there are serious flaws in present approaches which aim for agreements on single issues, like carbon emissions. But take almost any single issue and you find it has winners and losers. The biggest emitters of carbon – China and the USA – have the highest costs to bear and the most to lose. Little wonder they too often fail to cooperate!

That’s why a multi-issue approach could prove far more effective. Imagine, for example, that alongside a negotiation on carbon emissions, governments also negotiated a global currency transactions tax. The billions of dollars raised on the tax could be apportioned so that the losers on the climate part of the agreement were compensated. In that way decisive action could, in principle at least, be made to be in every nation’s immediate interests. Global implementation would also mean that objections to the tax, such as those voiced by former Prime Minister David Cameron, would be eliminated.

But there’s still something missing: how can we, citizens, drive our politicians and governments towards such deeper cooperation?

One approach enjoying increasing support internationally and from across the political spectrum is the Simultaneous Policy (Simpol) initiative. I was responsible for starting Simpol in the UK but it’s already spreading to other countries. It invites citizens to use their votes in a new and powerful way to support the kind of global cooperation we’ve been describing. At the UK general election in 2015, it succeeded in gaining the support of over 600 candidates from all the main parties, including some Conservatives. Thirty of them are now MPs, making Simpol a powerful voice for global solutions in Parliament.

Such an approach, like Green conservatism, reconciles individual and common interests. It’s surely where our future lies.

John Bunzl is founder of Simpol

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

UK research in electricity grids has put us in a great position – but can we capitalise?

The way we generate, transport and increasingly store electricity has become a hot topic – whether discussing Tesla’s introduction of the Powerwall home battery installation, or the introduction of electric vehicles, or, of course, Hinkley Point C nuclear power station.  A consensus has built around ‘smart grids’ which can react to power outages faster, accommodate renewable resources and allow consumers to self-generate electricity. Meanwhile, overseas, there are thousands of kilometres of conventional grid either still to be built or which have a reliability that you or I would not accept.

We must make good on our investment in innovation

So where does the UK stand? The European Commission published a study in 2014 of the amounts invested by individual European countries into smart grid demonstration projects.

The UK topped the leader board. We had awarded €462 million of funds to smart grid demonstration projects - this is an enviable position. Most of those projects are intended to assist the UK energy sector as it transitions to low carbon. But we have a huge opportunity for that money to pay for itself twice over – by converting that knowledge into exports, and thereby jobs and tax revenue.

Recent weeks give us a lot of confidence that the words ‘industrial strategy’ are making a comeback. Other countries have worn their industrial strategies in the energy sector proudly.

In the area of smart grids, UK companies have won the global Grid Edge awards, appeared on the Sunday Times Tech Track 100 list, won the CBI Growing Business awards and the Queen’s Award for Enterprise. Meanwhile in ‘conventional grid’, Lucy Electric’s subsidiary in India is the largest manufacturer in the country of certain types of switchgear. But we also create jobs and wealth when multinationals situate product lines in the UK. For example, Siemens have based their Global Cites Centre of Competence in the UK and GE’s control room software is designed in the UK.

India and sub-Saharan Africa represent a huge opportunity for the UK

I believe that the development of the grid in India and sub-Saharan Africa represent a massive export opportunity. We have a host of natural advantages: we share a common language; there is a legacy of British design standards meaning that the networks look like ours; we have an outstanding health and safety culture, which is exportable expertise; and there are Indian and African engineers working in UK industry and studying in UK universities, who are natural ambassadors for our technology. None of these is an outright winner, but the combination of these can really tip the balance.

Most importantly, however, there is a political consensus. Initiatives such as the announcement by Rt Hon David Cameron MP and Prime Minister Narenda ModI to develop three cities in India under a five-year partnership, and the Prosperity Fund introduced as part of the Strategic Defence and Security Review set us explicitly on a path to help countries like India and sub-Saharan Africa as they develop.

To give you one key statistic: 1.3 billion people globally are without electricity. Many more suffer from unreliable supplies, even in urban centres. But of those 1.3 billion, 905 million live in sub-Saharan Africa and India. A lot of infrastructure will be financed and built over the coming years – the only question remains, whose technology will it be?

What help is required?

We need to build an overall strategy which reinterprets the UK’s strengths in the context of India and sub-Saharan Africa. In the UK, we worry about narrow capacity margins between our generation fleet and our maximum demand; in India, the rate of construction means that the generation fleet may at times outstrip the available consumers. In the UK, we worry about the cost of construction of ‘conventional grid’; in India and sub-Saharan Africa, the challenge will be the lack of skills, and potentially trying to carry out large construction with poor transport links. It is vital that we understand that this is not about selling the same product cheaper – it’s about using our core technologies and innovations to tackle different market needs.

Ultimately we need to build confidence. This requires a combined effort from industry and government, recognising that for the mid-sized companies with real growth potential to take on investments in these regions can be a substantial bet. Government needs to continue to be bold – decisions and partnerships are being formed at country-to-country or country-to-multinational level. In order to allow our smaller companies to participate, we need government to be present.

Conclusion

We have developed world-leading skills in the UK in electricity grids and there is a huge export opportunity to India and sub-Saharan Africa. But this needs attention – otherwise there is a risk that it falls down the policy cracks between overseas development initiatives, UK decarbonisation initiatives, and the commitment to double clean-tech investment. It is not yet clear that the cross-government Prosperity Fund will ensure this doesn’t happen.

Martin Wilcox was formerly Head of Future Networks at UK Power Networks, the electricity distributor for 8 million customers across London, the South East and East Anglia. He is about to take up a consulting position in the energy sector. 

You can read a fully referenced version of this article, including proposals for policy. You can also join the debate on LinkedIn.

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Decarbonisation, decentralisation, digitisation: the changing energy landscape

The energy landscape in the UK is currently undergoing a major transformation, presenting both opportunities and challenges for organisations working on the frontline of clean energy.  Add to that the fact that the erstwhile Department for Energy and Climate Change has now been subsumed by the Department for Business, Energy and Industrial Strategy – whither climate change? – and we could be on the verge of a brave new world, one that hopefully encourages closer links between energy and cleantech innovation, and the chance to develop a thoughtful strategy for the future of low-carbon energy in this country.

Decarbonisation

This year’s crop of Ashden Award winners is well placed to respond to the ever-shifting sands.  The joint winners of our Sustainable Communities Award – Low Carbon Hub and Repowering London – have already proved themselves resilient in the face of an onslaught of policy changes over the past 18 months.  

Low Carbon Hub has launched its own manifesto, setting out why community energy is a fundamentally important part of the UK’s national energy transition.  Their ambition is for the whole of Oxfordshire to be powered by an interconnected series of smart micro-grids centred around multiple small-scale, community-controlled renewable energy schemes.  

As well as supporting communities to install and manage solar panels on housing blocks and communal buildings in Brixton and Hackney, Repowering London have recently joined forces with Transport for London.  They now have permission to create 50 energy gardens across London’s Overground stations.  The organisation has also been appointed as a community energy provider by Lambeth Council and is working with them to bring solar energy to Electric Avenue and the Brixton Market area. 

Social businesses like Low Carbon Hub and Repowering London are decentralising ownership of energy resources and reinvesting surpluses in community-benefit activities, like fuel poverty alleviation and energy efficiency projects. They have a critical role to play in ensuring that the UK’s energy transition does not recreate ‘business as usual’.   

Decentralisation

Making the UK’s big cities more energy efficient, and sourcing more of their heat and power from decentralised energy sources, will not only reduce carbon emissions, but will also help to create energy stability, when we are having to rely increasingly on fuel imports and our existing energy infrastructure is ageing.

As part of his London mayoral manifesto, Sadiq Khan pledged to learn from existing initiatives in Nottingham and Copenhagen among others, where municipal owned, not-for-profit energy companies are offering citizens greater control over managing their own energy needs.

With this in mind, he announced the launch of Energy for Londoners – a not-for-profit clean and green energy company - to support communities that want to set up their own clean energy generation schemes. It will assist the roll out of projects like the Bunhill Energy Centre in Islington that takes waste heat from the tube to warm over 1000 homes in the capital.  At present, London only accounts for around 2.5% of solar installations nationwide and is in dire need of a dedicated solar strategy - which has been promised for next year - if the capital is to have any chance of becoming a zero carbon city by 2050.  At Ashden, we are currently working with the Greater London Authority to look at how London can become more energy smart, drawing on the experience and expertise of some of our Award winners.

Digitisation

In the last budget, the Treasury accepted the recommendations of a report by the National Infrastructure Commission on how to support the development of a “smart power” system that could save consumers up to £8 billion a year.

The changing patterns in both the demand and supply of electricity are putting the power grid under ever increasing stress. This makes it more challenging to allow for peaks and troughs in demand, manage intermittent and dispersed forms of generation, and ensure that there is sufficient flexibility in the system to keep the lights on. As more and more coal generation drops away, the need to innovate is becoming more urgent.

Smart energy companies, like 2016 Ashden Award winners Tempus Energy and Open Energi, are transforming the way businesses buy and use electricity through flexible demand technology.  They work with commercial customers to identify electrical equipment, which does not need to run continuously or does not need to run at a particular time, and then install their technology to turn that equipment on or off, and therefore their electricity demand up or down, in response to wholesale prices, network charges and conditions on the national grid.  This is an approach which, as it is scaled up, will reduce the need to keep inefficient and polluting reserve power stations running, and means fewer new power stations may need to be built in the future to keep the lights on. 

UK coal plants are due to be phased out by 2025. But, although the National Grid has plans in place to preserve security of supply and is supportive of the kind of ‘disruption’ being shown by Tempus and Open Energi, we are still lacking robust, stable policies from government in order to both speed up the transition to cleaner energy.  Given the lack of national leadership, it’s to be hoped that devolved governance to ‘metro mayors’ in Manchester, Sheffield, Liverpool and other cities in 2017 will give greater space to business innovation and transformative change when it comes to embracing low carbon energy.     

Mike Snowden is a UK Programme Officer at Ashden, a charity that champions and supports leaders in sustainable energy to accelerate the transition to a low-carbon world

Photo by Andy Aitchison/Ashden: The National Grid control room at the their headquarters in Wokingham

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Smart meters: powering the new economy

As a nation we are becoming more and more reliant on electricity to power our lives.

Whether this is through the expanding range of gadgets in our homes or the predicted rise of electric cars – our energy demands are set to rise. 

This week we published a piece of research conducted by the Centre for Economics and Business Research on Powering Future Cities, which details the rise in demand that UK cities will face over the next twenty years.  

Keeping up with these new demands will be a big challenge, but also presents some important opportunities. 

Smart meters and smart technology could help us as a nation meet these demands, ensuring the long term security of our energy infrastructure and helping us better-integrate renewables into our energy mix.

Policy makers are already thinking about new ways to manage Britain's energy demand. From the National Infrastructure Commission’s vision of Smart Power to the development of smaller-scale energy generation in local areas, the advent of a smart meter in every home is creating newly integrated energy communities, using new energy data as a platform for innovation.

Smart meters are here 

By 2020, every home and microbusiness in Britain will have been offered a smart meter by their energy supplier, at no additional cost. By establishing a digital connection between the home and the energy supplier, these new meters are bringing an end to estimated bills and showing us in pounds and pence what we’re spending on gas and electricity. They’re replacing traditional energy meters ticking away under the stairs in a language of kilowatt hours that few understand - one of the things holding us back from behaving as fully empowered consumers in this market.

Change is coming, and the national rollout is well underway, with over 3.5 million smart meters already installed. 

Our Smart energy outlook, an independent piece of research into the experiences of over 10,000 people conducted by Populus twice each year, has found that 80% of smart meter users are taking steps to use less energy, and 76% are more conscious about the energy they use. Nearly four in five smart meter users say they would recommend one to others.

The benefits of smart meters are even wider than the way they’re transforming individual experiences. Smart meters are digitising Britain’s last analogue industry, and will deliver both energy savings and system efficiencies of £6billion to the economy while saving 32.7 million tonnes of carbon dioxide.  

The smart energy grid

For the first time, we will have data on our energy use. Our energy networks will use this data, aggregated to postcode level, to better understand peaks in energy demand, and to identify power cuts more easily. 

Better data on how we’re using energy is essential as more of our energy starts to come from renewables – which by their nature are intermittent, generating when the wind blows or the sun shines. 

More sophisticated ‘time of use’ pricing will then empower households to play an active role in managing demand, via tariffs which offer cheaper energy when demand is lower or supply from intermittent renewable sources more plentiful.

Other countries are embracing this. In Texas, for example, to use up the surplus of wind energy at night time, a new tariff was introduced offering free energy to customers at night.

Smart grids mean a cheaper and more reliable energy supply. In its report, Smart Power, the National Infrastructure Commission said that moving to a smart grid could save consumers £8bn per year. 

Driving forward the low carbon economy

Operating a smart grid will allow Britain to fully benefit from low carbon technology like electric vehicles.

The electrification of transport will be a big driver of energy demand in coming years, but also essential in helping to tackle air pollution in cities. 

But the take up of electric vehicles will needs to go hand in hand with the development of a smarter energy grid. Cars will need to charge ‘smartly’ to avoid unmanageable pressure on the grid at peak times such as the end of the working day.

Electric cars are just one part of the broader smart home. Smart appliances like washing machines, freezers and dishwashers may also in the future make decisions about when to use energy – communicating the smart meter and drawing energy when it is cheapest.

Cities like Groningen in the Netherlands are already trialling this sort of approach with great success. Households are empowered to choose the sources of energy they use, including buying it from their neighbours who may have solar panels, and also selling excess energy back to the grid or to other residents.

Digital opportunities 

The opportunities of smart energy data goes far beyond the energy sector. Smart technology is opening up potential for innovators in every possible field to use new data to develop new services.

The UK's digital economy is the largest and fastest growing in the G20 and already makes up over 10% of our GDP. In the future, we are likely to see a whole host of innovative new services which use energy data. These could include the next generation of price comparison and switching websites using your smart meter to automatically switch consumers onto the best tariff – even hour by hour.

Smart meters could connect to fitness monitors and sleep trackers, turning the thermostat down to a lower temperature when you go to bed.

Data could be used at a local level by a fuel poverty charity to identify households who are regularly self-disconnecting from their energy supply. 

And it’s not just in energy that this data can provide insight and innovation.

Getting a better understanding of people’s energy behaviours could be applied in areas like health – allowing carers, agencies or relatives to keep an eye on those they care for. Changing patterns of energy use can help identify if an elderly relative hasn’t switched their kettle on in the morning as they usually do – prompting a carer to check in on them.   

Smart technology and smart meters will be transformational, and are unlocking exciting new areas for economic growth in the low carbon economy. 

Claire Maugham is Director of Policy and Communications at Smart Energy GB

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Powering ahead: the case for a new green industrial strategy

If a week is a long time in politics, as Labour’s Harold Wilson famously said, this last month has felt like an eternity. It is scarcely more than a month since the UK took its most important collective decision in post-war history and voted to leave the European Union. Twenty days later, Theresa May became the UK’s second female Prime Minister.

Given the complexity of leaving the European Union, Mrs May’s time in No. 10 may be dominated almost completely by Brexit, yet all other policy issues – health, education, security, the environment and much more besides – are still there to be addressed.

From a trade union perspective, it has been a welcome surprise to see the new Prime Minister address a number of issues that have long been of great interest to us. These include corporate governance and the importance – or otherwise – of British companies remaining British. Particularly important has been Theresa May’s early commitment to an industrial strategy, even reorganising a government department to take that forward.

Yet some have expressed concern that climate change, a central part of the government’s agenda under both the last Labour administration and the Coalition, has been downgraded. Early action to dispel that fear would be welcome.

The Trades Union Congress (TUC) believes that on this issue, we could kill two birds with one stone. Our new publication, ‘Powering Ahead’, puts the case for a sustainable industrial strategy. By sustainable, we mean it must take account of social, economic and environmental concerns. It is natural that industries are born, grow and ultimately die as technology moves on, but the upheaval involved cannot always be left to the whims of the market. In recent decades, deindustrialisation has caused serious disturbances, to put it mildly, in the lives of families and communities. That is why trade unions call for a just or fair transition as we move to more green jobs and away from more polluting ones.

Based on new research from Germany and Denmark, ‘Powering Ahead’ calls for a target of 50 per cent of UK energy coming from renewable sources by 2050. The market, by itself, will not deliver this objective. In Germany and Denmark, two countries that have made great strides towards environmental technology, the enabling role of government has been harnessed in a mission to break into those industries.

The UK government needs to step up to this challenge, with its potential for significant economic and industrial rewards. The economist Lord Stern has predicted a future annual global market of $500bn in environmental goods and services, so investment in these sectors today could reap very real economic benefits tomorrow.

We also believe that government should steer new green tech jobs towards the UK’s former industrial heartlands, which lost their livelihoods with the demise of heavy industry and too often have not seen new opportunities moving in to take the place of jobs lost. The referendum campaign showed that too many people do not believe globalisation has worked for them.

‘Powering Ahead’ explores a range of policy options the government could adopt. It calls for funds to support companies and universities, working together, to tackle the problem of storing renewable energy. It also calls for the development of a proper strategy, based on the building of a political consensus and using a social partnership approach. As readers might expect, the TUC looks enviously at the role of Danish and German trade unionists, utilising their countries’ models of social partnership to influence company decisions from an employee perspective. Politicians of the centre-right, such as Angela Merkel in Germany, seem most comfortable with this approach. Germany’s continued success as the strongest economy in Europe bears witness to its value. Collaboration must also be international; for example the report argues for cross-country effort to develop Carbon Capture and Storage technology, if this is too expensive for the UK government to fund by itself.

What is undoubtedly true is that pollution and environmental degradation know no borders and affect all of us, young and old, rich and poor, supporters of all political parties and of none. We all have an interest in the future of the planet and none of us have a monopoly of wisdom in how to safeguard it.

Outside of the EU, the TUC believes that challenge has become even harder. It was Lord Deben, described by Friends of the Earth as “the best Environment Secretary we’ve ever had”, who said he first became interested in environmental issues in the 1990s when the UK was described as the “dirty man of Europe” due to its poor recycling rates. Brexit may mean Brexit, but there is no mandate to return to those dark days and the Conservative Government needs to demonstrate how the UK’s environmental standards will be maintained and enhanced outside of the EU. The Green Conservatism project of Bright Blue has an important role to play on this issue and the TUC stands ready to support its work. 

Tim Page is senior policy officer at the TUC

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Believing in the British people: why environmental stewardship will benefit from decentralised power

On Monday 11 July, the day Theresa May found herself to be the last candidate standing for the leadership of the Conservative Party, she made a speech setting out her vision for the country. While she did not mention the environment, she did articulate a fundamentally green principle when she described Conservatives as “custodians with a responsibility to pass on something better to the next generation”. This allies with Edmund Burke’s notion of society as a partnership between “those who are living, those who are dead and those who are to be born”. This is the most powerful conservative argument for environmental stewardship.

Also in May’s speech were two other extremely salient points. The first was her call “to break up power when it is concentrated among the few”. The second was her declaration that Conservatives “believe in Britain – and in the British people”. These principles are less obviously environmental, but they will in fact be crucial to shaping the UK’s natural environment post-Brexit, because a more decentralised state has the potential to deliver improved stewardship. 

Who governs?

May has made clear that the UK must leave the European Union. We will take back control, as the Vote Leave campaign consistently demanded. But what will we do with this new power? And who will take control? Will the British public feel content if we wrest powers from Brussels, only to concentrate it further in Westminster and Whitehall?

Thinking about power in this context is best provoked by the question, ‘who governs?’ This was articulated in the 1960s by political theorist Robert Dahl in his study of democracy in an American city. He attempted to map out the geography of power: who had it, who didn’t and what that meant for pluralistic politics. Pluralism is essential for a healthy democracy, not only because silencing any group within society could lead to unfair outcomes, but because what the liberal philosopher John Stuart Mill called the “collision of adverse opinions” enables us to get closer to the truth. Pluralism requires multiple groups to check and balance each other; it fails when power is overly concentrated.

Today, asking ‘who governs?’ is a pressing task for those of us seeking to restore the health of our environment. The EU has enabled the UK to co-ordinate policies with our neighbours, to raise ambition together, tackling everything from acid rain to sewage-strewn beaches. EU environmental law has also allowed campaigners to challenge the national government to clean up London’s air. That source of external pressure was why environmental groups like the Wildlife Trusts made the case for keeping our EU membership. After we leave the EU, who will decide on the future of our green and pleasant land? How will we hold government to account on environmental issues like air pollution, which until now Brussels has, at least in part, enforced?

Rethinking where power lies

We shouldn’t need to rely on Brussels to ensure healthy surroundings, clean air and water, and the diversity of our wildlife. The argument that we needed a higher power to keep us in check was never Remain’s strongest point. At least, it wouldn’t have been, if we’d had strong accountability mechanisms within our own borders. But we don’t. 

Leaving the EU is an opportunity to rethink where power should lie. Right now, political power is concentrated among “the few”: a handful of top ministers and senior civil servants are responsible for major decisions about the future of our country.

It’s nothing new to say that we have an unusually powerful executive branch of government, and weak devolution. When Americans – the first Brexiteers - took control from Britain in the late 1700s, they understood that their new government must seek to balance executive power, which they tried to do with two strong elected houses, a robust judiciary and a federal structure which maintains the power of states.

Perhaps we should ask not only who governs, but how they govern, and who they listen to. Accountability is a product of transparency, as well as of checks and balances. The new prime minister has proposed having employees represented on company boards, arguing they will provide better scrutiny, coming as they do from outside the social and professional circles of the other directors. She has not yet indicated whether she would be open to exploring a similar opening up and decentralising political power.

Giving people a say

Taking back control should not stop at Westminster. The centre needs to get better at listening, and people need platforms and processes to enable them to have a voice in decisions about the future of their local communities and the country. Neighbourhood plans are a good start, but they operate on such a micro scale that many issues are beyond their scope. We have written about this before in relation to infrastructure planning, but the argument can be applied to most areas of public life.

The process of decentralising political power has gathered momentum in recent years. City or county wide, the new regional government deals operate at a scale at which strategic decisions can be made, at which sustainable solutions to twenty first century problems can be found, whether in providing integrated transport systems or wildlife corridors. What’s more, cities and counties are where we live, places we truly know and are familiar with. So they make a great context in which to engage the public in discussions about where new energy or transport infrastructure should go, or which protected landscapes should be made more accessible to visitors and volunteers.

Some representatives see their role as requiring sustained engagement with those they represent, but this should be standard practice. And it needs to go beyond simply educating or informing, and involve meaningful deliberation. Engagement experts have developed a plethora of tools that can assist with this, such as citizens’ assemblies: two recent pilots in Sheffield and Southampton found that these can build political engagement, legitimise decision making and go some way towards defusing apathy, as well as producing evidence based recommendations that reflect local needs. There will still need to be national frameworks of minimum environmental and social standards, but devolved administrations or local governments, whose citizens wish to see them go further, should be enabled to race to the top.

New environmental governance

If accountability is not to come from Brussels, it must come from the citizens themselves: as participants in local dialogues; as members of diverse civic and campaigning organisations from the National Trust to Greenpeace; and as local and national electorates. 

In this new era, good environmental governance will rest on a commitment to public engagement and a politics in which all interests are better represented. Voters have demonstrated that they are fed up with politicians not listening. Politicians of all parties and places need to accept the underlying referendum challenge and, as Theresa May says, believe in the British people, giving citizens a say in the decisions that affect them. That goes for environmental champions too: we need to remember that we seek to protect the environment for people, and that people are the environment’s only defence, as was well demonstrated by the response to the attempt to sell off the nation’s forests. We need to trust that, when given the chance to deliberate, our fellow citizens recognise the case for protecting and restoring the natural world on whose integrity we, and those who are to be born, all rely.

Matthew Spencer is director, and Amy Mount is senior policy adviser at Green Alliance. 

The views expressed in this article are those of the author, not necessarily those of Bright Blue.

Accelerating productivity investment

Theresa May’s new government has an unprecedented opportunity to reshape the UK economy and it should not be wasted. Now is the time for Government to review its role in helping to finance productivity enhancing capital investments.

Lost confidence due to Brexit uncertainty and persistently weak productivity growth, the ultimate driver of long-run economic growth, are major concerns and new supply side investments and reforms are urgently required. While the amount of financing available is returning to pre-crisis levels, the length of loans and the cost of capital have not. Financing is available for too short a period of time and is too expensive, which results in many potentially profitable and productive investment opportunities failing to go ahead.

Given the massive difference between long-term UK government borrowing costs and those available to private investors, it would make sense to pass on some of this difference in capital costs and length of loans to those making productivity enhancing investments in social, physical, technological, and human capital.

An approach could be based on existing instruments created since 2010, namely the UK Guarantees Scheme for Infrastructure (the Scheme) and the UK Green Investment Bank (the GIB). Both of these policy instruments were created to help unlock financing for infrastructure, but both are severely constrained - largely because of the need to comply with EU State Aid rules.
State development banks in other European countries, such as KfW (originally Kreditanstalt für Wiederaufbau) in Germany, have block exemptions from these requirements as they were established prior to the EU existing and were folded into EU treaties and directives.

Now that we are committed to Brexit, the Scheme and GIB should be similarly unshackled so they can provide concessional finance. Providing low cost finance to sectors (as opposed to specific companies or ‘national champions’) through fair and competitive tendering processes can boost growth, without unfairly and counter-productively ‘picking winners’.

Such a reform would allow lower cost capital to be invested in assets able to improve long-run productivity. Concessional finance can be disbursed through tenders, or by allocating funds to banks or asset managers operating in selected sectors. This would be an important public policy tool able to accelerate investment in key areas. It could also improve the UK government balance sheet: interest would be charged on finance provided and these rates would be above the government’s own cost of capital, but below market rates.

Priorities for financing could include energy efficiency or capital improvement loans for households and small businesses – dramatically improving the attractiveness of borrowing to invest for those groups. Projects eligible for Contracts-for-Difference (CfDs) - which underpin power generation investments - could also receive the option of low cost loans, which also have the benefit of reducing their overall cost. Other priorities could be energy intensive industries – providing low cost finance for new technologies that improve the resource efficiency of industrial processes – and the deployment of a new national electric vehicle charging network. An offer of low cost capital could unlock the construction of an ambitious new UK electric vehicle charging network that would be privately owned and operated on a commercial basis.

Investments that are more resilient (for example, those future-proofed against flooding) and supportive of multiple government objectives (such as pollution and biodiversity) should be prioritised. HM Treasury and the new Department for Business, Energy and Industrial Strategy (BEIS) should determine these win-win opportunities together with the independent Committee on Climate Change and Natural Capital Committee. The creation of BEIS is a significant opportunity for a joined up approach to supporting investment.

The government can enable important productivity enhancing investments, while minimising the direct role of the state, the impact on the public finances, and the risks of ‘picking winners’. A majority Conservative Government can deliver this and get the appropriate balance between positive intervention and counter-productive market distortion.

Ben Caldecott is an Associate Fellow of Bright Blue and author of Green and responsible conservatism: embedding sustainability and long-termism within the UK economy

This article first appeared on BusinessGreen.

Solar PV: why the UK needs to get involved in a global opportunity

The global market for solar photovoltaics (PV) is ‘one to watch’ for every financier, policymaker and energy professional. If you are looking for a technology that is going to boom over the next few decades, you’ve found it.

This is ‘the one’ that is going to transform the way we generate our energy – at home and overseas.

Why? Because ultimately a solar panel is not that dissimilar to a computer microchip. Both are semiconductors. Both have seen staggering falls in costs as manufacturing economies of scale increase. For computing hardware this is known as Moore’s law, for solar it is Swanson’s law. Costs drop astronomically and efficiency goes up as more and more of the stuff is made.

And that means solar is quickly becoming a mainstream electricity generation technology. Bloomberg New Energy Finance recently predicted that there will be $3.7trillion of investment in solar between now and 2040, much of it small-scale rooftops. That is a market worth getting in on.

The International Energy Agency is predicting that globally solar could be the largest source of electricity by 2050. India is aiming to install 100 GW of solar by 2022 – more than twice the amount needed to supply all of Britain's power needs.  China is moving faster still, and will have far exceeded 100 GW by 2020. Hillary Clinton is talking of installing a billion solar panels across the United States. From Chile to Morocco to Bangladesh, the solar revolution is accelerating fast.

According to the International Energy Agency, we could have 440 GW of solar PV capacity installed worldwide by 2020. At present the UK has a world-class solar design, installation and financing sector and could, with help from UKTI, be out there getting our share of that business. Some already are, with leading solar businesses Solarcentury and Lightsource examples of home grown solar companies already starting to set up shop abroad.

However, in order to reap the rewards of export markets you need a stable domestic market to build on, and sadly the situation here in the UK could not be worse. Cliff-edge cuts to the Feed-in Tariff, Renewables Obligation and (in effect) Contracts for Difference has led the market to crash by over 80% according STA analysis, with thousands of jobs and exportable skills disappearing as we speak.

By 2030 solar could be generating 13% of global electricity by 2030, according to a new report from the International Renewable Energy Agency. Some might say “ah but that’s just for southern climes in the global sun belt”. Not true. Solar works well in Britain – solar panels in London generate much of the power they would in Madrid. Cooler British temperatures prevent the panels from overheating, keeping them efficient. Solar uses daylight, not sunshine or heat, generating power even from just diffuse light on a cloudy day.

The cost of solar has come down by 70% over the last five years. The cost of a typical solar installation on a home has dropped from around £20,000 five years ago to £6,000 today. Not yet cheap enough for it to be attractive without government support, but that gives you an idea of how cheap a way of generating power this has become.

And as the cost of the actual modules falls through the floor, the rest of the cost of installing a solar PV system, such as the labour, scaffolding, mounting gear and the inverter that converts the power from DC to AC make up an increasing proportion of the total cost. That means it is more important than ever to support a stable domestic industry with a broad based supply chain that can work to reduce costs as installed volumes increase.

The prize is enormous – a market of $3.7 trillion. If the UK moves now we can still get a significant slice of that. But export markets and domestic markets are inextricably linked, and if we want our businesses to thrive abroad, we have to allow them to thrive at home first.

Paul Barwell is CEO of Solar Trade Association

The views expressed in this article are those of the author, not necessarily those of Bright Blue.