How the energy system of tomorrow could have saved >£100m in COVID grid balancing costs
- National Grid has forecast that its spending on balancing the grid from May to August 2020 is set to cost a further £500million due to Covid related reduced electricity demand.
- Cleantech companies have today written to Ofgem highlighting that up to £133million could have been saved through smart charging and a higher uptake of electric vehicles.
- Consumers will continue to face higher than necessary bills for balancing if technologies like this remain underused as balancing costs are spread across households.
London – 10 June- Today, leaders from across the cleantech industry have outlined that up to £133million could have been saved in electricity grid costs during the lockdown period if electric vehicle (EV) smart charging and smart tech adoption had been more wide scale. The companies have written to the regulator to highlight the important savings that could be made if the UK had a more intelligent energy system.
During lockdown, abundant renewable generation and record low energy demand have created balancing challenges for the national electricity system operator. In response, National Grid has increased balancing costs by £500million this summer, extra charges that will ultimately fall on consumers as part of their energy bills. This amount comes from the cost of the National Grid paying for actions to help balance demand and supply. Without modern systems in place for balancing the network which would pay consumers, National Grid are reliant on traditional solutions, such as paying renewable generation to switch off when energy is being produced in excess of what can be used at the time.
Electric vehicles are able to support the grid through intelligently charging during periods of low demand and carbon intensity, and could be helping to create a more resilient, lower cost system. In addition to EVs, there already exists a wide range of flexible technologies that could be supporting the grid while also delivering customer cost and carbon savings, such as smart electric heaters and home solar batteries.
A pioneering group of organisations across the energy sector have forecast that in a system where flexible storage capacity from 6 million electric vehicles could have provided the grid an extra 3.6 TWh of energy, up to £133million could have been saved. This saving equates to a 27% reduction on balancing costs for National Grid and a subsequent bill saving of £4.82 for each UK household.
Throughout the lockdown period, consumers have saved hundreds of grams of CO2 per day by storing green energy in car batteries and other home storage systems and feeding it back to the grid when demand increases. Over the last two months in Orkney, innovative technologies have enabled a further 7.5MWh of wind power to be generated when it would have been wasted.
Pilot and test projects have already demonstrated the value of smart, low carbon technologies across homes. Despite successful real-world results and commitments from Ofgem and the Government to create a more intelligent system, the market frameworks that would enable these smart technologies to support the energy system are not yet in place. While reforms are underway, it’s not certain they’ll go far and fast enough in delivering the signals that tell users when they should be charging for cheaper, greener energy.
The lockdown period has demonstrated the need for these technologies and why they will be so important as we move towards a more decarbonised system.
Colin Calder, Chief Executive, PassivSystems said: The size of savings in the future energy system should not be overlooked. Smart devices will allow customers to receive tangible benefits for using their energy demand effectively, but by co-ordinating energy across households there can be even greater savings to the grid without affecting the experience of the customer.
Marzia Zafar, Head of Customer Policy & Strategy, Kaluza said: The technology works, the benefits are clear, and it’s now time to take some real action in rolling out a smarter grid. These increased balancing costs demonstrate how important it is to lay the foundations for a flexible grid that places customers at the heart of the energy transition and leads to a more affordable system.
Greg Jackons, Founder, CEO, Octopus Energy: The bank holiday weekends have been a wake up call. With a flexible, digital grid, cheap renewable power would have saved households money. Without it, they will be forced to pay billions in infrastructure upgrades and compensation payments. We need to fix this, fast.
Notes to editors
- The figures have been drawn together by members of the Flexibility First Forum. The Flexibility First Forum is an affiliation of organisations who want to highlight the value of energy demand flexibility to the energy system and consumer.
- The high winds over the recent bank holiday weekend helped push the UK’s generation from renewables to 50%, peaking at 83%. National Grid took emergency measures this month so it could instruct renewables to switch off when demand was low.
- Initial costs for balancing the system for the late May bank holiday alone are estimated to be £51m
Case studies demonstrating technology
- Organisations across the domestic flexibility supply chain have already been contributing cost, carbon and capacity savings to customers and the grid during lockdown, providing a snapshot of the future energy system. For example:
- Kaluza-connected vehicle-to-grid devices increased their green energy exports at a rate of 50% throughout April. These devices allow electric vehicles to import energy when it is greener and export it back to the grid. ‘Freeing up the Locked Down Grid: V2G and Flexible Charging in Glimpse of Green Energy Future’, Kaluza, 5th June, 2020.
- Moixa UK customers have prevented an average of 710g of CO2 being released per day during lockdown, by shifting energy consumption away from traditional peak times and using solar panels and battery storage for power. Customers have also saved money by shifting their household energy consumption to times of less demand. For example, over the Easter Bank Holiday weekend, customers with PassivSystems’ technology on Octopus Energy’s Agile Tariff paid only 2p per kWh for all of their electricity consumption by optimising their home solar, battery electricity storage, heat pump and vehicle charging to maximise solar use and move grid consumption to low cost periods.
- Electron and the consortium behind Project TraDER recently launched a Local Energy Trading Market amidst COVID19 on the Orkney islands. The Electron platform allows local wind generators to avoid being switched off when demand is low, by trading with demand response assets owned by Kaluza. Without this option, the wind farms would not be able to export power; their generation would be lost, and they would go uncompensated. Since its launch in March, there have been 2385+ trades between generators and demand side assets, with approximately 7.5MWh of wind energy not curtailed.
- Through Centrica, 75 Cornish households have signed up to take part in a trial aimed at deploying residential flexibility as a frequency response service. During April and May, those homes were contracted to provide dynamic Firm Frequency Response (dFFR) to National Grid ESO as part of Centrica’s portfolio of optimisation services. A dFFR service is a rapid increase or decrease in energy usage which is used to maintain system frequency within safe operating parameters. Traditionally, frequency response services were the domain of large fossil fuel generators. This trial is part of Centrica’s efforts to expand the opportunity to new sectors and new technologies.
How the £133 million figure is concluded:
- The calculations are based on the assumption that 6 million EV batteries could have provided National Grid ESO with an extra 3.6 TWh of energy to balance the system over the summer months if their smart charging capability had been harnessed and customers were able to charge and discharge their EV batteries to support the grid.
|Current Additional System Balancing Cost per MWh (£36.95)|
|Demand Decrease||Associated Balancing Cost||Associated Balancing Cost/Demand Decrease|
|0.11 TWh per day (Elexon Data) x 123 days (4 Months, May-August) = 13.53 TWh||£500m||£500m / 13.53 TWh = £36.95 per MWh|
|Potential Additional System Balancing Cost Saving with Support of 6m EVs (~£133m)|
|TWh of Flexible Charging of 6m EVs over 12 Months (EV figure from National Grid Future Energy Scenario prediction for 2030)||TWh of Flexible Charging of 6m EVs over 4 Months [May-August]||TWh of Flexible Charging * Balancing Cost|
|10.8 TWh (Kaluza Data)||4/12 * 10.8 TWh = 3.6 TWh||3.6 TWh x £36.95 per MWh = ~£133m BSUoS cost saving|