As we are reaching a point of no return in the fight against climate change, with the decarbonisation targets of net zero emissions by 2050, we must completely overhaul how we generate and store energy in order to be able to halve carbon emissions across the energy sector every decade.
Adopting more renewable energy across the grid is the only way we can reduce carbon emissions from the energy system, however this intermittent supply will put increasing strain on the grid. The key to enabling this is leveraging technology and unlocking distributed energy systems’ potential, such as virtual power plants.
However, the sector needs to radically rethink energy markets to bring these changes to life and help eradicate our reliance on fossil fuels.
The energy industry has considerably evolved over the past few years. Distributed energy resources are rapidly becoming a prolific and dependable source of power. However, existing energy market designs are ill-suited to unlocking their full potential. It is increasingly clear that all relevant stakeholders in the energy landscape need to work together to accelerate the push towards a net zero energy sector.
A broad collaboration within the energy industry
Last week, Moixa attended EnTech World Congress 2021, a virtual conference that allowed the leading industry executives to share insights into how new markets are forming and discuss how the sector’s shared roadmap to face future challenges should look like.
Our Commercial Director Ed Gunn had the opportunity to speak on the panel: Rethinking Energy Markets and Unlocking the Value of Distributed Energy Resources. It was great to hear that several opinions were shared amongst the panelists, showing that industry and policy are heading in the right direction towards reaching net zero targets.
Flexibility is synonymous with net zero
As the electricity system diversifies, finding ways to produce flexibility on the grid is crucial to decarbonising our electricity supply. The energy market needs to evolve to be ready for this new zero carbon world.
Distributed assets, like smart batteries, will enable more virtual power plants (VPPs) to deliver flexibility services to the grid, allowing individuals and businesses to become active participants in the energy landscape. By creating millions of “home power stations”, we can generate bi-directional energy flows, rather than just a top to bottom energy system.
Moreover, local energy markets play a crucial role in encouraging new market design as they become test beds for wider implementation. Sometimes, with acute issues, including peak consumption going beyond substation capacity, local needs can create the right environment for the most innovative technologies to be deployed.
Reducing barriers in delivering flexibility services and enabling more experimentation
In order to support the growth in residential flexibility services, regulators need to recognise the flaws in the current system and rethink electricity markets to enable a more fitting regulatory design that can provide additional flexibility.
Standards must be adopted universally across TSOs and DSOs to reduce the barriers in delivering flexibility services. More funding for innovation must also be made available to encourage experimentation in how flexibility services can be delivered. That is why we are happy to be hearing more and more from Ofgem about the upcoming funding focused on flexibility.
Active consumer participation is key
Active consumer participation is the key to a greener, cheaper energy future. As energy flows become bi-directional rather than flowing from top to bottom, customers are becoming active participants in the energy landscape rather than passive consumers.
Understanding consumer behaviour to be able to encourage active consumer participation is vital to unlocking the value of distributed energy systems. Business models must also find ways to fairly reward consumers for actively participating in the energy market. Collaboration across all energy actors is needed to put a greater emphasis on user experience to increase trust and willingness to participate in flexibility services among people with energy devices in their homes.
Working together to reach a decarbonised system
In order to make a significant impact on our 2050 net zero targets, it is vital that we accelerate the pace of innovation of the flexibility services. The market and regulation must enable the development of new solutions and innovative strategies, and all energy actors should work together to ensure no one is left behind in the transition to a flexible energy system.
The role of digital technologies and AI in energy optimisation and flexibility delivery will play a fundamental role in enabling a low carbon grid. Only by challenging old market regulations and assumptions, embracing digital transformation and working in collaboration with all stakeholders will we be able to rethink energy markets so that we unlock the real value of distributed energy resources.
In transitioning to a more sustainable and decentralised energy system, we need to create an ecosystem where everyone is doing their part – regulators, operators, innovative companies and consumers – where people’s needs are at the heart of new solutions.