Demand side key to UK’s net-zero future says National Grid ESO

National Grid ESO has released this year’s Future Energy Scenarios, outlining potential routes to a net zero by 2050 scenario. Key within this year’s report is the role of the demand side and activating consumer participation through low-carbon technology is flagged to be pivotal in enabling net zero.

During a webinar discussing the report’s findings, Lauren Stuchfield, energy analysis and insights manager for ESO, commented: “Policy is not always enough. We must see the action on [the] back of this policy in order to achieve net zero.”

Added Fintan Slye, executive director of the ESO: “The world is heating up and the clock is ticking; the time for action is now.”

The 2023 report makes the following recommendations:

1. Policy and delivery

Net zero policy: The Government must continue to reduce investment uncertainty around the business case for net zero-critical technologies such as Long Duration Energy Storage (LDES), transport and storage of hydrogen and CO2, low carbon dispatchable power and negative emissions technologies. A clear plan is needed for the funding and development of hydrogen and CCUS projects beyond delivery of the first industrial clusters.

Focus on heat: There is a need to accelerate both the uptake of heat pumps and the decision on whether hydrogen will be used for large-scale heating. While some progress is being made through the Boiler Upgrade Scheme, further policy support and incentives are needed to increase the uptake rates of heat pumps. Alongside this, a clear decision on hydrogen for heating should be accelerated and heat pump targets and incentives reviewed accordingly.

Negative emissions: Negative emissions technology is required to enable a net zero energy system. Robust emissions accounting standards are needed to ensure both investor and public confidence in a negative emissions market. Further demonstration of innovative emissions removal technologies is required to reduce uncertainties over technology and commercial readiness.

Although these movements in policy are needed, caution should also be taken to look beyond. So stated Lauren Stuchfield, energy analysis and insights manager for ESO: “Policy is not always enough. We must see the action on [the] back of this policy in order to achieve net zero.”

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2. Consumer and digitalisation

Empowering change: There is a need to instil trust for consumers and they must be advised on how they can best engage in the energy transition. This could be delivered through an information campaign, supported by a national advice service.

Digitalisation and innovation: Innovation and smart digital solutions are required to enable consumers to further benefit from energy savings at times when they are not able to manually adjust their demand.

Mandating technology manufacturers to include smart capability in their products is key to the delivery of smart homes. Further incentives and grants can encourage greater innovation and implementation of smart digital solutions. Successful delivery of Market wide Half Hourly Settlement will enable consumers to participate more readily in demand flexibility.

Energy efficiency: Further emphasis is needed to harness the potential of efficiency improvements in reducing energy demand. Energy efficiency improvements to the construction and technology within our homes must be accelerated. Radical overhaul is required to achieve this both in new build and existing housing stock. Targets for minimum energy efficiency standards should extend beyond the private rented sector. Additional incentives and grants must be considered to ensure energy efficiency improvements are available for more consumers.

3. Markets and flexibility

Distributed flexibility: The growth of distributed flexibility (flexible energy demand resources, such as storage, EVs, heat pumps and thermal storage, connected at distribution level) is a key enabler to achieving net zero. A market-wide strategy, including government targets, policy support and market reform is required to facilitate the significant growth in distributed flexibility. This can also provide incentives for consumers to provide Demand Side Response, such as smart charging of EVs.

Transport flexibility: Across all future scenarios, cars are primarily electrified, increasing electricity demand and requiring strategies to manage how they are charged and how system costs are recovered. Increasing implementation of smart EV charging is a no regret action to help reduce the impact on peak demand and reduce curtailment of renewables.

Commercial trials of Vehicle-to-Grid (V2G) business models are required to explore their viability and contribution system services. It also requires current challenges to be addressed, such as the slow rollout of charging infrastructure.

Locational signals: Market reform is needed to provide the real-time locational signals required to optimise decisions on when and where flexible energy sources are used. Improving locational signals has the potential to deliver significant cost savings to consumers and support the delivery of decarbonisation targets.

4. Infrastructure and whole energy system

Strategic network investment: Strategic and timely investment across the whole energy system is critical to achieving decarbonisation targets and minimising network constraints. Accelerated coordinated planning and delivery of strategic, whole system investment through Centralised Strategic Network Planning (CSNP) will require continued collaboration and engagement with the Government, Ofgem, local communities, industry and the supply chain. Strategic network investment should be enabled through reforms to the planning system, while also balancing social and environmental impacts.

Connections reform: Connections reform is required to facilitate quicker, more coordinated and efficient connection to the GB electricity system to deliver net zero. Continued collaboration between Government, Ofgem and industry is critical. The process must be future-proofed to facilitate potential prioritisation of connections for delivery of whole system benefits and net zero in line with strategic network planning.

Location of large electricity demands: New large electricity demands, including electrolysers to convert electricity to hydrogen, will be required for net zero. This demand has significant potential to deliver whole system flexibility and reduced network constraints alongside decarbonisation. A coherent strategy is required to ensure large electricity demands are located where they provide the biggest benefit to consumers and the whole energy system.

Industry response

Responding to the report, Jon Ferris, head of flexibility and storage at LCP Delta, commented: “The report is a transformation from a few years ago, where scenarios largely failed to meet the net zero target. Three scenarios describe three different, plausible pathways to get there by 2050, but also highlight the risk that we don’t – electrification of heat and heavy industry, grid reinforcement, market reform and supporting demand side flexibility remain challenges that need to be addressed.”

“EVs are clearly winning in transport decarbonisation, but only a small proportion of the capacity is seen as providing flexibility…It confirms the direction of travel in some areas (especially EVs, storage and flexibility), but also highlights outstanding questions (such as for hydrogen, LDES and market design).

Also commenting was Energy Savings Trust, whose head of policy Stew Horne said:

“Crucially, alongside enabling renewables and storage technology, people must be actively engaged with the energy system and incentivised to use energy more flexibly. The success of the Demand Flexibility Service last winter shows that people are willing to change their everyday behaviour to reduce their own energy demand, in turn helping to deliver flexibility in energy demand on a large scale.

“But this must be sustained. As we’ve highlighted in our new research for the Climate Change Committee with Green Alliance, behaviour change campaigns and the provision of impartial advice seen around the world are empowering people to understand how to best manage their energy use and insulate their homes. They are proving successful in reducing energy demand.

“While the solutions outlined in the scenarios today raise questions over who pays, when, and how to ensure it’s fair for all, we do know that a clear, long-term plan is needed to create certainty for industry and consumers to enable the net zero transition. There are still opportunities for the UK Government to provide such clarity this year, not least in its Autumn Statement.”