3. The electricity grid
Make sure the electricity grid is equipped to cope with a high percentage of renewables
It is important to ensure the electricity system works efficiently and reliably with a high volume of variable renewable power. This means deploying a range of existing and new technologies to upgrade the grid and balance and store power.
Overarching measures
• Drive investment in storage, smart energy and interconnection with other countries right across Europe to allow our grid and those of other countries to better handle large amounts of variable renewables. Indicative targets should be set for 2030 of 15GW for interconnection, 38GW of storage and 18GW of Demand Side Response (DSR)
• Change capacity market rules so that new technologies like storage and DSR are able to compete fairly, following the EU legal decision that judged the UK to have been biased towards fossil fuel back up generation
• Support an expansion in the role and function of regional grid operators, so that they are more actively involved in managing the energy system – including local trading and balancing, procurement of flexible services like storage etc. – rather than just allowing power to flow on their lines. In effect, Distribution Network Operators (DNOs) should shift to Distribution System Operators (DSO)
• Introduce a flexibility market, compatible with existing auctions for power, to incentivise demand response and reduction as a tool for providing system security, rather than simply relying on additional power generation for back-up – with a view to phasing out the capacity market completely.
Grid storage and balancing technologies
• Smart storage: Remove regulatory barriers to smart power and storage. This should include removing restrictions on “stacking” of revenues for storage projects in the capacity market. This would make it possible for storage projects to secure revenue from several policy mechanisms
• Interconnection: Establish a market framework for interconnection that has lower risks for investors, allowing for further developments whatever the Brexit outcome. For the longer term, draw up a strategic plan for an offshore grid connecting the UK with offshore wind farms and other European countries to maximise offshore wind delivery at lower transmission cost
• Pumped storage: Establish a market framework for pumped storage development, potentially mimicking that for interconnectors
• Green hydrogen: Invest significantly in innovation for green hydrogen and larger-scale energy storage, to support their expansion as a grid balancing option. There are plans to deploy green hydrogen at scale in Germany and the Netherlands