Self-storage solution?

Economy 7 has been remarkably successful in the past. Multiple benefits would result from a new domestic energy storage incentive as part of the Green Deal, argues Colin Calder.

Grid stress is becoming a growing feature of energy markets across Europe. Germany’s grid was placed under unprecedented pressure this winter following the shutdown of seven nuclear plants after Fukushima.

In the UK, Eon and RWE recently ditched their plans for new nuclear plants. Yet at the same time we are nearing the end of European Union production allowances for our fleet of coal power stations.

The Queen’s Speech this week was expected to introduce a raft of new renewable energy subsidies to help deliver the shortfall, while also moving to meet incoming carbon targets. Renewables bring with them the well-documented problem of intermittency, giving rise to claims that they can only make a limited contribution to UK energy supply. These arguments do not consider the potential of demand-side measures, which are a crucial element of turning our abundance of indigenous renewable resources into affordable energy.

The issue of demand matching is not new. The coming online of new nuclear and coal spinning reserves in the 1960s presented a similar problem of power being available at the wrong time, which the market met with a price incentive in the form of Economy 7. The storage heaters of the day were not very efficient, but a new generation of storage heaters and hot water tanks is being rolled out later this year by Dimplex. The fact that one in five UK homes reportedly still has an older generation storage heater shows the powerful effect that strong pricing signals can have in the consumer market.

Using homes as energy stores achieves three complementary goals. First, it improves options for demand response at a grid level without making unreasonable demands around behaviour change. Second, it reduces grid reinforcement costs by flattening the load curve and restricting peak use. Third, it breaks down the capex required on energy storage by spreading it among homeowners, who have fundamentally different return on investment expectations than utilities.

According to the Institute for Sustainability, consumers are expected to spend in the region of £500 billion on retrofitting in the next 40 years. Such expenditure must be properly incentivised and rewarded as part of developing a cost-efficient, clean energy supply system. By agreeing to set a cap on grid usage – either at certain times of the day, or on demand – consumers, as before with Economy 7, should be entitled to share some of the benefits accrued by energy companies.

For their part, distribution network operators would find themselves not only liberated from centralised energy storage costs, but for the first time engaged with consumers and able to participate in a dynamic market. They could, for instance, act as aggregators for demand reduction among multiple households, with the aim of improving returns from incentives.

Lastly, home energy storage and microgeneration create a virtuous ­circle – a home with one is more likely to install the other because of the opportunity for off-grid home-balancing they provide together.

We will soon have a vehicle for the delivery of such additional incentives in the form of the Green Deal, which is predicated on the “golden rule” that savings should outweigh the cost of interventions. By reducing peak demand – as well as potentially earning a feed-in tariff – energy storage could satisfy this rule with highly quantifiable savings. Financing flexible energy demand and storage should therefore be incentivised under the Green Deal framework.

There are three specific areas where demand flexibility can be developed: space heating, which accounts for 66 per cent of household energy use; hot water, which accounts for 17 per cent; and electricity use. For space heating, heat pumps powered from local hot water energy stores could significantly reduce the load required to maintain temperature in the home. For instance, on a freezing cold day, going off-grid for an hour could reduce demand by 5kWh.

A further 12kW of energy is currently used by households for heating water – if kept hot for a day by properly insulated tanks, this could also help flatten demand considerably. Although not significant today because of the high use of gas heating in homes, we should not lose sight of the important role hot water storage will play as homes migrate from using carbon-intensive fuels to electrification.

Perhaps the greatest prize is flattening the evening winter peak between 5pm and 9pm. The most viable technology that can achieve this is a new generation of storage heaters and hot water systems able to function as energy stores. Such systems present the opportunity for homes to go off-grid at peak times – or cap their off-take – using either stored grid energy, micro-generated energy or, potentially, community-generated energy.

Our predecessors had the vision to change consumer behaviour by introducing a tariff that offered a 65 per cent discount in return for consumers ­re-engineering their homes. The resultant market adoption by millions of homeowners is testimony to the power of meaningful pricing signals. Today, ­consumers are being encouraged to retrofit their homes; energy companies are struggling to make renewable energy sources affordable; and Denmark is actually paying people to use surplus electricity made from wind ­generation. It is time for government and regulators once more to show real leadership by introducing a residential energy storage pricing mechanism.

Consumers should be provided with financial incentives for building grid flexibility into their Green Deal or similar retrofit plans. What could be more compelling than offering a 50 per cent discount on grid-­supplied electricity in return for re-engineering a home to meet certain grid storage and flexibility standards? Consumers would benefit through having access to lower cost clean energy, while energy companies would benefit by having control over distributed energy resources, and governments would benefit by making energy more affordable for all.

Colin Calder is the chief executive and founder of PassivSystems

This article first appeared in Utility Week’s print edition of 11 May 2012.

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