Future Markets and Regulations

About the Author:

Ian Hower is a research associate in the Faculty of Science, Agriculture & Engineering at Newcastle University. With a background in policy, Ian’s research surrounds the policy and market frameworks for the UK energy system.


Supergen Energy Networks Hub brought together a group of stakeholders in May 2019 to discuss the future of energy markets and regulation. The stakeholders included:

  • academia such as Professor Furong Li of the University of Bath and Professor Michael Pollitt of the University of Cambridge
  • regulators such as Marcia Poletti of Ofgem
  • industry representatives including Chris Harris of NPower and Nigel Turvey of Western Power Distribution
  • early career researchers (ECRs) from University of Oxford, Imperial College and University of Bath

 

Each presenter gave a slightly different view on the same theme. They acknowledged the need for increased flexibility, the challenge of decarbonising heat, power and transport, and the current barriers to creating an efficient and renewable future energy system posed by current pricing and regulatory challenges. Each also put forward their view of research activities and forward thinking how best to overcome some of the barriers.

Marcia Poletti of Ofgem highlighted the principal foci for regulating the energy industry going forward; independent decision making, broader consumer protection and greater use of markets and price signals. Regulators are especially interested in the information behind the price signals as the data indicate where investment and regulation are needed. They expect significant movement toward more granular data and thus more granular pricing.

In this evolution, not only will massive changes need to be made to physical infrastructure, but questions about who will have access to data, markets and prices will also need to be addressed. For consumers to fully engage in demand side response, they need to be exposed to the sharp price signals. To aid this, Chris Harris of NPower argued that there should be a liberalisation of who can contract with whom, but cautioned that this process must be done slowly to prevent a free-for-all and unjust market capture. He also advocated that prosumer contracts should be fed into balancing and settlement, for the same reasons wholesale energy contracts are included in balancing and settlement.

This begs the question of how best to ‘liberalise’ the market to allow more granular price signals to reach consumers, while ensuring equity and justice. How can we both liberalise the market while also ensuring the market is fully incentivised to meet the ‘Net Zero’ emission targets?

Attempting to harmonize how future retailers can understand customers’ network needs and optimise capacity at least cost, Harris argued that demand side response (DSR) is the number one priority for Distribution Network Operators (DNOs) and the wider system going forward. Harris critiqued the techno-optimist view that technology alone can successfully address climate change, arguing there are no models, predictions or calculations that get us to the 2050 carbon goals without significant demand side response. To achieve this, Harris suggests that we must develop decentralised democratised markets to meet the evolving needs of energy supply and demand. In doing so, he suggested changes in both the regulatory market architecture and culture that would move the UK away from price socialisation, something that resonates with Ofgem’s call for increased price signals and competition.

Nigel Turvey of Western Power Distribution (WPD) discussed how DNOs will adapt to this new future, and the plans for preventing possible conflicts of interest between asset solutions and the use of third-party flexibility by separating DSO activities into a separate management structure.

Michael Pollitt also gave insights into his current thinking on ancillary service markets, namely that companies operating in this space need to be more transparent and that there should be more oversight of this. Pollitt was especially concerned about the dual impact of domestic PV and wider adoption of EVs on the burden of fixed costs. He discussed research which showed those with solar will pay a lower portion of the system’s fixed costs under current charging methodologies.

Pollitt’s broad argument acknowledged that the UK is one of the few countries to have a fully privatised energy network, and thus the massive changes that are coming to the industry need to coincide with regulators ensuring that the benefits of these changes are equitably distributed to consumers and society, not just shareholders. He also emphasised that the benefits of a faster, smarter connection need to be shared out better, in a way that all parties, (particularly DNOs and wider society) clearly benefit.

Furong Li discussed how network capacity could be provided under differing demand flexibility and uncertainty, to underpin a new philosophy in network access arrangement in a highly uncertain energy future. She highlighted key drivers for the new philosophy as flexibility shifting from the central to regional and local system, and an increase in instruments in providing distribution network capacity. Li identified a number of key research questions:

    • How to factor differing capacity provisions/increased optional efficiency into network pricing?
    • How to quantify ‘value of wait’ for an investment option with differing/changing levels of generation and load uncertainty?
    • How to quantify/estimate current and future operational capability from differing degrees of network and customer flexibility?
    • What are the key drivers to determine the right balance between cost recovery from network investment and network operation?

ECRs were also given the opportunity to present their latest research findings in flexibility markets:

  • Thomas Morstyn – on liquidity and granularity questioning whether prosumers can provide flexibility for the system, and emphasising the importance of markets staying interconnected.
  • Dimitrios Papadaskalopoulos – on assessing the value of flexibility, and the modelling needed to move from a centralised to a distributed optimisation. He highlighted the dangers of group think as illustrated by the 01.30 peak that emerged with the introduction of Economy 7.
  • Antonio de Paola – on the capability of thermostatic loads acting in energy frequency markets.

Ran Li – on the importance of price elasticity in electricity supply, or the lack of it! He believed that attitudes and technological change were key.

Overall, the themes that arose from the event surrounded the massive changes anticipated for the system, and how best to prepare with minimise energy cost and carbon emissions through energy transition.

  • There are significant shortcomings in the current market, network access and regulation, and missing market components to minimise the cost of low carbon transition, cope with uncertainty, and ensuring customers benefits
  • Interestingly, both Harris and Pollitt – and later the rest of the attendees – agreed that the biggest technical challenge facing the UK is the decarbonisation of heat, where electrical systems could play a key role.
  • In Harris’ words, the substantial energy policy decision of our generation is “what gas will flow through what pipes in 2050”.
  • Meanwhile, the transition to renewable sources of energy in the power and transport sectors are already well underway.
  • To help encourage these positive changes – and to ensure that the benefits are spread equitably throughout society – proper pricing, access to network and regulations are needed.
  • Various ideas for what form these pricing methods and regulations should take were put forth, including new ways of capturing costs currently omitted from pricing methods such as carbon emissions and constraint costs.

It also became clear through the course of the event that the various players in the industry will have to work together on a deeper level than they do today. To fully extract the benefits of a carbon-neutral energy industry, players will have to collaborate to fully engage each other’s efficiencies and flexibilities to help ensure security of supply and decarbonisation, while also helping contribute to the economy and keeping costs down for consumers. However, underpinning all of this is the primary concern expressed by all stakeholders was that everyone must work to ensure that this increase in collaboration, marketisation, and decarbonisation provides real and noticeable benefits to every corner of the UK.

Further information on the workshop and access to presentations can be found here.

Modelling of Integrated Multi-Energy Networks – Current Practices and Innovation Gap

About the Authors:

Jianzhong Wu is a Professor of Multi-Vector Energy Systems and Head of Department of Electrical and Electronic Engineering at Cardiff University.

He is  Co-Director of Supergen Energy Networks Hub , Co-Director of INCOSE UK Energy Systems Interest Group, a member of Wales Smart Energy System Group, the Scottish Power Energy Networks Strategic Stakeholder Panel for England and Wales, and the Academic Promotions Committee of Cardiff University.

Contact details: WuJ5@cardiff.ac.uk   Prof. Jianzhong Wu’s Profile

Karolina Rucinska is a PhD student and a research assistant at Cardiff University and provides administrative support to the Hub at Cardiff University.

Contact details:  RucinskaKA@cardiff.ac.uk  Miss Karolina Rucinska’s Profile


The energy trilemma (energy security, environmental impact and social cost) present various complex interconnected challenges. These challenges extend throughout the UK and have a significant international bearing.  There is vast diversity in challenges faced regionally due to historical, geographic, political, economic and cultural reasons. As technology and society change so do these challenges.  Therefore energy networks planning, design and operation need to adapt.

Whole-systems approach to energy networks research is not considered the norm. Comprehensive knowledge of the interconnected and interdependent nature of energy network infrastructure is simply not available.  The recent development of local energy systems and global energy internet bring further uncertainties and challenges to the development of our energy systems.

Currently, there is a lack of:

  • modelling experience and skills
  • replicable models
  • commercial software
  • awareness of the value of integrated multi-energy networks in the UK.

To better understand the relationships among different energy vector networks, ICT, policy, markets, and risk need to shape future energy development.  Through understanding how external factors may lead to significant changes in the way energy networks behave, we can plan and operate accordingly.

To address the issues above the EPSRC Supergen Energy Networks Hub and the INCOSE UK Energy Systems Interest Group hosted a joint workshop to investigate modelling for Integrated Multi-Energy Networks.  The workshop on the 12th April saw 31 invited participants from academia, government, industry and independent organisations come together to share current best practices in multi-energy system modelling and to discuss how to tackle the barriers and identify innovation gaps.

The first session of the workshop, chaired by Prof Jianzhong Wu from Cardiff University, was devoted to sharing experiences and practices of modelling.  It provided an insight into the challenges of modelling complex systems while giving examples of new tools, models and projects.   There were several interesting presentations by:

  • BEIS (Dr Noramalina Mansor, top left photo),
  • Energy Systems Catapult (Dr David Wyatt, bottom right),
  • West and Wales Utilities (Mr Chris Clark, top right photo), and

academia (Prof Mark Barret, UCL; Prof. Goran Strbac, bottom left photo, Imperial College London; Dr Sara Walker, Newcastle University and Dr Meysam Qadrdan, Cardiff University).

The second session considered how to tackle some of the pressing challenges, difficulties and uncertainties faced by energy systems modellers and the wider community. This session helped to identify research gaps, questions and potential research topics within energy networks.

There were lots of open discussions led by Professor Phil Taylor, Director of the Supergen Energy Networks Hub on how to move forward in terms of research and practice within energy networks modelling.

The suggestions were to focus on demonstration projects, modelling of extreme events as well as the design of simpler but interconnected models among other things.  Moving forward, the participants expressed an interest in another set of such workshops, with a focus on balancing the needs of the local and national systems.

 

 

 

Creating Bridges with Chinese Partners interested in the Supergen Energy Networks Hub

Prof Vladimir Terzija creates bridges with Chinese academic and industrial partners and talks about his recent academic visits to China.


About the Author:

Prof Vladimir Terzija is a Co-Investigator of the £5 million EPSRC funded Supergen Energy Networks Hub. Since 2006 he has been the EPSRC Chair Professor in Power System Engineering with the School of Electrical and Electronic Engineering, The University of Manchester. From 2000 to 2006, he was a senior specialist for switchgear and distribution automation with ABB, Ratingen, Germany. Over the last decade he has been the PI on several large scale EPSRC, Network Innovation Competition (Ofgem) and Horizon 2020 projects. His current research interests include smart grid applications; wide-area monitoring, protection and control; switchgear and transient processes; ICT, data analytics and digital signal processing applications in multi-energy systems.

Prof Terzija is Editor in Chief of the International Journal of Electrical Power and Energy Systems, Alexander von Humboldt Fellow, IEEE Fellow, as well as a DAAD and Taishan Scholar. He is the National Thousand Talents Distinguished Professor at Shandong University, China. For his contributions in creating bridges between Chinese and UK academic institutions, in 2018 he was awarded with the prestigious Qilu Friendship Award.

Contact details: vladimir.terzija@manchester.ac.uk            Prof. Vladimir Terzija’s Profile


Since joining The University of Manchester, I have been collaborating with a number of Chinese academic institutions, including Shandong University, Tsinghua University, North China Electric Power University and Tianjin University. This has resulted in a number of collaborative activities relating to future Smart Grid solutions and implementation of novel ICT and sensor technology.

As a Visiting Professor at the Shandong University I lead a research team involving both Professors and PhD students. Jointly with the Tsinghua University, I support their research on power system protection and control.

Since 2017, I have attended several high impact events organised by Chinese partners and related to multi-energy networks. I will briefly update you about them in the following text.

 

The 1st and the 2nd IEEE Conference on Energy Internet and Energy System Integration, Beijing, China

The 1st conference was held in December 2017, whereas the 2nd conference was held in October 2018. Both events were held in Beijing.

The conference focuses on innovative technologies and practical implementations around “Energy Internet” and “Energy System Integration” (EI2). These can be interpreted as the fusion of energy systems with information technologies and artificial intelligence, as well as, the coupling of multiple energy systems (e.g., heating, cooling, electricity, gas, and transportation). This conference promotes innovative EI2 technologies and practical applications which aim to fully realize the interconnection, openness, sharing, and collaboration of various energy resources, and to create green, low-carbon, high-efficiency and low-cost smart energy systems.

The conference has offered opportunities to share experience on a number of topics and I was privileged to meet two of my respected colleagues, who are currently acting Editors in Chief of the hey(? Need to check this with VT) journals relevant for our profession: Prof Nikos Hatziargyriou (IEEE Transactions on Power Systems) and Prof Jianhui Wang (IEEE Trans on Smart Grid). We exchanged our experiences in leading our international journals and discussed how to incorporate, in our journals, results relevant to multi-energy systems/networks.

 

GEI Panel Discussion on 26th September 2018 in Jinan, Shandong Province, China

A Global Energy Interconnection (GEI) panel discussion was held as a part of a more general Forum, attended by the leading Chinese and international authorities interested in future challenges of energy related industries.

GEI is a clean energy-dominant, electric-centric modern energy system that is globally interconnected, jointly constructed and mutually beneficial to all. It is an important platform for large-scale development, transmission and consumption of clean energy resources worldwide. In essence, GEI is “Smart Grid + UHV Grid + Clean Energy”.

The panel has been moderated by Sr Michel Sterling and discussed the following two questions:

Question 1: Based on your own special fields and experience, could you please share with us your thoughts on how universities, research institutions and international organizations shall play their respective advantages to promote the innovation development of GEI?

Question 2: Could you forecast what unprecedented opportunities will GEI bring, and what kind of cooperation mechanism shall be established as institutional support, so as to guide all parties to participate in the development of GEI?

As one of panellists, I tried to address those issues linking strategies relevant to academia, industry and global society. In this context, I elaborated the concept in which the benefits for the global society should be enabled through joint collaborative work between industry and academia. This collaboration should be fair, open and honest. Industry can help academia to shape the directions of the university research activities, putting to the top of agenda the interest of the society we are leaving in. A typical example are efforts towards reduction of CO2 emission, or optimal operation of multi-energy systems. I particularly discussed the advantages of integration of massive power systems across the globe. In my address, I just reminded the respected audience that e.g. when it comes to solar energy, it is always somewhere available and could be used anywhere in the World, or stored locally, or somewhere remotely.

From the perspective of the cooperation mechanisms, I insisted on the collaboration in which younger researchers, creative and ambitious to contribute to new and high quality innovation, should be particularly involved at all spheres of the collaboration.

 

December 2018 Gathering with the Premier of China at the Great Hall of the People, Beijing, China

This event focused on the global challenges of Chinese Government in terms of the selection of an appropriate strategy on how to move forward (move forward with what?). The host of the event was the Premier of the State Council of the People’s Republic of China, Mr Keqiang Li. Three Nobel Prize Laureates gave their personal views about the future technological and societal development of China. One of them was Prof Kostya Novoselov (The University of Manchester). In his address, an interesting and exciting information about the future role of “smart materials” opened very vibrant discussions, leading to conclusions that a number of new opportunities for future collaboration are indeed very obvious.

The conclusion is that instead of insisting on the “speed of technological development” the focus should be on the “quality of this development”. This is also directly tackling movements in the sphere of energy systems and networks. Their future development should include attributes like “high quality standards”, “high quality solutions” etc. Just putting the speed of the development to the top of the agenda, might lead to sub-optimal solutions and not the top quality of the innovation. My personal impression was that the planned research activities within our Supergen Energy Networks Hub indeed insist on the quality research, instead on the quantity of results and uncontrolled rush towards scheduled targets

More information of the event and videos of the discussions is available online.

In conclusion, the activities related to Energy Networks development in China is very intensive and the Supergen Energy Networks Hub look forward to collaborating with the above mentioned Chinese partners.

 

 

Addressing Equality Diversity and Inclusion in Engineering

Dr Sara Walker, a keen advocate of Equality, Diversity and Inclusion (EDI), discusses the EDI imbalances in engineering and how the Supergen Energy Networks Hub hopes to address it.


About the Author:

Dr Sara Walker is an Assistant Director and Co-Investigator of the £5 million EPSRC funded Supergen Energy Networks Hub.  Additionally she is also Associate Director and Co-Investigator at CESI. Her research focus is regarding renewable energy technology and transitions to low carbon systems, with a particular focus on policy and building scale solutions. She is Director of Expertise for Infrastructure at the School of Engineering at Newcastle University.

 

Contact details: sara.walker@ncl.ac.uk     Dr Sara Walker’s Profile 


Equality, Diversity and Inclusion in Engineering

I recently attended and event called ‘Data Driven Culture Change’ at the Royal Academy of Engineering where the startling results of an industry survey showed:

  • 11% of surveyed companies had a generic EDI Policy, and 1% has a specific EDI Plan
  • 4% of surveyed companies had some way of measuring EDI
  • 42% of surveyed companies planned general activities around diversity and inclusion.

That means those activities typically aren’t aligned to any strategic plan and the impact of activities aren’t being measured, in the majority of cases.

The Royal Academy of Engineering has a vision to address the engineering skills and diversity challenge. The scale of the diversity issue is being reported more frequently in the mainstream press, particularly recently with the gender pay gap reporting hitting headlines:

Across the energy sector, Powerful Women report a similarly disappointing picture for the top 80 energy companies.

  • Women occupy only 13% of board seats
  • Women make up 6% of executive board seats
  • 86% have no female Executive Director
  • Half have no women on their Board

The Supergen Energy Networks Hub wishes to better understand EDI for the community, to develop and implement good practice in EDI in the way we engage with the community, and to create a sense of belonging for all regardless of background.

Why?

Well firstly because it is the right thing to do. Discrimination is not something we wish to support. We intend to engage widely in a way which is inclusive to all.

And secondly, because it is good for research.  Diverse teams outperform homogenous teams for creativity and innovation, which is just what we are looking for in order to tackle the thorny issue of future energy networks.

Thirdly, it makes business sense.  There is strong evidence that diversity in the workplace results in better financial performance (Powerful Women report companies in the top quartile for gender diversity outperform those in the bottom quartile by 35%).

Our approach to EDI for the Supergen Energy Networks Hub is:

  1. To initially audit EDI statistics of the community who we engage with
  2. To ask the community where their needs lie with regards to EDI
  3. To investigate and implement best practice in our own activities around events, recruitment, flexible funding and the many other ways in which we interact with our community
  4. To agree an action plan for the 4 year duration of the Hub.
  5. To continually monitor EDI, to evaluate the impact of the Action Plan, and to update it as required.

Complete our first EDI audit here.

Get in touch if you would like more information at supergenEN@newcastle.ac.uk