Shocks that people can see and feel are the most powerful drivers of change

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The energy crisis has made the transition tangible for end-users

From the recent Covid-19 pandemic to the 9/11 terror attacks, history is peppered with key moments in time where the gravity of the situation shakes the foundations of society and causes a fundamental shift, transforming deeply embedded architectures of democracy, sovereignty and security.

Whether the current energy crisis will go down as an equivalent, historic event that catalyses accelerated action remains unclear. But Putin’s invasion of Ukraine has handed us the greatest crisis our modern energy system has ever seen—so it should stand to reason that we are in a unique position to acknowledge the limitations of our reliance on fossil fuels, drive towards a future powered by renewables and unlock the opportunities it affords. Every unit of gas we burn benefits Putin’s regime; yet nobody can weaponise access to the sun or wind.

A definitive transformation remains to be seen, but there are important glimmers of hope that change is happening. Energy has suddenly become front and centre of everyday discourse; consumers are seeking out ways to reduce their bills and use energy in a more intelligent way.

FLEXIBLE DEMAND

Faced with immense supply-side challenges, focus has shifted to the demand side.

While European countries were quick to roll out public information campaigns encouraging a reduction in energy consumption, the UK made significant progress in domestic flexibility—whereby households shift or reduce their energy demand at specific times to support the grid.

At the start of 2022, the concept was completely novel. Fast-forward 12 months: we have gone from the first large-scale domestic flexibility trial involving 100,000 customers that proved the ability of consumers to respond to grid signals and reduce demand to a fully-fledged “Demand Flexibility Service” involving more than four times as many customers.

Households in the UK are being offered discounts on their electricity bills if they cut energy use at peak times over the winter, as part of National Grid ESO’s efforts to avoid blackouts.

CONSUMER ROLE

The remarkable speed and scale of this progress are what we need to meet our net zero targets. Consumers will be at the heart of a green, decentralised system and will need to play an active role in supporting the grid. This requirement will not be borne out of geopolitical circumstances but will result from a system powered by variable renewable energy.

The combination of variability and greater electrification, fuelled by the roll-out of low carbon technologies (LCTs) in the home such as electric vehicles, heat pumps and home batteries, means that intelligently shifting demand around in households will be a central part of the future energy system.

Whilst LCTs have the potential to increase system peaks—the times at which lots of people are using energy—they also offer a controllable resource. This means users can still adopt these technologies without putting the grid under strain by using energy at different times.

PLAY A PART

Whether a household owns low-carbon technology or not, everyone can play a part in domestic flexibility and reap the rewards. We know that the benefits that a fully flexible energy system offers are significant, with the potential to deliver material net savings of up to £16.7 billion a year in 2050.

This cost would otherwise be passed on to households through their bills. At present, the costs of balancing supply and demand are at an all-time high, primarily as a result of high gas prices.

Consumers have responded positively to domestic flexibility initiatives, but there are lots of questions to answer to refine the consumer experience, in order to deliver maximum benefit and value back to the people who will drive this transition.

Areas of research include what level of automation is required to unlock seamless domestic flexibility at scale; how we can leverage behavioural insights to design schemes that incentivise more people to participate; and how we can improve accuracy and engender trust in the system.

FAIR PAYMENT

Ensuring that consumers are fairly rewarded for providing flexibility services is paramount.

To do this, more accurate forecasting models that predict a household’s normal electricity consumption in the absence of external signals, known as a “baseline”, are necessary.

If a baseline overestimates a household’s consumption, then consumers would be given higher energy reduction targets that are harder to achieve, potentially impacting opt-in rates. An underestimated baseline would mean a consumer would not be appropriately rewarded for the flexibility they provided.

Whilst the system-wide shock that we might have hoped for is yet to materialise, the current crisis has shrunk the psychological distance we place between ourselves and our polluting energy system, bringing it to the doors of millions of homes.

Now is the time to capitalise on recent evidence of our willingness to adapt, change our behaviours and actively shape a greener energy system, with people at its heart.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.