The ADE analysis is a response to the government’s recent legally binding Net Zero target and the Committee on Climate Change (CCC) Net Zero report, published in May. The energy revolution in the UK will see the country moving away from gas and electricity into an integrated system where power, heat and transport systems work together, designed around the user’s needs. In this approach, the customer not only consumes energy but also generates and stores it and influences the timing for when the energy they need is supplied.
According to the ADE, this future-smart, user-led system will replace the traditional purely centralised approach and enable users to participate in and benefit from the energy system. The ADE analysis places the energy user at the heart of this approach. Flexibility and energy storage enables energy customers to support the grid with the market for flexibility services from homes and businesses set to grow. The market value for reducing peak demand by 5 percent alone is estimated to be worth at least £800 million if unlocked for consumers. This will help the UK to ‘keep the lights on’ with a reduced need for investment in generation and wire-based transmission. If comparable levels of flexibility are achieved in other countries, peak power demand could be reduced by up to 15 percent by energy users. Over half of domestic, a third of commercial and almost a quarter of industrial energy demands can become flexible, driving down cost and providing new revenues to energy users.
Energy efficiency measures, centred on the UK’s leaky housing stock, can slash household energy bills by up to £400 per annum, reducing current annual energy bills by about a third. Business competitiveness through investment in cost-effective energy efficiency technologies and industrial processes could cut £6 billion from energy bills between now and 2030.
By 2030, up to 1.5 million homes could be heated by heat networks, and by 2050 this number could be more than doubled meeting almost a fifth of total heat needs and 5 million homes Heat networks deliver cost effective, low carbon heat, in the form of hot water, from the point of generation (usually an energy centre) to the end user through a network of insulated pipes. These networks will unlock a range of low or zero carbon heat sources, including waste heat that we currently have no use for.
Flexible combined heat and power (CHP) located onsite at businesses and using the heat that is normally lost could triple from over 5 GW today to over 15 GW by 2050, the equivalent of 7 large power stations. All this CHP would use low carbon fuels in line with the Net Zero goal.
“Whether through onsite generation, storage, energy efficiency, capturing waste heat or smart vehicle charging, the next stage of the energy revolution centres on the energy user” said Dr Tim Rotheray, Director of the ADE. “From homes to industrial sites, we need to help energy users drive a dramatic change in our energy system. Those same users will benefit from lower bills, cleaner air and even a rebate on their power bill for helping the system. Facing the climate emergency is a challenge for everyone. Our analysis shows it can be an opportunity for everyone too.”
The transition from the UK’s decades-old, inefficient and purely, centralised system is already happening at a pace. The country already has 500,000 homes connected to heat networks, saving connected households an average of £100 per year compared with using a gas boiler. There are currently 5.8 GWe of highly efficient combined heat and power (CHP) systems across 2,000 sites in the UK. These CHP plants provide 6.4 percent of all the UK’s electricity generated and 42 TWh of heat, representing around 7 percent of total UK heat demand and 10 million tonnes of CO2 saved in 2018.
Customer-owned solar energy generation has grown by 330 percent from 499 MW to 2.1 GW over the period 2013 to 2017, compared to centralised generation, which has fallen by 8 percent over the same period. Currently, there are around 1 million solar PV installations with a capacity of less than 4kWe across the UK - equivalent to two large conventional power stations.
UK energy use decreased by 10 percent between 2000 and 2014. Energy efficiency improvements played a central role in this achievement, as without it economic growth over the period would have resulted in energy use increasing by 6 percent.
The ADE analysis suggests that the UK can go further through better use of smart technologies, utilising the ability of customers to respond to peak grid energy demands by either reducing their energy usage or selling excess energy back to the grid, something that will be of vital importance in this new energy system. Onsite smart energy technologies, such as smart meters, have the potential to grow, helping to reduce UK peak power demand by up to 15 percent. Energy users reducing peak power demand by 5 percent would lower costs by £200 million per year, generating £790 million in benefits to the consumer.
Businesses are already helping to make this happen across the UK. Thousands of district heat systems and onsite combined heat and power generation plant at over 2,000 sites are improving the energy performance of millions of homes and business premises.
For the UK to achieve its Net Zero target, the ADE is calling on the government and the regulator, Ofgem, to allow energy customers to fully realise the benefits of the energy transition through opening up access to markets in order to ensure all homes and businesses generating energy are paid appropriately. This will keep the lights on and keep the grid stable through energy generation and management. This can be achieved by moving energy use to different times of the day, permanently reducing demand through energy efficiency measures or providing very short term power system stability through onsite batteries or demand flexibility.
Unlocking infrastructure investment in heat networks can recycle wasted heat in British towns and cities. This has already been done in other energy networks and needs to be extended to heat through a similar regulated investment framework. One that gives heat energy customers clear rights and protections and drives down the cost of heat.
Efficiency requirements need to be established for new power stations to ensure they capture wasted heat for industry, businesses and heat networks.
There needs to be a clear road map to deliver the Clean Growth Strategy promises of EPC C for all homes and a 20 percent improvement in business energy efficiency, including robust, enforced minimum efficiency standards, fiscal incentives and public sector action that sets a clear example for others to follow.
“Local energy is growing at pace, and has the capacity to expand rapidly” added Dr Rotheray. “If government puts customer led energy at the heart of its policy making and works alongside business we can put power back into the hands of customers and meet our net zero in a fair way. Saving customers money, and delivering radically cutting CO2 emissions. Now is the time to focus on the role of local energy as key alongside other energy solutions, safeguarding the UK’s energy future.”
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