1. © 2013 Astutim Ltd Smart Energy SIG - 1 - Smart Energy SIG The Role of Community Energy Systems in the UK Resilient Energy Supply A Study by the Smart Energy Special Interest Group for the Technology Strategy Board April 2013 Rob Morland Nee Joo Teh Mike Perry Smart Energy Special Interest Group Jenni McDonnell Paul Huggett Eddie Townsend

2. © 2013 Astutim Ltd Smart Energy SIG - 2 - Smart Energy SIG CES Project Background Planned as a follow-on to the SE SIG Community Energy Systems Fore sighting Project Originally envisaged as two projects: one focused on a technical assessment of CESs and potential alternative business models, a second concentrating on energy storage technologies, an environmental analysis and alternative power sources for CESs With guidance from TSB a single initial Phase 1 study was scoped, addressing issues of particular interest to the TSB 1 Available at: https://connect.innovateuk.org/c/document_library/get_file?uuid=532149cb-0c3c-43f1-9aec-ba67e0ac1c30&groupId=91689https://connect.innovateuk.org/c/document_library/get_file?uuid=532149cb-0c3c-43f1-9aec-ba67e0ac1c30&groupId=91689

3. © 2013 Astutim Ltd Smart Energy SIG - 3 - Smart Energy SIG Scope of the Report Focus on community elements and technology opportunity National-level generation and distribution not covered Initial look only at business models Policy and planning considerations also left for later

4. © 2013 Astutim Ltd Smart Energy SIG - 4 - Smart Energy SIG Potential Contribution of CESs Several interviewees in our CES Foresighting project suggested that CESs might in time contribute 10-15% of final UK electricity generation: what would this look like when built up from real household and community scale systems? DECC’s chosen FIT scenario projects around 6TWh (1.6%) of final UK electricity generation through FITs by 2020: from around 750k installations, perhaps topping out at 800k by around 2025 For 10-15% CES contribution we need 6-9 times the current FIT programme Simply scaling the current FIT programme with 4-6 million more individual microgen installations would be challenging: costs per install would grow as ‘low hanging fruit’ already picked with current programme building the necessary understanding with enough individual households could be difficult interfacing 5-7 million microgen systems to the present grid may be impractical such numbers of microgens could make a future Smart Grid more difficult to control

5. © 2013 Astutim Ltd Smart Energy SIG - 5 - Smart Energy SIG Example Scenarios Four scenarios created: these contribute from 1.6-15% of the UK’s predicted 2030 generating capacity of 417TWh Achieving 10-15% will require a ‘mixed’ CES economy: individual households and community systems opportunity for a variety of sizes – street to city including both geographically-linked and country wide ‘communities of interest’

6. © 2013 Astutim Ltd Smart Energy SIG - 6 - Smart Energy SIG Energy Storage Technologies Storage is key to stabilising fluctuating supplies with decentralised generation Electrochemical offers the best short-term solutions: improved capacity and lower cost are key to viability for mass deployment Absorption-enhanced compressed air energy storage (AE CAES) is an example of a new technology already being deployed in the US Source: EPRI

7. © 2013 Astutim Ltd Smart Energy SIG - 7 - Smart Energy SIG Technological Challenges in CESs 1.Power electronic controllers 2.Solid state tap changers 3.Interconnection of D-STATCOM devices 4.DC networks at LV, MV and domestic levels 5.New fault current limiters 6.Soft open point power electronics 9.Solid state transformers 10.Inductive EV charging 12.New electricity storage devices 13.Hydrogen production and storage

8. © 2013 Astutim Ltd Smart Energy SIG - 8 - Smart Energy SIG CES Business Models – Supply and Demand Energy system investment may be categorised as: Supply side – creating new generating capacity Demand side – reducing or changing the timing of energy consumption In most cases, supply side measures are more costly than demand side: CESs provide an opportunity to increase supply and reduce demand but at what cost? Work in Japan post-Fukushima suggests that central generation remains more cost-effective than local generation: but this may not be the case into the future, especially when other factors (e.g. low-carbon generation, security of supply, etc) are included New business models need to be created that properly assess the costs and benefits of CESs against alternative supply side and demand side measures

9. © 2013 Astutim Ltd Smart Energy SIG - 9 - Smart Energy SIG CES Business Models - Ownership CESs introduce the potential for new modes of commercial operation of the UK’s energy system, and ownership of its assets Several ownership options exist, for example: community owned supplier owned jointly owned third party owned (e.g. a financial institution) Each option has benefits, but also challenges It is likely that a mixed economy where market forces stimulate development of different models will be the best solution However, more work is needed to understand the costs and benefits of different models, and the potential implications of allowing a free market to develop

10. © 2013 Astutim Ltd Smart Energy SIG - 10 - Smart Energy SIG CES Business Models – Structural issues Widespread introduction of CESs (taking over 10-15% of UK electricity generating capacity by 2030) will impact the current UK energy generation and distribution industry: it has been suggested that a 15% contribution of CESs could undermine the commercial viability of some existing central generation and distribution businesses Clearly a strong national grid is needed into the future: for supply of large consumers (e.g. heavy industry) to smooth peaks and troughs of intermittent CES generation (PV and wind) to provide a ‘supply of last resort’ for all consumers Business models for CESs therefore need to build-in an appropriate ‘levy’ to ensure availability of the national grid service into the future: this should not need to be more than the margin on carriage of energy lost when CESs are deployed and it should be reduced by savings in grid reinforcement costs that CESs may enable

11. © 2013 Astutim Ltd Smart Energy SIG - 11 - Smart Energy SIG Study Conclusions It is possible to create plausible scenarios for CESs to deliver 10-15% of the UK’s electricity generating capacity by 2030: however, it is unclear what would be the optimum balance between domestic, small community and large community CESs from technical, commercial and operational viewpoints A number of technical challenges need to be resolved before large numbers of CESs could be connected to the UK national grid: significant increases in capacity and reductions in cost of CES storage technologies are likely to be needed before mass deployment is viable Mass deployment of CESs will change the commercial balance of the existing UK energy generation and distribution industry: measures may be needed to ensure the long-term viability of the national grid There remains uncertainty regarding the economics of electricity generation in many CESs when compared with a few large central generating stations: however, the UK’s diversified energy industry structure could enable us to take a lead in innovative new approaches to design and deployment of CESs