Flexible power grid could save UK households £90 a year

A new report from think tank Policy Exchange calls for an overhaul of the UK’s power system to encourage smarter, cleaner technologies.

The report claims that a smarter, more flexible power system that makes better use of technologies such as battery storage and demand response could create savings up to £8bn by 2030 — the equivalent of up to £90 per household.

In the report, Policy Exchange sets out how to remove the regulatory and policy barriers facing these technologies in order to create a level playing field and reduce the reliance on dirtier forms of electricity.

The think tank highlights short-term measures the Government could implement, such as carbon taxes on polluting diesel generators and a review of the Capacity Market rules to ensure that technologies such as storage and demand response are able to access longer contracts.

Additionally, the report calls for regulatory changes to remove the ‘double charging’ of environmental levies on storage, and says that Distributed Network Operators (DNOs) should be encouraged to consider new approaches to managing their networks.

In the longer term, Policy Exchange wants to see a major reform of the wholesale power market with a switch to a ‘nodal pricing’ model. According to the report, this would better reflect the geographical patterns of demand and supply across the country, as well as the physical constraints within the network.

The report also proposes a major overhaul and simplification of the balancing services managed by National Grid, as well as network charging arrangements.

Richard Howard, author of the report, said:

“Making the power system smarter will also mean it can provide cheaper and cleaner electricity. The current set of policies is encouraging a growth in dirty diesel generators — exacerbating air pollution in UK cities and towns. The Government needs to level the playing field to encourage the use of cleaner technologies such as demand response and storage. This approach is not only greener, but could also lead to savings worth £90 per household per year by 2030.”

Professor Sir David King, special representative for climate change at the Foreign and Commonwealth Office, added:

“In order to move to a low carbon power system, incorporating more renewable energy, we also need to create a smarter, more flexible power system. This important report from Policy Exchange shows how Government can encourage smart technologies such as storage through changes to policy, regulation, and market design.”

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