The GreenSCIES partners have published a policy paper that will help steer the future of Smart Local Energy Systems (SLES). Written by Cenex, in collaboration with Energy Systems Catapult the white paper reviews current energy systems policies and aims to identify opportunities and constraints. It examines proposed policy changes and the impact of them on SLES, using GreenSCIES as a case study.
There is a need for more certainty in terms of roles and responsibilities, and coordination between national and local electricity markets to drive the uptake of SLES. Whilst flexibility markets and related policy have been evolving, there is considerable uncertainty over future flexibility revenue.
There are a number of industry code changes progressing that provide mechanisms for consumers to engage with both the wider energy system and SLES. Market-wide half hourly settlement, which will be completed by October 2025, will significantly improve the value of flexibility for SLES. Recent regulation changes have also been removing barriers for distributed storage in the energy system.
With government ambitions to phase out the installation of gas boilers, heat networks will become increasingly important. Current consultations for heat network developments, and on vehicle to grid (and related technologies) show a desire to get the most from these emerging technologies. The UK’s first Energy Digitalisation Strategy also shows a good level of engagement to update the energy system to be smarter and more flexible.
Heating and cooling are the most significant revenue streams for GreenSCIES (and other SLES that incorporate district heat networks). Therefore, policy changes that affect the relative prices of gas and electricity will be material for these projects. One possible policy change would move levies from electricity to gas.
Revenue from Electric Vehicle (EV) charging and sales of power into either the capacity market or balancing market are expected to be a relatively minor proportion of overall scheme revenues – so policy changes affecting the scheme’s ability to access these revenues or to increase them are a potential upside factor – but unlikely to be critical to the overall business case for the scheme.
Ofgem’s current position is to introduce increased network access rights at the distribution level. In constrained areas where Distribution Network Operators roll out active network management solutions, they may also offer flexible network connections. This would provide additional value for flexible SLES assets.
Another significant change could be the creation of zonal or nodal electricity pricing. This would increase wholesale prices in London, shifting value from the Balancing Mechanism and Transmission Network Use of System (TNUoS) charges to the Wholesale Market. This would drive a need for local balancing services, potentially benefiting SLES.
And finally, though unlikely, reforms to the supplier hub concept and the supply license framework could open new business model opportunities and greater scope for SLES.
Download the full report
The full report can be found on this website. It provides a comprehensive policy review, detailing the effect on revenue streams for SLES and the impact of proposed and potential future changes to energy policy and regulation.
This research and the resulting report will provide a valuable reference for future SLES projects, enabling new schemes to be designed with the framework of energy policy and regulations in mind and supporting the UK on its journey towards a smarter, more flexible energy system.