Regulations governing the UK's power system should be reviewed to enable a cleaner, more efficient electricity system, according to a think-tank.
The Policy Exchange has published a report outlining the economic and environmental case for a power system that can support the growth of renewable energy, energy storage and demand response systems, where users vary their demand to meet supply.
Regulatory and policy barriers facing these technologies need to be removed to reduce the reliance on dirtier forms of generation, such as small-scale diesel, the use of which has increased following the award of contracts under government capacity market auctions, it said.
The current regulatory regime was largely devised during privatisation of the electricity market in the 1990s and has struggled to keep pace with the low-carbon transformation now underway, it pointed out.
The report says there is significant potential for businesses to adjust their power use to help balance the electricity system. This is often done through an ‘aggregator’ company, which sells demand flexibility into the market, it notes.
However, regulations need to be updated as the existing regime prevents aggregators from participating in the wholesale electricity and balancing markets, even though they could play an important role in helping to balance demand and supply, the report argues.
It says energy storage can be given a boost by removing rules that result in the technology being ‘double-charged’ – once when the storage device is charged, and again when the same power flows to an end consumer. This does not apply to other technologies, such as thermal power stations, and is a major cost for storage operators.
Meanwhile, the think tank recommended that diesel generators should be subject to carbon taxes since they are the most carbon-intensive form of generation. They should also be subject to regulations to control emissions of greenhouse gas and air pollutants, it said.
Small-scale diesel generators are currently outside the remit of such regulations, which gives them an unfair advantage over other technologies that could help make the grid more flexible.
Richard Howard, author of the report, said: ‘Making the power system smarter will mean it can provide cheaper and cleaner electricity. The current set of policies is encouraging a growth in dirty diesel generators – exacerbating air pollution in UK cities and towns.’
Dr Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit, said: ‘Think tanks from across the political spectrum, leading academics, National Grid and the electricity industry itself have all called for a level playing field for technologies such as storage and demand-side measures, facilitating the movement to a free-market, consumer-oriented energy system that no longer relies on subsidies.’
This will increase the opportunity for UK businesses to take control of their energy bills by using electricity when it is at its cheapest, he added.
