Current electricity demands are threatening the national grid infrastructure and with it the pressing need for low carbon power favouring the old approach of distributed generation. In Britain today, this takes the form of solar panels installed on close to one million residential roofs, wind farms across the countryside and numerous small scale biomass plants in disparate locations. For the energy industry however, it is also presenting a new set of headaches.

The flow of demand

Wind and solar power are intermittent and now represent over 25% of generating capacity in the UK, so one immediate issue is whether to have alternative sources available in the event that demand is high when the sun’s not shining. It is imperative that the UK meets binding targets to cut greenhouse gas emissions, in addition to generating energy through renewables and improving energy efficiency by 2020. However, it also requires extra funding at a time when investment levels in generating plants are already high due to an ageing nuclear portfolio which needs replacing. The announcement in 2015 by Amber Rudd, the former environment minister, that all coal plants must close by 2025 has exacerbated the problem. Coal has traditionally been the largest contributor to the nation’s electricity supply and though decreasing, it still accounts for 23% of generation.  

Due to rising interest in electric and hybrid vehicles, each of which can use as much electricity in a day as the house they are plugged into, the difference between average and peak demand on our national electricity grid will double if nothing is done.

According to a recent paper published by Imperial College and Cambridge University, Delivering Future Proof Energy Infrastructure, as much as £8bn a year of additional investment in grid infrastructure, could be avoided by 2030 if demand for electricity is smoothed across the day. There are some obvious techniques for achieving this.

Charging up

Concepts such as installing energy storage systems which pump water uphill have existed for years but the rapid development of battery technologies is a new area worth exploring.  A key advantage is that these technologies can be located either as large battery rooms adjacent to substations, or alternatively, located in individual houses where they are particularly suited for operations with solar panels. In this scenario, unused power developed from the solar system at the height of the day can be used to charge the battery for release during the evening peak period. Although battery costs have been falling significantly, a cost issue still remains regarding the incentivisation of households to install such battery systems. 

Smart power

In the Nordic countries householders can elect to pay a variable price for electricity hour by hour. Over time, this has started to show reductions in the volatility of pricing across a typical day as more companies devise ways of making or saving money by spreading the load on their grid. Combining this concept of variable tariffs with battery storage makes a lot of sense as the batteries can be charged at times of the day when electricity is cheapest and therefore in least demand. A key enabler to getting this mechanism to work is smart meters. The UK has a programme to install technically advanced smart meters in all homes by 2020. Although promoted as devices to provide accurate bills, their ability to provide meter readings every half hour is invaluable for opening up a market for variable tariffs. This development is influenced by the Internet of Energy, derived from the Internet of Things, and which relates specifically to the connections made between equipment that generates power, equipment that uses power and the smart devices that can control and take vital information from both.

A second approach to creating “demand flexibility” is to automatically switch off non-essential loads (such as appliances) at times of peak demand. Several companies are trying to figure out how they can aggregate thousands of appliances together and sell the ability for grid managers to switch these loads off for short periods of time. This concept is described as a ‘virtual power plant’ because with enough houses under management like this, removing the load on the grid acts as a substitute to building a new power station. National Grid, a public company which has responsibility for balancing supply and demand on the UK electricity network, has been looking at practical solutions for some time, but in a recent paper Future Energy Scenarios, a number of scenarios and their outcomes are set out. The findings are emphatic – at one extreme, the “no progression” approach, will result in missing all targets for carbon emission reduction. At the other end of the spectrum there are distinct advantages to the “go green” pathway, which involves an expansion of local generation with distributed battery storage and demand flexibility all supported by the capabilities of smart metering.

It is clear that the situation we are in currently is unsustainable. Smart metering programmes, which are a lynch-pin to the battery and demand flexibility approach, are already being rolled out. The variable tariffs that smart metering can offer, combined with the Internet of Things and its ability to control devices in the home, can provide the technology to solve much of the problem.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.