TALKING NEW ENERGY

Title: Smart Meters: who wants one?

Jon Slowe –Delta-EE- Director

Rob Cheesewright – Smart Energy GB – Director of Corporate Affairs

Chris Fleck – Onzo- CTO

David Trevithick – Delta-EE – Principal Analyst

Smart meters are a key building block for a smarter energy system. In part of Europe, industry 'push' has already rolled them out. In others there's more reliance on customer pull. In this episode we focus on the 'pull', exploring how the benefits of smart meters are being framed and communicated to customers. Rob Cheesewright, Director of Corporate Affairs at industry body Smart Energy GB, Chris Fleck, CTO at Onzo and Delta-EE expert David Trevithick join Jon Slowe to discuss experiences in the UK and Europe.  

[00:00:04.560] – Jon Slowe

Welcome to Talking New Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

[00:00:22.400] – Jon Slowe

Hello and welcome to the episode. Today we're looking at smart meters, everything's becoming smart these days.

[00:00:29.600] – Jon Slowe

Smart phones, TV watches, even kitchen appliances and of course, electricity and gas meters are becoming smart. Smart meters have been rolled out in some countries across Europe and elsewhere. The Nordics for example have had smart meters installed for many years. Other countries, Germany is an example here have a much slower approach, without a coordinated national rollout planfor smart meters and many countries are somewhere in the middle of those two points starting or in the middle of smart meter rollout programs. And today we'll be looking at the experience of rolling out smart meters in the UK.

[00:01:11.300] – Jon Slowe

 Those of us immersed in the topic will know about the many benefits that smart meters can bring to the electricity and gas industry. But today we'll be focusing on more customers, their perception and what smart meters could do for them. Now I'm joined by three fantastic guests today, let's introduce them. So, first of all Rob Cheesewright, Director of Corporate Affairs at Smart Energy GB.

Jon Slowe - Hello Rob,

Rob Cheesewright - Hello,

Jon Slowe - Rob thanks for joining us, now your organisation Smart Energy GB, this is a government backed campaign to roll out smart meters across the country.

[00:01:48.800] – Jon Slowe

 Can you tell us a bit more about what you and Smart Energy GB do?

[00:01:55.250] - Rob Cheesewright

Yeah, so the British roll out is very very consumer focused with a real focus on making sure that consumers directly benefit from getting their smart meter and a device in their home called an in-home display and also the national infrastructure benefits are vitally important to our energy infrastructure. So, the government decided that there needed to be a national communications body to promote smart meters. So, our job is to firstly raise awareness of the rollout but then secondly raise people's appetite to have them with a particular focus on vulnerable consumers. Then finally once consumers have got them our job is to help people use them and reduce their energy use and CO2 as a result.

[00:02:35.820] – Jon Slowe

Great, okay, well we'll come back to that in a sec. My next guest is Chris Fleck, CTO at Onzo

[00:02:43.200] – Jon Slowe

Hello Chris,

Chris Fleck - Hi Jon, thanks for the time to talk today.

[00:02:48.700] – Jon Slowe

Thanks for joining, so many of our listeners will have heard the phrase that data is a new oil and if it is then on Onzo is in a good place as you’re an energy data analytics company. Can you tell us a bit about how Onzo is involved with smart meters?

[00:03:06.740] - Chris Fleck

Yes of course it we'd love to, so if I could provide a small amount of context around Onzo and what we do and then I go into some more detail about the kinds of energy retailers we work with and the kinds of things we try and help them achieve.

[00:03:20.640] - Chris Fleck

So, Onzo is UK based software service business and we perform analytics on smart meter data. We have energy retail clients in a number of European markets including U.K, Spain, Norway, Sweden, Netherlands and also some of the earlier markets that are just beginning to open up like Austria and Estonia.

[00:03:46.150] – Jon Slowe

What would you do for those retail partners? So, you take smart meter data you perform analytics on it. Can you give a lesson as a feel for then what you and your partners do with that?

[00:03:57.940] - Chris Fleck

Yeah sure, so as a business our vision is to influence every touchpoint an energy retailer has with its customers. And so what we mean by that is every time a consumer comes to an energy retailer whether that's through a telephone call, through a web application, the mobile application we want to have Onzo’s analytic results there, supporting our conversation to make it more meaningful and more relevant for the consumer. And I think today if I look at utility interactions lots of conversations are supported by operational data so they're not very personalised or they're supported by generalised demographic data.

[00:04:38.080] - Chris Fleck

 So, it's hard to have a meaningful one to one interaction with your consumer. And so, there is two angles in terms of how we're helping these retailers. Firstly, we're providing each utility with a data set around insight and consumption behaviour which can improve the way in which they engage with each one of their customers. So, you can start to have better relationships better conversations around you and your personal situation, and your energy consumption patterns. And that starts to drive better loyalty reduce churn but also from a utility perspective, this broader dataset we generate allows them to understand what does my customer base look like?

[00:05:20.310] - Chris Fleck

 What are they doing? And what propositions and offers makes sense for them? And so therefore I can start to serve my customer base in a far more relevant way because I actually understand how the consuming our commodity products.

[00:05:33.580] – Jon Slowe

So, what you're effectively doing then is driving a better customer experience by enabling electricity retailers to give their customers a better experience, better products, better services.

[00:05:47.030] - Chris Fleck

Yes, it is about trying to help the energy retailer differentiate themselves from everyone else selling the same commodity products. If you're selling a commodity product, the only difference really is the service you provide to clients/consumers and what you do around them.

[00:06:02.300] – Jon Slowe

Okay, that's Chris. Now my final guest today is David Trevithick, our energy insights expert here at Delta- EE.

Jon Slowe - Hello David.

David Trevithick – Hello,

[00:06:13.280] – Jon Slowe

David, your work is, you're working with energy companies, technology companies across Europe on how value can be created from insights from smart meters data. If you stand back and look at that, how much focus do you think the energy sector has at the moment on using smart meters to bring new insights and services to customers? Perhaps in the way Chris described for example.

David Trevithick – Yeah, the focus of innovation in the energy insights market has naturally started around for the major consumer pain points of bringing transparency and understanding energy bills and has developed from there.

[00:06:55.570] - David Trevithick

But this is most often done via energy insights through apps and online portals for instance, used by millions of consumers in the UK, over 20 million in Europe in the UK as well you've got the in-home displays which is another important consumer interface as they’re offered to all smart meter customers. So, in some ways the market is already at scale, but the energy insights market is still quite product almost looking for problems to solve. So, there's still a way to go there, so the value that's generated is not always as clear or commercialised as we might expect.

[00:07:33.010] - David Trevithick

 So, I'd say the market is established but there's still a long way to go to be considered mature.

[00:07:40.010] – Jon Slowe

So still a bit of the technology push modes rather than being wholly in the, how does this help our customers mode, is that a fair characterisation?

[00:07:50.500] - David Trevithick

I think so, I think things are changing, I think it's becoming more customer focused but yeah there is still that element of product push for now, yes.

[00:07:56.620] – Jon Slowe

OK thanks David. Rob let's come back to you and this rollout of smart meters across Britain. So in Great Britain they’ve gone down the route of rolling out smart meters by the energy retailer and a combination of push and pull, push on the energy suppliers to offer smart meters to their customers and install them but it does also rely on an element of customer pull. Can you tell us a bit more about this push/pull balance in Great Britain?

[00:08:28.930] - Rob Cheesewright 

Yes, and so the first thing is that push element I suppose energy suppliers have been mandated by the UK government to install smart meters as quickly as possible and that was initially the intent was to do that by the end of next year. But government has just consulted on moving up to the end of 2024. But the bigger, probably harder challenge in a way, is you know consumers do they need to opt in in a way that they haven't had to do in other parts of the world. And that is a really tough challenge because the smart meter itself except for pre-payment customers isn't a wonderful consumer product on its own.

[00:09:10.630] - Rob Cheesewright  

 It's when you add in the data services and you add in the new products and technologies that it really becomes an amazing product, not only for the consumer and potentially saving them up to hundreds of pounds, but then also start to provide the ability to help us get to net zero as an economy as a whole. So, it's - we've been sort of selling the foundation to the house to people and they're not that impressed necessarily, but the house is yet to come and then they will be. So, in terms of where that leaves us we're about a third of the way through the rollout which, which is actually quite good.

[00:09:40.260] - Rob Cheesewright   

 You know in being a third of the way through digitising our economy in terms of energy is quite impressive. But it does leave us a long way to go. So, we do have to evolve as the rollout progresses. And one of the key things that have evolved is the way consumers think about this and the way we think about that as well. So, when we first started on this journey six or so years ago, consumers weren't really interested in the bigger picture you know the change in the public appetite to think about climate change and in this country whether that's extinction-rebellion,

[00:10:16.990] - Rob Cheesewright    

David Attenborough and climate strikes have really raised the kind of public willingness to think of the bigger picture in the last year or so. There's been a real change in what consumers are prepared to listen to when it comes to engaging in what changes we need to make in our energy system. And then secondly are our evidence base has improved. So, in fact the key, one of the key moments was a piece of work the Delta-EE did for us which was around the what does it mean for our energy system if we get smart meters? The fact that the you know getting to net zero will be slower, more piecemeal, more expensive and potentially more risky about smart meters and that, that is actually a real point of motivation that we can draw on and we have really strong evidence for that.

[00:11:00.790] - Rob Cheesewright    

That meant that we have been able to shift our campaign, less from where it was the first two years which is get a smart meter in your home, can save some energy and you no longer have estimated energy bills towards a, yes there were all of those things but also playing your part in a bigger energy system changed and that means we can have an electric vehicle, that means we can have smart products and services you know the things that can be done with the data to really provide you with a much, much, much better service. Those are the things that are probably really important, and we think are actually proving to be more motivating maybe than, certainly now in the rollout than those initial just use your in-home display to save some energy.

[00:11:42.240] - Rob Cheesewright    

So, we've been on a journey actually as part of this rollout and have a long way to go. But I think we're starting to get better at realising what tools in our armoury are going to be compelling.

[00:11:53.160] - Rob Cheesewright    

I still think at some point, sorry.

[00:11:54.720] – Jon Slowe

It sounds like a hard, you've got a very exciting job Rob, but it sounds like a hard job because that, as you say the message you're trying to communicate is well you could make it simple as you did at the beginning, get a smart meter, get accurate bills for example have an in-home display, but it could be quite complex as well, when you're talking about the foundations for the future energy system. How well do that first message land with customers, in terms of get a smart meter, get accurate bills, an in-home display.

[00:12:31.270] – Jon Slowe

Did that motivate customers? What were their concerns? What did you learn from that more simple message in the early days?

[00:12:37.780] - Rob Cheesewright       

I think that more simple message motivated a large number of customers and we were finding that we were creating levels of demand for the product that far outstripped energy supplier’s ability to actually fulfil that demand. But it was only so motivating, it worked well for some consumer segments and not all. So, we've had to evolve over time, so you know the idea of saving you know £30 on your energy bill from making manual choices in your home, that is quite motivating for some but it's just not going to motivate.

[00:13:15.350] - Rob Cheesewright       

Or equally, it's a low interest category energy, except for the of us probably listening to this podcast. So, you know they're not inherently motivated about what is under their stairs in terms of their energy meter. And so, a pure savings message was only going to work for a chunk of the audience and then we do have to think about what else. You know in the long run government is probably going to have to be brave around, more stick like methods of dealing with consumers so we have done as good a job as we think can be done in terms of educating customers about the benefits.

[00:13:49.670] - Rob Cheesewright        

 But I think that we'll have to be an element of enforcement that takes the last chunk of the population through to completing this energy system transition.

[00:13:58.610] – Jon Slowe

What have you learned Rob about suspicions that customers have? Because in Britain energy companies don't always have the best the best brand and aren’t always viewed with the levels of trust say maybe they could be. So, have you learned, what have you learned about the suspicions that customers have about having a smart meter installed?

[00:14:23.940] - Rob Cheesewright         

So I think they, I mean a group of customers who broadly speaking, when you're talking about using a smart meter to save you money wonder why an energy supplier is giving you that, it seems like it would be in their interests to sell you more of that product not less. So, there have been a little bit of that but the big thing that's reduced demand for smart meters has been some of the technical issues that the rollout has suffered with. So, the what we see in the data is slightly different to what we were expecting.

[00:14:54.260] - Rob Cheesewright         

We were expecting when we looked to other international rollouts to see things like data privacy concerns be the big thing that would reduce demand and we know from the early experiences of the Netherlands rollout that that was an issue that they faced. But actually, that's been a relatively low level, that's not to say there aren't data security concerns, but it's been relatively low level. The big thing that's happened over time is as the, as there have been sort of teething issues with the technology shall we say, that has led to a poor consumer experience, and then some of that gets into the press.

[00:15:28.190] - Rob Cheesewright          

 And that leads to a general sense that the technology doesn't work as well as it should. And that's been the big consumer suspicion that we've been having to explain and in a way you can't really, you can't disagree with that because it's true, you can't say no you're wrong. We have to say yes, the journey is difficult, but the destination is worth it. And that's why some of the bigger picture messaging has become so crucial to us and why the message about climate change and the needs of our energy infrastructure in the 21st century have become more important, because you can't say this is about you saving energy but it's not working well.

[00:16:02.210] - Rob Cheesewright           

They kind of go, well I don't really want to do it then and if you say the journey has been difficult, but the destination is non-negotiable, well then you can start to convince some people

[00:16:09.210] – Jon Slowe

Well that is fascinating to hear about that journey you have been on, we’ll come back to you Rob. Chris I'd like to bring you in at this point and explore in a bit more detail the way that smart meters and in particular how smart meters data can help customers.

[00:16:28.880] – Jon Slowe

And we could break it down into two ways.

[00:16:33.210] – Jon Slowe

First, how smart meter data can directly help customers and secondly what you were saying at the beginning about how smart meter data can help energy retailers to help their customers or better serve their customers. Could you sort of illustrate a couple of real-life tangible examples for our listeners about some of the work you're doing and how it falls into one or two of those categories I described?

[00:17:00.720] - Chris Fleck

Yeah sure, let me start with how we can directly help consumers through our technology. And so, step one at a very basic level is helping to raise awareness for consumers. So, for example we have a home energy dashboard product which are energy retail customers can use and that can show consumers what's going on inside your home. So, it provides a view of categories of consumption it gives you calendarization consumption, so I can see what my high consuming days, what my low consuming days. And this tool is being used in the UK to help drive smart meter take up, so a generic version of this report for your dashboard is provided to consumers with the offer of, if you give us 30-minute consent for data, we will make this dashboard live, real and personal for your home.

[00:17:47.980] – Jon Slowe

Okay

Chris Fleck - So we will work with a number of big six to try and help encourage consumers to see the benefit of smart meters and the data they provide and the awareness and information. For me that feels quite basic, but it is still interesting for us our customers.

[00:18:08.390] – Jon Slowe

It's more than they had in the past but maybe not as much as they can get in the future.

[00:18:16.300] - Chris Fleck

For me where things start to get really interesting are some of our advanced analytics. So, for example one thing we do is anomaly detection, so we're looking for unusual patterns of consumption inside a home and internally within Onzo, we call these analytics detection of unusual consumption or ‘Duck.’ So, we have a duck and we have an electric duck and these algorithms are looking for significant changes in your house, in your personal consumption patterns. And the aim is to provide alerts to the energy retailer about individual homes, where we think something may be going wrong or adrift.

Jon Slowe – And what might that something be?

[00:18:55.660] – Jon Slowe

Is it like a…

[00:18:57.830] - Chris Fleck

Let me give you an example, so there's a real-life example is one of the big six has had a consumer in the UK and their gas boiler had broken down and so like most UK homes they have an immersion heater which can heat up a large volume of hot water, so consumers switches on the immersion heater and leaves it running for a longest period of time. And whilst that's running, they then go and get the boiler replaced so they have brand new gas as boiler installed and they completely forget they've left the immersion heater running.  

[00:19:34.470] - Chris Fleck

This is a spot that they’ve got a lot of energy being consumed and it's a significant change. So, we generated an alert I went back to the retailer, they informed the consumer, the consumer came back and said thank you so much, I'd completely forgotten about the immersion heater, I switched it off. So, from a customer looking after your customers perspective, you've now got a customer that probably feels like my retailer, maybe not as far as loves me, but they they're looking after me.

[00:20:04.610] – Jon Slowe

They care,

Chris Fleck – In a meaningful way, which is far, far different to what they do today without smart meter data.

Jon Slowe - Yeah

Chris Fleck – I think more importantly, the climate crisis and energy reduction is really, really important. So, we've done for example trials which have been monitored by Imperial College, which have proven that Onzo’s technology and the smart meters, we've proven a 4-12% reduction in energy consumption. And then right now we're running a trial with a different big six in the UK around voice assistance, how we can use voice assistance technology to help consumers drive down energy consumption.

[00:20:41.460] – Jon Slowe

Okay, and that 4-12% reduction that you mentioned for the trial, are the sorts of things you'd be doing there? Just one example if I'm a customer what would I be doing, what would I get? That would help me to reduce my consumption. 

[00:20:56.780] - Chris Fleck

It’s awareness, so we're almost beyond, so technology is almost competing with the in-home displays.

Jon Slowe - Yeah OK.

Chris Fleck – But through broader channels, so through mobile, through web,

Jon Slowe - Yeah

Chris Fleck – We can provide it in ways that are perhaps a bit more convenient for consumers. So, reliant on a specific device, on your phone or laptop or PC. 

[00:21:16.710] – Jon Slowe

Okay. So, Chris I'll come back to another example in a minute. But just wanted to keep in our time which is faster in podcasting than in real life.

[00:21:29.150] – Jon Slowe

David if, when you look across Europe as you do, what examples have you seen that really stand out about how smart meters and smart meter data are being used to delight customers? In addition to the sorts of things Chris has talked about.

[00:21:47.860] - David Trevithick

Well delighting customers is a great aspiration. And while there are examples and Chris gave a fantastic one there, it's hard to achieve this really at scale and in such a just a low engagement sector. So, we've developed a sort of customer, a customer engagement maturity model to help explain the different stages of bringing the energy customer on this new energy transition. And looking beyond the old ways of the very sort of transactional relationships and operational efficiency of the past. You've got customer engagement which is around to helping customers understand their energy consumption and spend.

[00:22:25.110] - David Trevithick

So, this is a big step forward. But it's still rooted in past behaviour. The energy consumers don't just want to understand their bills and be informed about their energy consumption which has already happened. They want to be empowered to make good energy decisions in the moment in the present. Some examples are around things like high bill alerts or linking consumption to smart thermostat settings to act on the energy insights that are generated. You have a sort of budget and energy sort of coaches and there are various examples around that, that really helps things in the presence.

[00:23:02.180] - David Trevithick

 But we can take that a step further forward in amongst the future thinking end of the spectrum. There's innovation there around sort of moving beyond this customer empowerment and smart meters play a really important role in enabling this sort of transformation of customer relationships through what we term customer collaboration, whereby there's an ecosystem of partners to the customer in bringing that new energy world of optimised self-generation of energy trading and these sorts of things that are going to go on in the future. So, we're not there yet, and there are sort of different stages that people are at and a long way to go.

[00:23:40.910] - David Trevithick

 But you know that the path forward if you like it is clear how that transition is developing, and the innovation is picking up.

[00:23:48.410] – Jon Slowe

And if I had to ask you David on a scale of 0-10 where 0 is at the beginning of that sort of spectrum or journey and 10 is a-some kind of nirvana in the future where smart meter data is part of that new way of companies and customers collaborating together, self-consuming smart charging electric vehicles, peer to peer models. Where would you say we are on that 0-10 scale at the moment? If you had to generalise.

[00:24:18.490] - David Trevithick

Always difficult to do that, I mean yes in terms of technology some stuff is there. So, you know in theory things are possible but actually it is it's in the market at scale? No. So, if that's your sort of benchmark I would say perhaps it'll look like a 3 or something like that, so there's a long way to go about doing this regularly at scale. But you know, you can see the direction of travel and how that can be done because in terms of technology for the most part exists.

[00:24:51.790] – Jon Slowe

Chris, if I ask you that 0-10 question, I mean you might be more, you're on some of the leading edge of this so you may be more ambitious but where would you say the energy sector as a whole in the countries you're working in, is that on that scale.

[00:25:05.910] - Chris Fleck

Well it's interesting actually that David talks about the maturity model, because we also think about the maturity model but really more at a country level. And most, well a lot of maturity models run at typically five tiers. And so, we consider level one like an initial adoption of the smart meter technology and getting an understanding of what it does how you use it. We see U.K, Ireland, Germany, Austria in that, where you're just beginning to get going. We're just starting to figure out what can I do and just starting to engage consumers with some of the basic tools that we thought today.

[00:25:40.800] - Chris Fleck

Level 2, which in our view is exploratory. So, you have fully smart meters which are beginning to make real and interesting use of that data. And so, for me there's countries like Netherlands, Spain, the Nordics where behaviour analytics, segmentation, voice interaction is starting to become more prevalent. And level three, four or five, right now I'm not sure I see anyone in that category, because as David said it's very early in the journey overall. And I think I'm almost looking and trying to find interesting clients that we work with to see where might they fit and what does three, four and five look like in terms of a definition.

[00:26:17.950] - Chris Fleck

So certainly, very early in our journey overall.

Jon Slowe - Well I think that, if you think of your level, five levels of maturity on a ten-point scale, then I think we come to about a similar point to David, a three probably somewhere like that, obviously a country dependent. Rob, how on, I don't know if you want to give a score for the UK, but when you hear what David and Chris have said, how do you feel the UK is doing or GB is doing on this journey.

[00:26:52.140] - Rob Cheesewright            

I think I completely agree with David and Chris. You know 3 is probably not far off. But what I am seeing is all the green shoots of this starting to emerge. And for us as a consumer engagement body that's really important because we need real things to talk about. So when I see you know customers of one supplier putting grass on Twitter showing that they're paying 3 pence per kilowatt hour for their energy rather than about 13/14 pence per kilowatt hour like the rest of us are because they got a smart meter a time of use tariff and an electric vehicle, I kind of look at that and go brilliant there’s stuff starting to emerge.

[00:27:25.480] - Rob Cheesewright            

 So I'm actually you know with each passing day I hear more and more examples of things I seen in a university, a kettle that links into the grid and so you can actually sell energy back to the grid form your kettle when you know we're in peak times and people. So, whether it's data and products and services I think it's getting more and more sophisticated all the time but it's from a pretty low base here. But that's what's exciting. I think we're on the cusp of a revolution and it's early days but the revolution is coming.

[00:27:54.020] – Jon Slowe

Well I share your excitement Rob because I think you could you could look at that 3/10 score and be depressed, but on the other hand we're on a journey here. We've got new infrastructure, new data, new possibilities,

Rob Cheesewright - exactly

Jon Slowe – And opportunity to move up from 3/10 to 10/10. So, I think it's a hugely exciting time. Now it's that time of the podcast where I bring out the talking new energy crystal ball and we look into the future but in a way, we have been looking into the future already.

[00:28:29.030] – Jon Slowe  

 So, I'm going to ask you each one question to finish off with and if you could give a brief answer. If we look five years ahead and you can answer this from our European or U.K. or whatever you want. We've already mapped out some of what the future may look like, the exciting use cases, the way smart meter data may be helping customers or helping retailers help customers. But I want to ask you each what you think is the biggest challenge to moving from the 3/10 we are now up to 6,7,8,9,10/10 so what are the biggest challenges in the next five years from whatever perspective you want.

[00:29:12.650] – Jon Slowe  

 Rob let's start with you.

[00:29:16.200] - Rob Cheesewright             

I think the biggest challenge we face in the next five years in the UK is the nature of the retail energy market is in a state of flux that I've never really experienced before. In that we've essentially got probably five of the Big Six have admitted that they would probably happily sell their business to someone else. We've got fast growing companies sort of in the middle who are actually very innovative and offering things like time of use tariffs and we've got lots of small companies but actually some of them are falling out of the market.

[00:29:44.760] - Rob Cheesewright               

 So, we are going to have a contraction in energy retail market over the next five years. And in that space the nervousness I suppose I have, is that if people are focusing on their existential future whether they will exist or not as a company how can they focus really well on providing these new products and services. I think the big challenge is probably making sure that there's breathing space in our, in our leadership in the market to really focus on delivering the products and services that we need not just to help people say tons of money but also to get to net zero.

[00:30:18.790] - Rob Cheesewright               

I think the market is so fascinating at the moment. It risks actually being a bit of a barrier to us doing this at full speed.

[00:30:32.520] – Jon Slowe

Okay, Chris how about you?

[00:30:36.140] - Chris Fleck

So, I think there are some really significant trends shaping the way in which consumers engage with every kind of business not just energy retailers. I think that is clearly huge today. But for me I think voice is probably the most significant thing coming. And then the investment that's going into it. And so if in five years’ time a voice is perhaps one of the most significant ways you might interact with every business for energy retailers I think the real challenge is data consent, that the consumers have power over like I do or do not want to give you my data and caution, consumer caution around do I want my information to be shared and used in this way.

[00:31:12.490] - Chris Fleck

 And those are the two big challenges to get around.

[00:31:18.210] – Jon Slowe

So, helping the energy retailers and the energy retailers have to help consumers feel safe. They have to build that trust.

Chris Fleck - Yes absolutely.

Jon Slowe - And David how about you biggest challenge to go shooting up that 10-point scale we talked about.

[00:31:30.360] - David Trevithick

You know in some ways it is echoing what you said before about the customer engagement our customer research we've done across Europe shows that there's not one killer application. Consumers have different you know different circumstances, different criteria, different levels of interest. So you know spitting out sort of for instance can be one example spitting out electricity and heating costs in one room might be a compelling use case for perhaps a home worker for financial or tax purposes but this wouldn't have mainstream appeal to some things will be relevant to some people at different times than others.

[00:32:05.520] - David Trevithick

 So, solutions really need to combine a range of use cases considering like the various apps on your smartphone for instance and you place different value on each of those at different times, in different households. So that's I think one of the core challenges is this to cram in lots of different use cases and and benefits but keeping simplicity and intuitiveness at its core because solutions need to consider how easy it is for consumers to use and what level of control or automation to provide for consumers or take on behalf of those consumers.

[00:32:40.980] - David Trevithick

 So, I think that's quite a big challenge going forward.

[00:32:43.980] – Jon Slowe

Okay well that's us reached time for this podcast. So I think it's been a fascinating discussion.

[00:32:52.770] – Jon Slowe

We're on it very much on a journey here. It's been a great insight into the UK, into Onzo and how you're working with energy retailers across Europe. And David thanks for sharing some of your views from your work, working across European energy sector. So, I look forward to the next years and seeing the sector mature grow and go shooting up that 10-point scale we talked about.

[00:33:20.850] – Jon Slowe

Thank you very much Rob for joining us.

Rob Cheesewright - Thank you

Jon Slowe - Thank you Chris.

Chris Fleck - Thank you Jon, very exciting times ahead.

[00:33:30.330] – Jon Slowe

And thanks David.

David Trevithick - Thank you.

Jon Slowe - And last but not least thanks to all our listeners for joining. We hope you enjoyed the podcast today and look forward to welcoming you back next week. Goodbye.

Distributed energy storage in Europe - where’s the market at, where’s it heading?

• Jon Slowe, Director, Delta-EE
• Andy Bradley, Director at Delta-EE
• Eva Chamizo Llatas, President of EASE (The European Association for Storage of Energy) and Director of European Affairs at Iberdrola
• Patrick Clerens, Secretary General at EASE

[00:00:04.560] – Jon Slowe

Welcome to Talking New Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

[00:00:22.310] – Jon Slowe

Hello and welcome to the episode, Energy storage is on the rise.

[00:00:27.230] – Jon Slowe

Batteries and other forms of energy storage are being deployed in ever greater numbers across Europe. Storage can be big or small, in front of the meter or behind the meter. And as technology costs fall and the value of flexibility turns upwards, storage has certainly got a bright future. But as with all things new it's not plain sailing. Market structures and regulations haven't always been developed with energy storage in mind. New business models need to be created and associated propositions developed for customers. So today we'll be discussing where energy storage is at in Europe and where it's going.

[00:01:06.480] – Jon Slowe

I'm delighted to be joined by three guests who are excellently qualified to explore these two questions. My first guest is Eva Chamizo from Spanish based utility Iberdrola. And she's also president of the European Energy Storage Association. Hello Eva and welcome to the podcast.

[00:01:25.680] - Eva Chamizo Llatas

Hello. Thank you.

Jon Slowe - Eva could you start by giving us a couple of examples of how Iberdrola, one of the biggest utilities in Europe, is working with energy storage today.

[00:01:39.780] - Eva Chamizo Llatas

Oh yes.

[00:01:41.630] - Eva Chamizo Llatas

As you have said energy storage has potential applications in all stages of the value change or electrical system and some of the applications have energy requirements when all the rest are focused on delivering capacity to the system. So, we work on both of them. So, for instance we work with pumping hydro storage that has a clear competitive advantage compared to other technologies for energy applications because it can produce energy for long long long hours. Iberdrola began to work with pumping storage in the late 70s. The reason why I introduced this is because we sometimes talk about storage about something that is really new.

[00:02:29.490] - Eva Chamizo Llatas

 Well not exactly, storage has been in the market for a long time and it is a necessary element for the transition and for the future but it's something that already has a lot of technologies working in it. So, we began in the late 70s and now we have more than 3 gigawatts of power and 60 gigawatts per hour of storage capacity. By 2022, when the timing a project is completed (because this is the one in which we are working right now) it is in the north of Portugal and we will own and operate pumping hydro facilities with a total of more than 4 giga[watts] of power and with the storage capacity of over 90 gigawatts per hour.

[00:03:15.360] - Eva Chamizo Llatas

 So, for you to have an idea it will mean the possibility to produce electricity to 1.2 million consumers during the one week

Jon Slowe - OK

[00:03:26.220] - Eva Chamizo Llatas

Yes.

[00:03:26.990] - Jon Slowe

They're quite big numbers aren't they Eva? And I think many of our listeners won't – or it's easy to not – appreciate how much energy storage there is today from technologies like pumped hydro. What about on batteries which are where much of the excitement is and I don't want to forget pumped hydro. But could you give us a feel of how Iberdrola might be working with one of the newer technologies?

[00:03:54.400] - Eva Chamizo Llatas

Oh yes of course. So, as I was telling you batteries and other elements in which we're working and in June this year Scottish Power’s plans for the UK's largest wind farm have been approved by the Scottish government.

[00:04:07.270] - Eva Chamizo Llatas

So, Whitelee will have its own purpose-built battery storage plant on site and it will be one of the biggest budgets project in the UK. So it will be charged with clean, green renewable power from the 539 megawatt wind farm the plant battery storage centre will maximize the renewable electricity integration and support the national grid in maintaining the resilience and stability of the electricity grid even at times when wind may not be blowing. So, this is a first for a wind farm in the UK at this scale. So, the battery storage size will be the size of half a football pitch and will comprise a lithium battery technology with 50 megawatt capacity and 25 megawatts per hour of storage of energy.

[00:04:56.050] - Eva Chamizo Llatas

 So, as you see we're working both in pumping and also batteries at a large scale.

[00:05:03.250] – Jon Slowe

Ok, I'm particularly excited about that second project Eva because I can see Whitelee wind farm from my house in Glasgow. So, I'm not sure I'll be able to see the battery from my house, but I'll be able to know it's there and…

Eva Chamizo Llatas – I hope not

Jon Slowe - Thanks Eva, so my second guest is Patrick Clerens, Secretary General of the European Energy Storage Association (EASE).

[00:05:26.950] – Jon Slowe

Hello Patrick.

Patrick Clerens - Hi there, how are you doing.

[00:05:30.710] – Jon Slowe

Good, thank you. So, Patrick, Eva’s told us a bit about pumped storage and batteries. Are these… when we think of energy storage—

[00:05:43.220] – Jon Slowe

As I said before many people automatically think of batteries they're exciting and they’re new, and pumped storage  very significant in terms of energy capacity.

[00:05:52.430] – Jon Slowe

Are there other forms of energy storage that we should be thinking about as well in addition to these two?

Patrick Clerens - Actually we managed in EASE to categorise all the energy storage technologies and we've put them down in five different families.

Jon Slowe - OK.  

Patrick Clerens - We’ve done five different families because they have five different distinct specificities and these technologies can be either a chemical one which has longer term storage which is starting to be more and more seen on the market which is mainly driven by hydrogen.

[00:06:28.930] - Patrick Clerens

So, it's hydrogen electrolysers, hydrogen generation, and then you can do any other kind of chemicals you want with those: you can work with methanol or ammonia or synthetic natural gas. So, this is the one which is mainly for longer term storage. Then you see obviously the batteries which are the electrochemical one. But there you see a new evolution with so-called flow batteries, these are batteries that can hold way more energy than the classical batteries as you know today.

Jon Slowe - OK

Patrick Clerens - Then obviously there is this electrical energy storage which is these balloons on birthday parties which attract the dust and your hair.

[00:07:03.990] - Patrick Clerens

This is static electricity, this is the super capacitor and magnetic super capacitor. In the last two ones is the mechanical one which is the oldest which is the pump hydro let's say or compressed air or liquified air, these are the mechanical one also flywheels which you would count in these that just rotating masses. And then the last one which is the cheapest way of storing is the thermal storage. This is a way where you would use the heat propriety of either molten salt or material or ceramics or whatever to store the heat and then use it mainly in heat form but you could potentially re-electrify it.

[00:07:39.670] - Patrick Clerens

 So there are a lot of different technologies and to come back to your question about what you're talking about in quantities I mean we are doing the European Market Monitoring for Energy Storage which is a reference document on the European market and we'll talk about it, I suppose in a moment. But we have also very clearly seen that the overwhelming majority of installed capacity today is still pumped hydro storage – we’re talking about capacity of something like 96% of all installed capacity in Europe is pumped hydro storage—

[00:08:11.590] – Jon Slowe

Okay, so when we think of storage—

Patrick Clerens – Energy contained it's 99% roughly.

[00:08:18.550] - Jon Slowe

So when we think of storage today Patrick we have to keep in mind that the vast majority of that as you said 96 percent or 99 percent by energy or capacity is pumped hydro.

[00:08:30.460] - Jon Slowe

Patrick, why do you, why do you see so much excitement then about batteries. And do you think other technologies are not getting the attention that they deserve at the moment? Are people too focused on electrochemical batteries at the moment?

Patrick Clerens – So, for the moment we see as you rightly said a lot of attention for batteries, mainly lithium ion batteries.

[00:08:53.880] - Patrick Clerens

And this is due to the fact that the prices have been dropping radically for these technologies. In the last year you saw drops of 80% compared to before. So, it's really huge price drops which makes them readily available and therefore you can stack them very easily and put them wherever you want. So there's no natural requirement of a higher reservoir and lower reservoir or high difference or anything else no cavern, you need nothing. So, this is allowing for these batteries to deploy more and more. The next factor is that you see the electric cars which are coming.

[00:09:28.680] - Patrick Clerens

 We all see the Paris agreement; we all see what's happening on climate change about CO2 reduction and we see that transport is the only sector which increases CO2 emissions in the last year compared to all the other sectors. So, there is a huge need for electromobility and therefore the batteries which allow for electroimmobility are so much on the rise and all the other activities we can do with these batteries like home storage and so on.

[00:09:54.470] – Jon Slowe

OK, now let's bring in my last guest Andy Bradley from Delta-EE, hello Andy.

Andy Bradley – Hi Jon

[00:10:06.130] – Jon Slowe

You've been doing some analysis in the European Market Monitor that Patrick mentioned about the energy storage market in partnership with EASE.

[00:10:17.170] – Jon Slowe

We've heard about the big numbers that pumped hydro:as Patrick alluded to pumped hydro is great but it requires specific geographic circumstances so you can't push it everywhere and there's probably a limited amount that could be developed.

[00:10:33.490] – Jon Slowe

So, I'd like to now look at the growth in the market and see how much new storage capacity is being added. So, can you give us a flavour for how much capacity is being added and how quickly the market is growing today.

[00:10:49.440] – Andy Bradley

Yeah sure, Patrick mentioned the report that we were producing very closely with EASE and its members, looking at the European energy storage market – it’s the European Market Monitor on Energy Storage – and the last edition of that report we did showed that in 2018 about 1.1 gigawatt hours of electrical storage was added to the system, or just under a gigawatt of power added to the system primarily as lithium ion batteries as Patrick mentioned. So it's still a small part of the total energy storage available in the energy system but it's growing quite quickly or very quickly actually and looking back at some of the numbers I mean the electrical energy storage market doubled in size in 2015 to 2017 periods, soit doubled in size in two years, and then it doubled in size again between 2017 and 2019.

[00:11:41.290] – Andy Bradley

 So, you know that's an exponential rate of growth. Now clearly the big question: can the market maintain that rate of growth in the coming years. I mean we certainly see it growing this year and growing in 2020. But it's probably unlikely the market will double in size and in the 2019-2021 period, but it might take three years for example.

[00:12:02.140] – Jon Slowe

Yeah, it's easy to double a small number and harder to double a big number

Andy Bradley - Absolutely, absolutely right.

[00:12:06.060] – Andy Bradley

But for sure the market is growing very quickly and I'm sure we'll talk about some of the ways in which it's growing in the next few minutes.

[00:12:12.970] – Jon Slowe

And in terms of where that growth is coming from you could cut that in different ways, but one way you can cut it is behind the meter and in front of the meter and the example Eva gave about the wind farm I can see from my house in Glasgow and the fixed storage facility there.

[00:12:30.640] – Jon Slowe

That's a great in front of the meter example behind the meter example might be a solar panel with a battery and a house for example. So what's that balance of in front of meter and behind the meter is most of the growth coming from one or the other or is that each split?

Andy Bradley - It is split actually and does vary year to year in front of the meter is typically a smaller number of bigger projects.

[00:12:51.460] – Andy Bradley

So, in any one year like last year actually 2018 the front of the meter space grew, grew quicker than we had anticipated actually because a larger number of grid scale projects were realized before the end of 2018. But the behind the meter space is also growing quickly both in the residential area but also in the commercial and industrial areas, so behind the meter projects at commercial or industrial sites. So, both parts of the market are growing quickly I think.

[00:13:22.150] – Jon Slowe

Okay.

Patrick Clerens – May I finish one sentence, Jon if you allow me?

Jon Slowe – Yeah, go ahead.

[00:13:26.340] - Patrick Clerens

I think we all are aware that there is this Clean Energy for all Europeans package  which has been done which is mainly the Electricity Market Regulation and Directive and in there is quite a neat feature that has been included.

[00:13:40.210] - Patrick Clerens

So the consumers in Europe may now choose to have a variable tariff – electricity tariff – meaning they're exposed to the wholesale prices, and this would mean that if you have a good storage at home and maybe some PV you could also buy electricity from the market or take it from the market at the moment when the prices are negative. So, nobody knows how this feature will be implemented in detail. But you're in theory now entitled to be exposed to wholesale prices and we know they're getting more and more negative prices. So this is really an opportunity also for consumers to be more energy independent meaning having more batteries at home, so this will for sure be a driver for the next years on how storage will be deployed.

[00:14:24.840] – Jon Slowe

Okay.

Andy Bradley – Absolutely, I mean when you look at the European market, we talk about the European market but actually currently it’s really two big markets: there’s Germany and there’s the UK. Actually there are markets in many other countries, but in terms of scale I think Germany is three quarters of the residential market in Europe, about 75% of residential energy storage is located in Germany and in terms of the front of the meter space 60% or so of the market last year was in the UK. So, the market is still… we talk about the European market but

[00:14:58.150] - Andy Bradley

The market is still actually quite concentrated in some markets, so there's huge potential for these propositions and developments to get traction in a large number of other countries in Europe.

[00:15:09.640] – Jon Slowe

Yeah, so you could look at it two ways couldn't you. You could say either UK and Germany are unique and that's why they've got a lot of this new capacity – and nowhere else is the same and nowhere else you can follow. Or you could say the UK and Germany are the front runners and everywhere else is going to follow. Which of those, well I know what you’re going to say Andy

Andy Bradley – We’ll come onto our crystal ball later on.

Jon Slowe - Yeah okay.

[00:15:31.100] - Andy Bradley

But I'm picking up on Patrick's point I’ve got to say its great to see the Clean Energy Package is a really central instrument I think to shaping the future of the energy storage markets in Europe and I'm sure we would pick up on that later. But it's one of the, one of the drivers which will continue to support growth, I think.

[00:15:48.310] – Jon Slowe  

Eva, can I come back to you and Iberdrola

[00:15:52.390] – Jon Slowe  

What's your observation on how the market is growing and this difference between big front of meter projects like you described at Whitelee and small, behind the meter project at houses or commercial or industrial customers.

[00:16:08.640] – Jon Slowe  

Do you see one or the other as more or less interesting to a company like Iberdrola?

Eva Chamizo - Well we are a big company so we tend to work with large storage projects, so obviously in front of the meter we are, let's say, more focused because of our capacities, but we have also been involved and we also think that there is a development in behind the meter product. And we have been launching products in niche markets where this technology can make sense in the short term. So we, we have projects that are smart solar.

[00:16:52.390] - Eva Chamizo Llatas

So, we go to a residential or even we envisage to talk to industry because, as was said before by my colleagues, the market's going to be needing the storage in both sides but also as a big utility see we have more focus in front of the meter because this is probably what, well of course this is something that you need more investment and the bigger size to do. And also because what we are going to be needing is we are integrating renewable and we are going to a system that is going to be based on this renewables with no fossil fuel as backup.

[00:17:40.010] - Eva Chamizo Llatas

 So, the system is going to rely massively on storage. So, we will be obliged to give responses at large scale and also a small scale, but large scale has to be, in terms of security of supply, a very important focus. And also, we are going to be working not only in the electricity sector but also – because the decarbonisation goes to all sectors – we will be in the heating and cooling sectors and so far they are, they need probably more capacity than what residents of storage, so behind the meter, is being able to to provide.

[00:18:26.090] - Eva Chamizo Llatas

 So, this is why I think that there is a market for both but probably we are more focused in in in front of the meter storage.

[00:18:36.290] – Jon Slowe

And I can see the fit with a company like Iberdrola that's as you say used to be in developing wind farms large capital projects, a big storage facility fits very well with that that type of business. But Eva, are there one or two challenges or practical issues that you've had to overcome? So, whether it's a Whitelee project or another front of meter a big storage project. Can you give us a feel for what's challenging, hard or difficult or maybe surprising about developing these types of projects?

[00:19:15.320] - Eva Chamizo Llatas

Yes of course. In terms of the practical issues involved in the deploying of storage today.

[00:19:22.490] - Eva Chamizo Llatas

Well first of all as I was saying we're going to be needing large storage. I mean it is important to know that for instance, the national plant that the member states or something for example in Spain: Spain has set a target of 2.5 gigawatt of battery storage and 3.5 gigawatts of new pumping hydro. So, what I mean is there will have to be a combination of in front of the meter and behind the meter but in front of the meter needs a lot of work and that. So, what do we need as investors?

[00:19:58.100] - Eva Chamizo Llatas

 And what's the problem that we have been discussing all through the Clean Energy Package? Of course we need long term vision in the revenue streams and any final investment decision in companies,

[00:20:11.720] - Eva Chamizo Llatas

..these decisions are taken based on the certainty of the long revenues that we are having and there are programs like the EFR in the UK or the DS3 in Ireland – they address correctly this issue.

[00:20:26.780] - Eva Chamizo Llatas

So, I think that the Clean Energy Package has established a framework in which we will be able as investors to have a long term vision because what large projects need.

Jon Slowe - Eva, on those frameworks so I can completely appreciate that.

[00:20:44.510] – Jon Slowe

So, with renewables project you might have a feed in tariff for some guarantee of the revenue stream, with storage you need that framework for the revenues. How, how far away or how close or far away are we from having the details of that kind of framework in place in different countries whether revenue streams for storage are indeed quite predictable and comfortable for investment decisions. Are we close to that certainty or do we still have a long way to go to enable the company like Iberdrola to invest in storage across different countries?

[00:21:18.800] - Eva Chamizo Llatas

No, I think, I think of course different countries have different realities. We are present in a lot of countries but a lot in Spain. I think that it is coming, I think that the clarity of decarbonisation is creating the need to have security of supply based on a decarbonised way of storage of energy and storage.

[00:21:47.860] - Eva Chamizo Llatas

Of course, it's getting there.

[00:21:49.480] - Eva Chamizo Llatas

So, I think that… because with the national plan, I think the national plan have been one of the most important elements in the Clean Energy Package. Because member states have thought that they really have to give an answer decarbonisation and storage is one of the biggest elements. So I think we are close to— I mean renewables begin begun with a need to have long term vision with it and it was through public aid and now we see a market for renewables for instance with the PPA.

[00:22:28.060] - Eva Chamizo Llatas

 We have corporate solutions that go in the market and storage will need some way to go as  well. But the I think that we have already the experience with renewables and it will come, the long-term vision is coming. I don't think it is something that will be, I think that member states now understand that this is a necessity for decarbonisation.

[00:22:55.780] - Eva Chamizo Llatas

So, it's coming..

Jon Slowe - That's encouraging to hear.

[00:23:01.300] - Jon Slowe

Patrick can I ask you about the perspective of your members. You've got a whole range of different types of companies active in the storage value chain. How…what is their mood at the moment? Are they excited about the market?  Are they frustrated at lack of clarity on certain issues? Are they thriving? Are there too many people trying to sell batteries at the moment. Can you give us a sense of how your members are feeling about the market at the moment?

[00:23:34.070] - Patrick Clerens

Yes so,

[00:23:36.220] - Patrick Clerens

Andy said very well where the markets are for [demand, the biggest markets]??? we see this behind in front of the meter in the U.K. or Germany we see also other business cases which are everywhere in Europe which are system services or what is emerging now is also to balance renewables on isolated systems. So you can have this on islands but also less interconnected. So there are very clear markets for energy storage today where companies make money. But the need for energy storage is very often not remunerated. I give you two examples. First of all, when you talk about balancing the system (frequency containment reserve) you're paid by capacity so everyone who's providing frequency containment is getting the same payment for the megawatt, one megawatt of capacity.

[00:24:30.200] - Patrick Clerens

 Now very often the batteries who are earning money from the system services react way faster than the conventional generation would: gas or coal plants or others. Which means in turn that they are doing the heavy lifting and also getting the frequency to 50 hertz again before the conventional generators start even to influence or to lift the frequency which means that the drop is done by the storage but everybody gets the same payment and that's something which is not working. So, if you do better system services, faster system services you should be remunerated in a better way or more way.

[00:25:07.250] - Patrick Clerens

 This is the case in the UK as was mentioned before or in Ireland, but very often on the continent where they don't feel the heat like they do on islands...

[00:25:15.020] - Patrick Clerens

…It's not the case. So it’s a bit frustrating to see that we do more work but we get the same revenues and then—

Jon Slowe - Patrick that's an example I guess of the market structures and regulations needing to keep up and move quick enough and not always doing so.

[00:25:31.320] - Patrick Clerens

That's true but it's also the question on the on, actually this how can you monetize the system service which is a service to the whole society to the whole electricity or energy system as such but were only one person is actually putting the technology down and invest in this technology so that the added value  is dispersed between all people. And how do you monetize such a service? And that's a difficult part.

[00:26:00.990] - Patrick Clerens

Now this is where we are asking for new services by the TSO , tendedered by the transmission system operator, or maybe distribution system operator in future – we're discussing at the moment how to have a more active distribution system operator also – and to have this therefore captured this added value and be able to monetize this added value. The same question just to finalize will be also on seasonal storage. We want to do governance in 2050. We want to increase the targets for 2030 with the new Commission, the European Green Deal is on the table. Newer or harsher targets for renewables for decarbonisation will come in which means that we need to get there.

 [00:26:37.700] - Patrick Clerens

But nobody knows how will we get energy from the windy times to the less windy times or for the sunny times to the less sunny times.  26:45 Not with this effort.

[00:26:47.000] – Jon Slowe

Ok, so more needed to do on the regulatory front on the market structures on remuneration.

[00:26:57.380] – Jon Slowe

It's that time in the podcast already when we're having to take our crystal ball out so let we just pick it up and put it down on the table in front of us and

Patrick Clerens - You broke it.

 

Jon Slowe - No not yet, Well I did break it trying to use it for Brexit the other day.

[00:27:12.410] – Jon Slowe

So, I'm not going make that mistake again.

[00:27:16.940] – Jon Slowe

So crystal ball time, let's set the dial on the crystal ball to 2030.

[00:27:28.820] – Jon Slowe

And I'd like to think about, whether you answer this in numbers or qualitatively, how much storage there will be/will be deployed between now and 2030. And any inclination as to what will be on the front of the meter and behind the meter. So, Eva starting with you, how much storage will we see and answer this in whichever way you'd like.

[00:27:52.160] – Jon Slowe

Will we see between now and 2030 and what type of storage?

 Eva Chamizo - well getting into such numbers is not easy so I will try to concentrate them in one Member State, the ones that I know better and that’s Spain.

[00:28:10.260] - Eva Chamizo Llatas

Spain has calculated and I think that all the member states have done in there national plans, the amount of storage they will be needing in order to correctly integrate the renewables that will be coming in as Patrick just said, when you don't have wind and you don't have sun or you don't have water you need storage and they well they have said is that they will be needing more or less six gigawatts of batteries sorry of storage. In Spain you take into account the particular conditions because this is one of the questions that is very important, there's no solution that is valid for all member states.

[00:28:56.370] - Eva Chamizo Llatas

 Spain has a very particular situation in terms of possibilities of pumping hydro. So that is why 3 gigawatt have been considered that will come from that from that technology and 2.5 from battery. And then how it will be distributed in front of the meter or behind of the meter. I think we need to do a lot of calculation yet. It depends also on the way that every member state is housing and residential is composed as you were saying. Germany for instance has a lot of houses, individual houses – it's not the case in Spain when you have a lot of buildings.

[00:29:40.110] - Eva Chamizo Llatas

 So, all those elements make that the decisions have to be adapted to the circumstances of the different populations and member states.

[00:29:52.740] – Jon Slowe

Okay so I'm inferring there may be a bit more front of meter in Spain than maybe in somewhere like Germany.

[00:29:58.800] – Jon Slowe

And if I had to ask a very cruel yes or no answer Eva, do you think Spain will reach that 6-gigawatt target?

Eva Chamizo Llatas - Well we are trying to do our best, I mean from the dollar point of view.

[00:30:12.210] - Eva Chamizo Llatas

So, I really hope that we can provide it because this is probably the only way to decarbonisation. So, I think it is something that we have to work to move, the state will have to do its job in terms of guaranteeing the long term that we were talking about in terms of investment simplification of the administrative procedures etc. So, it is feasible. We will need to work for it but I don't think we have a lot of different possibilities, if we really want to decarbonise.

[00:30:49.020] – Jon Slowe

1. Thanks Eva.

[00:30:50.790] – Jon Slowe

And Patrick what do you see when you gaze into the crystal ball in 2030.

[00:30:58.210] - Patrick Clerens

Yes. I put it on the wrong time frame I put on 2050, so I tried to bring it back from the 2050 timeframe. There was a very interesting study so let's continue in Spain. In Spain there was a study from the utility and your electric published it then, the Association of electricity utilities, And they said so imagine we are in 2050 in Spain and we have 70 gigawatt of peak demand. They calculated in order to balance, which in Spain would be mainly PV electricity, to balance this over the day to meet the noon peak over the day demands and night demands they would shift around 345 gigawatt hours over one day.

[00:31:50.040] – Jon Slowe

 Wow.

Patrick Clerens - So this is a huge sum 345 gigawatt hours, huge sums. And this is for 70 gigawatt of peak demand. It's roughly what Germany uses today. This is for over the day. Now if you see that this is in a decarbonise society so let’s say 100% renewable and if you foresee that you want to go in 2030 to 50% renewables that's roughly what you were aiming at for the moment. And this is what at least climate campaigners ask us to do then we would need roughly half a bit less than half of this because we have some more dispatchable generation.

 [00:32:28.320] - Patrick Clerens

 So, we would still end up with something like I don't know 150 to 200 gigawatt hours you have to shift around over one day. This is this is huge amounts of energy we're talking about. And this is for the daily balancing. When you now look at the forecast in 2050 with the same energy system, electricity system of Spain you want to go to the seasonal balancing taking the excess electricity of March, April and May and put this to the part of October, November, December when you when you really need it. There you are talking about a seasonal need in 2050 of 25000 gigawatt hours for seasonal energy movement from one side to the other.

[00:33:11.760] - Patrick Clerens

 And now we are talking really big numbers. And energy which need to be stored for 3, 4, 5 months.

[00:33:18.660] – Jon Slowe

So even if we get close to those numbers Patrick as you say they are huge numbers and they'll need every bit of storage we can find, be it hydrogen, pumped hydro, electric or thermal and so on.

[00:33:34.350] - Patrick Clerens

Yes. Because the batteries are such – and now we’re coming back to the technology question we had in the beginning – for the moment or in the last years, we had battery production which is limited. In 2020 we are expected to have, I don't know 180 gigawatt hours of battery we can produce a year. The yearly global production is 180 gigawatt hours or something like this in 2020 which means that if you want to have 345 gigawatt hours to move that move around and this is only Spain.

Jon Slowe -Yeah.

[00:34:02.010] - Patrick Clerens

 You cannot solve this with battery certainly. This is not possible.

[00:34:06.330] - Patrick Clerens

So, it will be way too expensive. So that's why we are advocating also on the policymakers side that we need a technology neutral framework which allows all technologies which store energy be it in a heat form, a gaseous form, a liquid form, electrochemical whatever it is, to be supported and not only to support lithium ion batteries as it is very often done to date not only but very often.

[00:34:34.200] – Jon Slowe

OK thanks Patrick. Andy last but not least what do you see in the crystal ball?

[00:34:41.730] – Andy Bradley

Yeah, I see lots of growth. The question is how much growth and how fast. I think what Patrick said is absolutely right that demand and needs for flexibility in our energy system in Europe over the next 10 years and beyond is strong and will only get stronger. A suppose from the energy storage perspective thing about battery storage. The question is how much of that will be, will be batteries so: just while Patrick was talking there and thinking about that question, I mean looking at the European markets today and how we see it growing in the next two,three, four years and then going out to 2030.

[00:35:17.580] – Andy Bradley

 I'd say 25, 35, 40 gigawatt hours of electrical energy storage perhaps would look reasonable based on the growth in the market for battery storage over the last years and how we see it going in the near-term. There are some big drivers and unknowns of course: the role of the V-G for example vehicle to grid technologies and how significant  they’ll become by 2030, will stationary storage still be a dominant part of the market or will the EV market be contributing in a significant way. What happens when the fit tariffs for many residential customers of PV in Europe start to phase out post 2021 in Germany and many other countries, and how much will that spur the uptake of household batteries across Europe in different countries not just the U.K, Germany and Italy you know the ones we have mentioned.

[00:36:10.460] – Andy Bradley

 Co-located storage stationary storage with EV recharging we see that as one of the big applications and big opportunities. There's lots of exciting developments around second life batteries and people even talking about third life batteries recently, I hear about. So you know the number of applications that we see and the use cases for energystorage which is large today and will only get bigger. So overall I think the market is bound to get much bigger but we mustn't forget that the energy transition encompasses all of the energy sources we've talked about so electrical energy storage, battery storage, will only be one part of that source of flexibility.

[00:36:52.790] – Jon Slowe

I think that's my takeaway from today actually that rather than thinking of an energy storage market, there are many many energy storage markets plural. They change from country to country, big plants like Eva described at Whitelee, through to behind the meter storage, hydrogen, thermal storage, electrochemical, batteries, there’s a whole variety of applications and the market will grow strongly but it won't grow one way, it will grow in many ways.

[00:37:19.960] – Andy Bradley

To come back to your question that I think you're trying to get to, is it going to be me in front of the meter or behind the meter, my personal view is that it's probably a 60:40, 70:30 split overall and I'm getting more behind the meter space.

Jon Slowe - Okay.

[00:37:33.210] - Jon Slowe

Well as I tell all my guests we will bring you back in 2030 and see if these predictions are right or wrong. So that draws us to the end of that podcast today. We hope that you've enjoyed listening and are equally engaged and equally excited about energy storage. So, thanks for listening. Thanks to my guests. Thank you very much Eva, thanks for joining.

[00:37:57.780]

 Eva Chamizo Llatas - Thank you.

Patrick Clerens - Jon, thank you very much for hosting.

Jon Slowe - And thank you to Andy. And we'll be back with new episodes from talking new energy next week. Goodbye.

Hydrogen: a silver bullet to decarbonise heat?

• James Watson, Eurogas
• Rob Bloom, Analyst, Delta-EE

Decarbonising heat is arguably the biggest challenge in decarbonising our energy system. Does hydrogen provide the answer? In this episode we explore the role that hydrogen might play, and what progress we're seeing.

 

[00:00:04.560] – Jon Slowe

Welcome to Talking New Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

[00:00:22.400] – Jon Slowe

Hello and welcome to the episode. Today we're looking at the future of gas in the energy system.

[00:00:28.760] – Jon Slowe

Over the past few decades natural gas has been regarded as a relatively clean fuel. In particular when compared to coal for example. But looking forwards if we're going to decarbonise our energy system in the next decades, then there really can't be an extensive and widespread role for natural gas because of its associated carbon emissions.

[00:00:51.020] – Jon Slowe

This is a challenge given today it's used extensively for heating across Europe and its significant role in power generation in some countries. But don't write off gas too quickly. Its flexibility is becoming increasingly valuable and decarbonised and renewable gases could well have an important and maybe extensive role in the future. Of these growing hope around hydrogen in particular. So, to discuss the role of natural gas in the future I'm joined today by James Watson Secretary-General of gas industry trade body Eurogas and Delta-EE expert Rob bloom.

Jon Slowe  - Hello James,

James Watson - Hello John,

Jon Slowe - Thanks for joining us and hello Rob as well.

Rob Bloom – Hi there,

[00:01:43.180] – Jon Slowe

 So, James I'd like to start with a question for you. What's the mood like in the European gas industry today. You know gas industry has had a huge role, has a huge role in the energy sector today. The future as I said will need to look quite different. So, on one hand you could imagine there might be doom and gloom as the pressure builds on natural gas. But on the other hand, there may be lots of excitement about the opportunities or nervousness about the changes required. How would you characterise the mood today?

[00:02:19.550] - James Watson

Well I think if you look at the context of the gas market in Europe today you might imagine that we could possibly be feeling super happy and on top of the world.

[00:02:29.220] - James Watson

And I say that in reference to events I saw recently where Fatih Birol from the International Energy Agency was showing the predictions that his organization has had for gas growth through 2018 and meet its predictions back in about 2012. And they called it Golden Age of Gas, I'm sure you probably remember that Jon. This whole report that you know we are we are living in the Golden Age of Gas.

[00:02:56.130] - James Watson

Indeed, the predictions the International Energy Agency had were more or less lived, today.

[00:03:04.150] - James Watson

So yeah. You would think that probably we were having a party and enjoying good discos but it's not like that at all. That's a funny thing isn't it. If you think that you know we are living in what would be called the golden age of gas according to some analysts and predictors.

[00:03:17.770] - James Watson

No, I think what we find is that there is a kind of a shift in mentality. I mean the gas industry understands that we are doing very well today but the future is of course more or less unpredictable. We know that we are going to be in a situation in Europe where we have to achieve a carbon neutral economy by 2050. And what I have seen across our sector and recently all of our members clubbed together and agreed to support that objective understanding all of the challenges that that entails for our sector.

[00:03:48.690] - James Watson

As you pointed out in your introduction, we are still a CO2 emitter much less CO2 than traditional fossil fuels like oil, lignite and coal, diesel.

[00:04:00.390] - James Watson

Nevertheless we will have to reduce that carbon footprint to live in a carbon neutral economy in Europe and globally I mean gas is the fastest growing fuel globally and in other jurisdictions gas will be undoubtedly the only means that we can use to achieve the overall objectives of the Paris agreement limiting warming to two or one point five degrees centigrade. But in Europe we have a different challenge and it's a challenge to achieve carbon neutrality by 2050.

[00:04:28.050] - James Watson

And so, I think if you look at it our members the gas industry is starting to invest and devise new plans new business models to bring forward new types of gas that we hope will be able to blend in as we go forward.

[00:04:41.160] – Jon Slowe

So, gents that's a heady mix of threat and opportunity there. Investors in start-up businesses in the venture capital and private equity sector will always say there's only two emotions that matter and that's a threat or fear and opportunity.

[00:04:59.040] – Jon Slowe

Is there more of one than the other or is that a bit unfair to ask you to characterise that?

James Watson - I don’t think it’s unfair at all Jon, I think it's a fair point.

[00:05:08.640] - James Watson

I mean there is of course the risk if you do nothing what will happen to your business, what will happen to your model. We know very well we've just had a new commission president put in place and she's promised to deliver a law by 2050 that we have carbon neutrality in Europe so they will become a law. Of course, we as the gas sector support that. And so therefore we have to see that as an opportunity not just think about a threat, we have to think about how actually you are not going to be able to electrify everything.

[00:05:38.490] - James Watson

 That's very clear. There is no way that you can build enough renewable electricity to deal with peak energy demands in winter. And the European emissions cells are very clear that they want gas, they need gas they're still full. So, I just say they're still forecasting a market of gaseous fuels in 2050 which is only about a third less than it is today.

[00:05:58.530] – Jon Slowe

So, a big role for gas. You've talked about the need to change and to have whether it's new business models, new technology, different approaches.

[00:06:06.970] – Jon Slowe

How well laid out or how clear do you think the industry is or are we still at the relatively early stages of exploring those and trying to define those?

[00:06:19.830] - James Watson

Well I think that the right way of looking at this is that we are at the beginning of that story. We are at the moment looking at how we can increase the amount of biogas, biomethane that is available because if you think of biomethane is a good product that you can directly inject into the grid with no need for any change of infrastructure whatsoever. And so, I think we are very much at the at the start of that story. And if I might just throw a statistic you know Jon the market that we have in gas today is 95 % natural gas and 5% biogas.

[00:06:53.860] - James Watson

 Do you think about electricity, you around about 50% still fossil fuel and about 18% that's variable renewables. Those 18% of more or less grown in the last 15 years. So, our story is perhaps if you argued behind the electricity story but then we haven't necessarily seen the same kind of incentives and programs put in place for gas as we have for electricity.

[00:07:18.280] - James Watson

So, my view is we're at the beginning of the story and we hope over the next 30 years that we will actually go through our own transition and increase the amounts and volumes that we have of the renewable gases.

[00:07:29.380]

Okay. Well let's look then at those low carbon and renewable gases and break it down a bit for the benefit of our listeners. So, when it comes to low carbon and renewable decarbonise gases, we could break it down in two ways. What the source of the energy is and whether that gas is either partially or fully decarbonise. So, Rob I'll ask you in a minute about hydrogen. But James can you firstly just walk us through biogas and biomethane in relation to these points.

[00:08:05.970] - James Watson

Yes, well I think the way that we see it is very much in line with the recently, the recently enacted Renewable Energy Directive which came out of the clean energy package and there are clear definitions of biomethane and biogas. And basically, they're considered renewable to the extent that the feedstock that is used to produce it is considered sustainable. And the overall process allows for reduction of greenhouse gas emissions, the way that we see this is that you therefore focus much more on the second-generation types of biomethane and biogas production.

[00:08:39.610] - James Watson

 So, this is wastes there are extensive lists of all different types of waste feedstocks you can have these vary from sewage and wastewater through to manure through to agricultural waste by-products. And so that ultimately what you're using is there is a second-generation approach to deliver biogas and biomethane that you want. I think that you have to consider renewable the gas has to have certain requirements around its sustainability of the feedstock. And so, it is important for us that we aren't talking about growing food crops to be puts directly in generate digesters because we are very aware of what happened on biofuel debate and you get trapped in a food versus fuel discussion politically which helps no one.

 

[00:09:27.970] - James Watson

 And then even starts you know driving some public perception against the idea of doing this. And in fact, we really need to do this, so we really have to work on the basis of what I call second generation. So that's wastes eventually.

[00:09:40.750] – Jon Slowe

Okay. And then once you've got that biogas you could either blend that into the network and blend it with natural gas or upgrade it to biomethane if I understand correctly?

[00:09:54.960] - James Watson

Well yes. So that's how we would see it. So that the biogas production at the moment contains impurities, so a lot of the volume is actually used to produce electricity. So, you really just burn biogas relatively easily and inject that into the electricity grid. But the real premium and we're you know about 2 billion cubic meters today, production Europe is biomethane we have to upgrade it, burn the impurities off and then you inject it into the gas grid and then it can be used for whatever purpose heating industrial use even of course gas houses have electricity.

[00:10:31.270] - James Watson

But in principle that's the way that we're looking at how you increase the amounts of by methane.

[00:10:41.050] – Jon Slowe

Okay and how much waste resource is there, out there in your view? Presumably, not enough to replace substitute natural gas with biogas from waste across the whole of Europe. But can you give us a feel for the level of bio resource or waste, bio waste that you think is out there.

[00:11:00.530] - James Watson

It's the sort of million-dollar question isn't Jon! Actually, the multi-billion-dollar question John. I think there are very many different studies with different views on this. And the reality is of course we will have to see how those, basically how those feedstocks develop and that the finance that is associated with them and what the costs are. There is a study by Navigant which suggests something around 200 plus billion cubic meters. Another was done earlier; I think by the same organisation which suggests around 100 in your Eurogas we are conducting our own study and we will have to see what we come up to do later this year.

[00:11:40.050] - James Watson

 But my view would be that you're definitely not going to be filling the current 450 plus billion cubic meter. Yeah, BCM cubic meter gas market with biogas and biomethane alone in the coming thirty years. It will play a part of the solution Jon. It's not the only the vector that we need. And I think Rob's going to say a bit more about other vectors.

[00:12:04.530] – Jon Slowe

OK well nice Segway onto Rob. So, with hydrogen Rob there's a lot of hope and dare I say it a bit of hype around hydrogen at the moment. It's not a source of energy as James just said it’s a energy vector. So, can you help us understand the different ways we could produce hydrogen and how to break hydrogen down a bit.

[00:12:29.990] – Rob Bloom

Yeah, of course. And an important thing to say is in a similar manner to biogas or biomethane it really depends on where your hydrogen comes from. You can broadly split down the production of hydrogen into two main methods of production. There is electrolysis which essentially uses electricity as an input and split water into constituents of hydrogen which obviously we want and an oxygen by-product which can still be sold on. The alternative to this is using an industrial process called steam methane reforming. This is quite a, well it's a very CO2 intensive process that basically combines steam and methane to produce hydrogen and CO2.

[00:13:14.090] – Rob Bloom

 So, talking about Steam methane reforming this is called the grey hydrogen so it's hydrogen. The vast majority the hydrogen produced today is produced by grey processes.

Jon Slowe- Okay

Rob Bloom - So very carbon intensive and typically goes into industrial processes like fertilizer production for instance.

[00:13:36.600] – Jon Slowe

Okay. So grey is then one variety of hydrogen. What else what other colours do we have?

[00:13:43.220] – Rob Bloom

So, going through the hydrogen rainbow if you like Jon from grey if we want to make that low carbon but still use kind of centralised industrial process. We need to use what's called carbon capture and storage. This is basically capturing the carbon emissions that would be emitted from grey hydrogen and storing them underground typically offshore. And this basically gives you one means of producing low carbon hydrogen but importantly not zero carbon hydrogen because the capture processes are not 100% efficient.

[00:14:17.660] – Jon Slowe

Okay. And what colour do we call that?

[00:14:20.570] – Rob Bloom

So that would be termed blue hydrogen. So grey hydrogen very, very carbon intensive industrial process, blue hydrogen low carbon intensity but still industrial, still centralised.

[00:14:34.000] – Jon Slowe

Yeah. Now moving on to electrolysis because that's using electricity which could come from different sources to produce hydrogen.

[00:14:41.960] – Rob Bloom

Exactly. Exactly. So, there are two. There are two colours of kind of electrolyte that produced hydrogen. You've got brown which uses grid electricity so that can use whatever the constituent electricity in the grid. So, in the UK that might have gas-based electricity, in Germany it might have coal-based electricity mixed with renewables. So generally, would be considered a higher carbon hydrogen. Counteractive to that is a green hydrogen which is where you’re fuelling your electrolyser with dedicated renewable electricity and that's where you can really achieve this zero-carbon hydrogen that will be so important in the future.

[00:15:26.150] – Jon Slowe

Okay. So today we're largely grey hydrogen using steam reforming natural gas if we have CCS we turn it into blue hydrogen if we have electrolysis with the grid mix today that's brown and that could have varying degrees of carbon emissions. And if we use electrolysis that is from 100% renewable sources then we have green which is where we'd love to get to I guess.

[00:15:51.740] – Rob Bloom

Exactly.

[00:15:52.400] – Rob Bloom

You couldn't have explained it better Jon, that’s perfect.

Jon Slowe - So, in terms of where we're at with decarbonise gases, James you sort of set the context at the beginning that we're at the beginning not right at the very beginning but very early on in the transition from natural gas to lower carbon gases. I'd like now to, sort of understand a bit more about the types of projects, studies, drill down into that journey towards lower carbon gases a bit. Rob can you give us a feel for hydrogen and where are we at in terms of theoretical studies, technical trials, pilots, big demonstrations in using hydrogen for example to decarbonise heat.

[00:16:48.080] – Rob Bloom

Yeah of course. And yeah that's a really good starting point. And the truth is there's a real variety of kind of projects that are currently active in decarbonising heating with specifically with hydrogen. These range from desk-based feasibility studies that are looking at theoretically if you were to convert a relatively large metropolitan area to using 100% hydrogen. How would you go about doing it? What are the actual practicalities involved in that?

[00:17:19.790] – Jon Slowe

Okay. So that's basically pushing hydrogen through the pipes that today carry natural gas,

Rob Bloom - Exactly

Jon Slowe - [Illegible] running on hydrogen yes.

[00:17:28.420] – Rob Bloom

Yes, so that the famous kind of report that kicked a lot of this discussion off was the H21 project based in Leeds in the UK. And this basically had a look taking lessons from the kind of town gas conversion in the UK. Well we moved from basically a gasified coal to natural gas to produce heat. What lessons were learned from that and what we can take on converting natural gas networks into hydrogen networks.

[00:17:56.700] – Jon Slowe

Okay. So, on that basis we've converted a gas network before. Can we do it again.

[00:18:01.150] – Rob Bloom

Exactly. Exactly spot on. So, there are a few projects like that looking at feasibility studies. A really interesting one again in the UK is high net which is looking at decarbonising a current steam methane reformer and using that hydrogen to decarbonise an industrial hub and then spread out into domestic heat. So, industry is very difficult to decarbonise, and hydrogen could be a really good solution for that blue hydrogen specifically. And that kind of gives you sort of industrial hub to then expand out into the domestic market.

[00:18:38.170] – Jon Slowe

1. James how about your view of hydrogen in terms of any particular example projects or perspective you'd like to draw out.

[00:18:48.100] - James Watson

I think that Rob mentions of course probably one of the most important in Europe that we see today and that's the H21 project looking up at Leeds. Basically, how you change a city of a million people from natural gas back to hydrogen. I would agree with the point that Rob made it's kind of like going back to the future. And so, I always tell people if we came from a situation where we had a town gas we should be able to relatively easily go back to being able to change the grids and the infrastructure to deal with that.

[00:19:18.250] - James Watson

 So H21 is a very important project because in the next ten, ten years or so it should be able to demonstrate the possibility of using hydrogen once again in the grids to deliver heat, to deliver energy for industry. So we definitely see that as one of the important flagship projects because in a way it's a very very large demonstration project and therefore the whole kind of feasibility is as important to show and therefore needs to deliver. I think the other point about town gas is that as a European wide phenomenon spoke to a number of the companies that make up our association and you find that kind of history also in Germany you have things like Stadtgas is the same,

[00:19:58.360] - James Watson

Same basis, so indeed a lot of the infrastructure in Europe would be ready to handle volumes of up to 50% hydrogen. So, from this point of view I think that we are very keen to see projects develop and not just on sort of blue hydrogen side. In Germany we are also seeing a lot of companies considering how to invest more in, to power gas, into electrolysers and you have to think this is a European technology. So maybe we have the lead and at the moments I was fortunate enough to visit ITN power just outside Sheffield who are moving to the largest electrolyser manufacturing plants in the world in the coming year and it's great to see this technology being developed in Europe and also deployed in Europe you know in Germany they have the big issue of trying to get all that wonderful wind energy in the north down to the south.

 

[00:20:48.100] - James Watson

 Nobody wants to build high voltage frequency transmission lines in the electricity side past all these villages. It's not just Bavaria you go past …{illegible} to Niedersachsen and nobody wants it. And in fact, many of the companies now thinking if they can convert that into hydrogen using electrolysis they could actually ship it through existing gas infrastructure for use by the industries in the south that would overcome the problems. There are examples of things like store and go it's a project that is run by companies in Germany and they're basically doing that they're assessing the technology potential of converting electricity renewable electricity into hydrogen.

[00:21:25.840] - James Watson

 And so, I think there are a number of projects on the go. When I was at ITM they were developing a very large electrolyser for renewable electricity to produce hydrogen for use in buses in the town of Pau in France for their fleet. So, I think that we are seeing a number of these projects being developed and numbers are growing. I think we're up to something like 600 megawatts of electrolyser deployments in Germany and so I'm going back to my earlier points at the beginning of the story but as you said quite rightly Jon it's not nothing has been done.

[00:21:57.850] - James Watson

 All of these technologies are in existence and are being deployed. And so, I think we also have to recall that.

[00:22:03.720] – Jon Slow

Okay

Rob Bloom – I think that’s a really

Jon Slowe – Sorry go on Rob

Rob Bloom – I was going to say I think that you've made some really important points there James and I think the kind of use of hydrogen is, is very or the intended use of hydrogen could be very regional even within Europe. So, like you mentioned James Power to Gas and basically using electricity constrained renewables that would produce electricity that is otherwise difficult to deal with changing that into hydrogen and putting that into a local gas grid. There's a project up in Schleswig-Holstein that's been doing this since the mid-2018 and essentially using constrained electricity and putting that into the gas grid from what we've heard Germany seems to be going down, seems to be a much stronger advocate of using electrolysis based hydrogen production for constrained renewables whereas if you shift perhaps more towards the UK and I’m trying not to be too UK focused there's a much stronger focus on dedicated hydrogen production for heating so that there are different ways of going about it really and I think that's important to emphasise.

[00:23:14.600] - Rob Bloom

 You know we see a huge range of different projects in fact that moving on from that kind of power to gas argument. There's a really interesting project at the moment running in Sweden called RE 8760.

Jon Slowe - That's a very catchy name Rob!

Rob Bloom - I know it's not you’re right. But the project is incredibly interesting. Basically it's a, it's a means to project leaders have tried to get a total of six housing blocks, 172 flats completely off grid electricity and grid heating and how they've done this is by having a large solar park so solar PV using batteries to store that energy so that you store the energy during the day and release it from the batteries during the night when demand is high but they're also using inter-seasonal demand matching.

[00:24:12.580] - Rob Bloom

 So, they use the electricity from those solar panels store it as hydrogen and then use a fuel cell micro CHP unit. So that's a, it's basically the reverse of an electrolyser it takes in hydrogen and produces electricity and water by-product. You can also harness heat from that, so it uses that hydrogen that is stored up during the summer months and uses it to produce both heat and electricity in the winter months. So, you have a really interesting kind of way of using hydrogen.

[00:24:43.520] – Jon Slowe

And I think that brings out one of the areas that we see a lot more focus research analysis on.

[00:24:51.220] – Jon Slowe

But what you described in that system Rob, you've got the benefits of that huge flexibility that hydrogen brings and that versatility, but you've also got inefficiencies from the conversions of storage and then turning it back into heat and electricity. So, I imagine we'll learn a lot more about these trade-offs or the values of flexibility in comparison to generating electricity and storing it to the battery for short term storage for example. I think it's going to be a fascinating area.

[00:25:28.060] - Rob Bloom

Undoubtedly Jon. Undoubtedly.

Jon Slowe - Now as always time is getting the better of us. So, I'd like to start looking forward now. But before I bring out the talking in new energy crystal ball what's going to drive this market? So renewable, James you mentioned at the beginning the transition that electricity is made over the last decade. So, the transition it's making and that's being driven by some very clear incentive programs maybe some subsidy programs. You're able to use market-based mechanisms to make that shift. Are we going to see the same market based mechanisms to decarbonise gas?

[00:26:13.510] - Jon Slowe

Do you think James or will we see more regulatory intervention, do you think?

[00:26:19.810] – James Watson

I especially need a bit of both actually Jon. I think this is really the way that we would see things in Eurogas. If you look at what's been done on the electricity side. That's a great solar from nothing to so 4/5% of the electricity mix there's been a fair deal of intervention if you like. And the real the real point of that is that the European level Renewable Energy Directive is set up that target of 20 percent of energy to be from renewable sources by 2020.

[00:26:51.270] – James Watson

 And the governments of Europe clubbed together and acted on their own and came up with their own ideas of how they would best achieve those objectives. And generally, many of the countries use feed in tariffs not always with the best outcome. I don't mean that deployment was somehow slowed.

[00:27:08.970]  – James Watson

It's just that often those programs of incentives had to be closed early because they were massively oversubscribed. So, the way we look at things is that we probably need that mix. So we're totally in favour of setting targets for renewable gas, penetration into the natural gas segments but we also believe that we should look at the development of things like guarantees of origin i.e. certificates that prove that you get for every you say megawatts or megawatt hour you produce a renewable gas you receive a certificate for it which you could also use to encourage people to buy that gas which in itself could also turn into a market and be traded and therefore encourage investments in its own rights.

[00:27:52.410] – James Watson

 I think we have to look at both measures. I would say that probably wouldn't preclude any form though in principle we'd probably prefer the idea of auctions or tenders if you prefer because these tenders, they provide a certain degree of public incentive but also put pressure on the companies that take parts to reduce costs, which is what we need as you bring this sort of market element into it. There's competitiveness and in a sense a carrot and stick kind of approach through a through tender. And I think that's probably the right way to go.

[00:28:23.670] – James Watson

 I think we leave it to the markets, to do everything on its own without putting these kind of incentives in place.

[00:28:29.430] – James Watson

It would take quite a long time to drive those things forward because you're talking about biomethane today being four times the cost of natural gas so needs to do it to drive change because the market on its own will always favour the cheapest and in electricity or gas it's always the fossil fuel that's the cheapest that's just how it is.

[00:28:48.670] – Jon Slowe

Okay. So we need to intervene with the right kind of mechanisms and market mechanisms could work in this case.

[00:28:57.770] – Jon Slowe

Rob

James Watson – There is practical example of how this is working and France set a target of 10% of all of its gas to be renewable by 2030. And what we've actually seen is that since that came in you're seeing a doubling of the amount of bio methane plants every year. So, these came in in 2015 and in 2016 the number of plants from 17 to 26 in 2017 they were 44 in 2018 76, so you are almost doubling year on year because the target was put in place.

[00:29:32.250] - James Watson

So, I just wanted to say this wasn’t some sort of up in the fantasy notion, we've looked at it, we've seen how it's worked in France and it seems to be a good way of actually driving the change that we need.

[00:29:43.340] – Jon Slowe

Okay. Rob I was going to ask you in terms of the switching part of the network over to, from natural gas to hydrogen and that's, that probably will be a policy decision that can't be left, or it’s much harder to leave that to the market. Which countries you mentioned UK. Is there anywhere else Rob you look in terms of switching a network wholly over to hydrogen for early activity earlier?

[00:30:10.140] – Rob Bloom

Definitely, I think other than the UK, which has had quite a lot of government backing or government interest the Netherlands is also very very hot in this area. They're looking at a range of solutions and to be honest in the Netherlands there are probably more projects where you’ve already got small networks of 100% hydrogen already heating homes. They tend to be very isolated typically serving a couple of apartment blocks but that's already going ahead which is probably a little bit of an advance of what the U.K. is doing. So, if I was going to highlight two major markets, I would say the U.K. and the Netherlands are probably leading.

[00:30:49.440] – Rob Bloom

 But as James said earlier you know Germany shouldn't be neglected but they're coming at it from a slightly different viewpoint I think.

[00:30:56.070] – Jon Slowe

Okay. Well let's now bring out the talking new energy crystal ball and wrap up by looking forward to 2030. And I'd like to ask each of you briefly to say one or two key things you think will have seen happen in this area by 2030.

[00:31:16.710] – Jon Slowe

James, do you want to go first.

James Watson - I think what we’ll definitely see by 2030 is an increasing volume of renewable gases. I think this is almost an inevitability in Eurogas. We're hoping that there will be EU targets for renewable gases put in place. We would also like to see a target for what we call decarbonise gas which is essentially a very hydrogen.

[00:31:37.930] - James Watson

Hydrogen being produced primarily from CCS carbon capture and storage.

[00:31:43.230] - James Watson

But in the field I guess that what we would also like to see is that the projects that we've mentioned today that these are moving beyond sort of demonstration and we are able to see more and more commercialised projects being deployed. And that really does depend on getting the frameworks right. But we believe that you will not be able to reach the objectives of 2050 let alone by 2030 if you don't put the right regulatory framework in place. And so we really believe in things like guarantees of origin for renewable gas and targets will be the cornerstones of this change.

[00:32:17.760] – Jon Slowe

And thanks James and Rob how about you buy it by 2030. It's one or two things you’d highlight.

[00:32:23.590] – Rob Bloom 

I'm going to be, I'm going to be quite ambitious here. But I think what I'd love to have seen by 2030 is at least one large scale project to produce kind of industrial volumes of hydrogen. Whether that be a dedicated offshore wind farm for producing hydrogen for instance, produced green hydrogen or a large-scale blue hydrogen industrial site. I think once we see hydrogen being generated at scale it's just a matter of time before it starts to sort of trickle down into domestic heating, into transport which is something we haven't been able to touch on in the session.

[00:33:04.420] – Rob Bloom  

 But is a really interesting sector. So yeah that's what I would like to see hydrogen being produced at scale in the domestic sector in terms of heating. I think what it’s not too ambitious to say, I think we'll see small gas networks serving you know the high hundreds low thousands of homes with 100% hydrogen.

[00:33:25.900] – Rob Bloom

I think that will definitely be a possibility, perhaps in the UK or Netherlands. So those are my two hot takes, I guess.

Jon Slowe - Okay well we'll bring you both back at 2030 and see if your predictions or outlook is correct. As you've both mentioned there's lots of other issues, topics in this area of hydrogen and low carbon gases and we'll come back to them in the future podcasts.

[00:33:52.230] - Jon Slowe

James and Rob thank you both very much for helping us navigate and understand this really important part of the energy system. So, thanks to each of you.

James Watson - Thank you Jon

Rob Bloom - No worries it's a pleasure.

Jon Slowe - And as always thank you to our listeners. We hope you've enjoyed the episode and found it useful and look forward to welcoming you back next week. Thank you very much and goodbye.

 

 

Local energy systems: miniature utilities

• Charles Bradshaw-Smith, CEO of SmartKlub
• Sam Wevers, Product Manager - Cornwall Local Energy Market, Centrica
• Jeremy Harrison, Principal Analyst, Delta-EE

As energy becomes more and more distributed, there is an array of local energy initiatives building across Europe. In this episode, we explore which form these are taking, and the different factors driving them.

[00:00:04.560] – Jon Slowe

Welcome to Talking New Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

[00:00:22.220] – Jon Slowe

Hello and welcome to the episode.

[00:00:24.830] – Jon Slowe

As we all know energy is becoming more distributed and customers are playing a more active role in the energy system. So is this going to result in more localised energy systems compared to today's mainly centralized system. In some ways the answer is inevitably yes, we will have more localised systems but the way in which this is happening, and the degree of localisation is not always clear. The markets are full of buzzwords today. Community energy, microgrids, citizens energy community’s, local energy systems, private wire networks, I could go on, but you get the point.

[00:01:04.970] – Jon Slowe

 It's a confusing area. So today it will be shining a light on the localisation of energy with the aid of three guests and let's introduce them all and make some sense of this exciting dynamic but at times a little confusing topic. So, my first guest is Sam Wevers from Centrica.

[00:01:27.800] – Jon Slowe

Hello Sam.

Sam Wevers - Hi there   

[00:01:31.260] – Jon Slowe

Sam thanks for joining. Can you give us an elevator pitch about your role at Centrica and the project you're working on in Cornwall in the south west of the UK.

[00:01:44.370] - Sam Wevers

Yeah, thanks Jon for having me on. So, I'm the product manager for our local energy market platform that we're delivering in Cornwall. And essentially what we're doing in Cornwall is essentially we're trying to build an energy market for the future. We're seeing the biggest structural shift in energy markets since Edison and Tesla. Anywhere technological and societal imperatives it's pretty clear that our market models have to change and we're showing that these new market models are not only possible but they're a reality now.

[00:02:13.230] - Sam Wevers

So, our platform, so in an age of stability it unlocks renewables and it places consumers at the core.

[00:02:21.000] – Jon Slowe

So how would you make that a bit more tangible for what you are doing in Cornwall unlocking renewables facing consumers at the core. But have you got an example of that or help our listeners understand what that means?

[00:02:34.860] - Sam Wevers

Yeah, so essentially what we're doing is we built a market platform where if I'm a seller and I've got some flexibility in my industrial process or in my battery in my home or potentially even in my EV, I can go onto a platform I can say what time of day I have flexibility available, I put in the amount that I can move my flexibility around, you know whether it be 50 kilowatts or two megawatts whatever it might be. I can then put a price on that, and I can then walk away from the platform. On the other side of the platform a buyer namely the DNO/WPD or National Grid the Electricity System Operator they placed bids on.

[00:03:13.980] - Sam Wevers

 So, they say I need some flexibility at a particular time of day and they put their prices in, and then what we do is we take those bids and offers and we take a view of the network constraints and we run a clearing engine to create contracts for those services and then going forward, sellers will know when they have sort of turn their stuff on or off and then they end up getting paid and we'll take money from the seller from the buyers they'll pass it to us and they will disperse that back through to the seller.

[00:03:40.240] - Sam Wevers

 So, it's an end to end process where somebody can you know monetise the flexibility that they have a good way for the price.

[00:03:48.720] – Jon Slowe

Great. Okay well come back to that Sam. Thank you. And my second guest is a colleague here at Delta EE, Jeremy Harrison. So, Jeremy welcome.

Jeremy Harrison - Thank you.

Jon Slowe - You've had some direct experience in local energy systems in your last role at E.ON before joining Delta EE. Can you tell us very briefly about that experience?

[00:04:15.180] - Jeremy Harrison

Yes, interestingly E.ON is both an energy supplier and distribution network operator and local energy systems present challenges and opportunities in both those areas. When we first started off looking at local energy systems it was actually from the network operator perspective, particularly looking at issues about resilience about security supply in remote areas within the E.ON network in Sweden actually. And in fact, the first project that was actually built was a microgrid, fully 100 percent renewable microgrid, in the southern part of Sweden and that was really technical demonstration to see how we could overcome those issues.

[00:04:59.240] - Jeremy Harrison

 And since then it's evolved into much more of a commercial community-based approach where the supply side of the business is interested in how they can partner with communities to deliver the kind of things which I think Charles will talk about a bit more detail.

[00:05:14.440]  – Jon Slowe

Okay. So that was more network led and that was more like a mini utility that could be disconnected from the rest of the network.

[00:05:24.300] - Jeremy Harrison

Yes, I mean that's just one of the many concepts which is used is very different from what Sam was just talking about which is more of a kind of a virtual approach where you match supply and demand but across a much wider area. E.ON’s approach was a very small, in fact mini utility of about 200 homes which is actually still operational.

[00:05:45.960] – Jon Slowe

Okay and thanks Jeremy. Let's turn to my third guest Charles Bradshaw-Smith. So, Charles you're at the opposite end of the spectrum compared to Centrica in terms of size, you're CEO of SmartKlub. Can you tell us what SmartKlub does and how it's involved in that localisation of energy?

[00:06:09.130] - Charles Bradshaw-Smith

Certainly, thank you for having me on Jon. SmartKlub’s focus is around the business models, that's the market arrangements in the energy industry. So, we've got a few fundamental beliefs that have steered our focus. Firstly, we think the technology out there is great at the moment, but the business models are sadly lacking and that's in particular for individuals and small businesses people who aren't professional energy people. And we need them to get involved. We're not going to solve a climate emergency without mass movement of people lending their flexibility as Sam has described into the mix as well.

[00:06:55.120] - Charles Bradshaw-Smith

 So, we're all about trying to help those people. Local energy systems in particular suffer from lack of business models. So, what we're doing, we've been busy working on two emerging products from our RND. One's all about group buying energy solutions where communities can club together and get economies of scale in doing that. And the other one is then about an easy Esco and Esco means energy service company which allows communities to then operate whatever energy system they become involved with. In particular accessing things like ancillary services which will become a growing focus and revenue streams for energy systems.

[00:07:42.280] - Charles Bradshaw-Smith

So, both of these need community activism really. So, our mission is about empowering those communities to participate. And we have a flagship project in Trent based in Nottingham where we're working with a developer the university to make renewables hassle free for both the residents and the developer. We're hoping that with the big building boom that is starting to emerge that we can get renewables embedded in that built environment as standards rather than the exception that it is at the moment.

[00:08:20.160] – Jon Slowe

Okay. And what might that look like Charles in terms of again trying to make it tangible you've got a new development maybe hundreds/thousands of homes. Would that be a local energy company? Would there be peer to peer trading between people? Can you paint a bit more of a picture of what that might look like?

[00:08:41.630] - Charles Bradshaw-Smith

Yes certainly. So how we've started this, so we have an esco called Trent Basin esco ltd which has worked with the developer to put photovoltaic panels and a large community battery on site but rather than having individual homes with individual batteries and individual homes with individual solar panels, we've actually created an energy system out of this. So, we've got a big community asset lots of solar panels strung together as well as Europe's largest community battery. And therefore that gives us the ability to act at a bigger scale than individual homes and to take the need for individual homes to do peer to peer trading for instance the esco the professional manager from SmartKlub would do that for them.

[00:09:40.220] - Charles Bradshaw-Smith

By having that scale, we've got several advantages. We can access markets in a more the ancillary service markets were talked about in a more advantageous way we have more efficient use of capital. One big battery is more useful than lots of little batteries and cheaper and so it goes on. So, the way we meant hassle free is that the community whose roofs we are using or for heat pumps their ground we're using they don't have to worry about being individual energy managers themselves. They give that to us, so we act as their trusted intermediary to use an ofgem term ofgem term being the UK regulator.

[00:10:20.090] – Jon Slowe

Okay thanks Charles. So that's three quite different projects we've got a flavour of, and already picking up some of the complex terminology and varying terminology in this area. In a minute, I’d like to go back Sam and Charles to your projects and look at them in a bit more detail. But before I do that, Jeremy can you help us to understand the ways to think about local energy systems or the key dimensions and how do we simplify what's a really confusing complex area.

[00:10:59.090] - Jeremy Harrison

I think confusing is definitely the key word here, right at the beginning you identified a number of different words and phrases that were used to describe local energy systems or things which could fall broadly into the localisation of energy.

[00:11:13.070] - Jeremy Harrison

And so one of the first things we did as part of our research service here at Delta-EE was to try and make some sense of what all these acronyms meant and what the different labels meant and so we developed a matrix which has both a technical axis and an ownership axis.

[00:11:30.200] – Jon Slowe

So, this whole coalition is to paint two axes in their mind yet and hold that.

[00:11:35.030] – Jon Slowe

Okay.

[00:11:35.420] - Jeremy Harrison

So yes, so the x axis if you like is the technical access and on the far extreme left you have things which are about systems where there is virtually no balance between supply and demand. One of the key characteristics of local energy systems in my view is there has to be some matching of supply and demand. It's about using local resources and matching those to local demands which is what Charles is talking about for example. So, things like a community, wind community owned wind farm which is referred to as a local energy system very often, is often completely balanced it's just community owned, but it has no relevance particularly to the demands locally.

[00:12:16.790] – Jon Slowe

Okay. So, the X axis and on one side very little matching of generation and demand and on the other side very high matching and that's an example of the microgrid project you mentioned earlier where it can be 100% matched and operate independently.

[00:12:31.760] - Jeremy Harrison

Exactly. And what Charles was talking about is very close to the right-hand side of that access axis with the matching of supply and demand locally.

[00:12:39.440] – Jon Slowe

So that is the X axis, let’s look at the Y axis

[00:12:40.580] - Jeremy Harrison

The Y axis is about ownership and it might seem to some people but that's not as important as physically delivering stuff but in fact ownership models as Charles has pointed out are one of the key ways that you empower local communities to manage their own supply and demand and to optimise it as well. And it opens up ways for them to invest and to increase the development of local renewables by communities engaging and becoming more involved. So on the Y axis you would have whether it's the top the bottom but one what end of it would be ownership by the local community by the local residents and at the other end the access would be centralised systems which are run by energy companies like E.ON for example.

[00:13:28.760] - Jeremy Harrison

 In some cases.

[00:13:29.850] – Jon Slowe

Okay. So, we could have community owned microgrid islandable projects or we could have projects that do some matching of supply and demand where there's not community ownership but it's privately owned.

Jeremy Harrison - Yes. Yes.

Jon Slowe - Other than other combinations. Okay, and with this, in your view Jeremy will this always have to involve the physical network, the distribution network or I guess as Sam as described we have some projects that don't have the physical network at the heart of the local energy system there.

[00:14:04.560] - Jeremy Harrison

Exactly. I mean really there are two distinct types of local energy systems. There are those which are physically connected like as Charles was describing where there is a discrete network with the energy centre with its own storage. So PDP generation supplying customers within that local network and then the other side of it which Sam has described which is a virtual network where there are generation assets and loads within a much wider system which okay they're indirectly connected to each other but the network in between is not an integral part of a discrete energy system it's much more virtual approach.

[00:14:42.920] - Jon Slowe

Okay thanks Jeremy. Sam let's come back to your project in Cornwall, your local energy markets project thinking of those dimensions Jeremy set out, would you say Centrica has got a clear view as to where it wants to be on those dimensions or is this a first step or how do you see Centrica as activities today and potentially go forward.

[00:15:12.050] - Sam Wevers

Yeah, so it's a good question and as I put that and all those axis in my mind, I think we're sort of centre left on that axis namely we are, you know we're a market platform so where we're a trading house essentially where people can meet and win contracts. We're not a microgrid, we're not directly managing behind the metre’s assets because in our view that is the role of the selling actors on our platform and actually as we as we sort of refer back to what Charles was talking about and what Jeremy was talking about those microgrids themselves or those community escos we see as sellers in a local energy market system and if we're talking about you know trying to get businesses and residential customers to access revenue streams you know they need markets in which they can win contracts and they need markets that have clear pricing signals that they can chase so that they can provide innovative solutions and cut costs.

[00:16:11.570] - Sam Wevers

 So, the LEM is essentially about trying to be, you know available both for aggregators for community escos, for industrial demand to sell directly for industrial demand to sell through a third party. And you know it's a broad church on purpose, it's a deliberately broad church in that sense. And the reason we're doing that is that you know it's clear that we need more flexibility on the networks if we're going to unlock increased penetration of renewables and the electrification of heat and transport. So, we need all potential sellers that we can get, and you know we need to have active consumers and communities and that's what we're trying to do.

[00:16:51.980] - Sam Wevers

 But yeah we're on that centre left where we're not controlling the end assets but we are you know a clearinghouse and we do take the network into account so it's not entirely sort of without reference to the state of the network we make contracts that are grid secure.

[00:17:09.550] – Jon Slowe

Okay. Sam, your active in Cornwall with this project and I'm looking at a map of the UK on the wall in the room I’m sitting in Cornwall and I don't know what the population of Cornwall is but it's a pretty small part of the UK, less than a million people I imagine Sam do you have the numbers?

Sam Wevers - Given that I'm from New Zealand I don't actually have the demographics to hand.

[00:17:34.190] – Jon Slowe

But it is, it is a lot smaller than London. I can say that for sure in population size.

[00:17:40.670] – Jon Slowe

So how local does your concept have to be. Would you, if you roll this out. Would you have 50 or 100 of these across the UK or would you have one platform in the UK. So how inherently is what you're doing local?

[00:17:58.100] - Sam Wevers

Yes, so it's a good question. We've built the platform to be scalable so you know if we import a new grid model from a different area then we can spin up a new LEM in Nottingham or Glasgow or wherever it might be. I think our current view is probably that these markets or LEMs given that their core function is about providing flexibility to DNOs and the ESO would probably operate sort of in DNO footprints. They wouldn't necessarily sort of get down to the village level, but they're given that the key buyers of those network companies I think that defines the shape of it.

[00:18:42.830] - Sam Wevers

So yeah that's probably the best view on how we see the sizing.

[00:18:47.300] – Jon Slowe

So that's dividing the UK up into 13 or 14 different areas and potentially one local energy market in each of those areas.

[00:18:56.420] - Sam Wevers

Yep and of course you know where they, where they you know are adjacent to each other then something that happens and in in Wales in a Welsh local energy market could then move across in to Shropshire or something like that because it's obviously not just sort of looking vertically DNO and the transmission network but there's also different DNO networks that could potentially interface with each other as well which was work it's very fun.

[00:19:23.650] – Jon Slowe

Okay, and a second question around customers. So, I think I said at the beginning customers are becoming a bigger part of the energy system. We talk about active customers, customer centricity, you talked about customers offering their flexibility. But I think we have to remind ourselves from time to time that a lot of customers just don't care and aren't bothered, and they've got many more important things in their lives to do than think about what flexibility they can offer. So how in in your project, how engaged do customers have to be and how much of a challenge has that been for you to try and get them onto your platform or into your project?

[00:20:07.000] - Sam Wevers

Yes, I suppose a few key facts there I mean we have 100 homes that we've installed solar and batteries into that is making up essentially the biggest residential VPP in the UK as far as we're aware. And you know we, we put out some marketing early on in the project and had a significant level of interest and we had to whittle it down to 100 homes. So, I think you know in Cornwall we found that people are very interested in taking part in these sorts of things. Obviously, that is dependent on you know particular trends and particular areas, but I think your point around making you know customers don't have time to think about their flexibility.

[00:20:50.530] - Sam Wevers

 You know I agree 100% and that's where having third party escos or aggregators is so critical, so that sellers or consumers can sign up to an app they can say what their preferences are how full they want their battery, how full they want their EV those sorts of things and all that can go into an algorithm and can be managed by a third party which is what we're doing in Cornwall with the batteries that we've installed. So, the homeowners aren't there you know 455 working out if they want to trade. That decision is made by somebody else and it's also worth noting that you know we're not just installing stuff in homes we're putting flexibility into businesses.

[00:21:34.600] - Sam Wevers

 The project is part funded by the European Regional Development Fund. So, it's really about developing the Cornish economy through unlocking flexibility. So, it's that gamut it runs the gamut of residential all the way up to big factories.

[00:21:49.100] – Jon Slowe

Yeah. Okay and the buyers of that flexibility today are the network company the DNO using UK terminology, DSO more European terminology, is that the main user or beneficiary of that flexibility today?

[00:22:11.000] - Sam Wevers

So yeah, it's the DNO for sure but it's also the transmission operator. And so that's something that also very exciting about what we're doing is that we're coordinating the procurement of the DNO and the and the ESOs as it's called in the U.K. because you know we can't go into a situation where there's a whole bunch of flexibility being dispatched that is connected to the distribution network but is winning a contract with National Grid and then causing a whole bunch of problems on the local lines that have to be managed by the DNO going around with a brush afterwards to sweep everything up. And it's a clear it's a clear drive in the regulatory direction that not only we move to independent market based systems but also that it's we think about this from a whole systems perspective because when we do that ultimately we bring costs down for the consumer.

[00:22:55.910] - Sam Wevers

 And so, a key part of the platform is making sure that WPD and National Grid don't do things that you know conflict with each other.

[00:23:03.820] – Jon Slowe

Yeah okay. So, managing those local and national benefits so that they work together.

[00:23:11.150] - Sam Wevers

Yeah and we do that throughout our clearing engine which has actually been developed by a Belgian company called N-Side who run the Euphemia, we have built the Euphemia algorithm that clears the European day ahead power markets. So, you know there's a thorough pedigree there in terms of taking all the various variables that you have to optimize and getting a nice clean answer out the other side.

[00:23:34.070] – Jon Slowe

Okay thanks Sam. Charles let's come back to your projects your activity. As with any start-up if I can call SmartKlub being four years old a start-up, you learn a lot on the way you pivot you change direction. What have you learned over the last years about trying to enable community individuals and particularly communities to do the sorts of things that you starting to do now?

[00:24:06.900] - Charles Bradshaw-Smith

Well firstly I would echo Sam's comments, communities and individuals really are up for this. They want to get involved, I think a lot of people are realising it can't just be left to governments, councils and the energy industry to solve the climate emergency so that that's really good news. As you would imagine there's a spectrum of knowledge and time that communities have to get involved. And that's fine, so the way we communicate with the communities and the way our customer service app works for them everybody gets an equal say.

[00:24:52.110] - Charles Bradshaw-Smith

 But people can take a bigger role if they want to. And it's a bit like everybody wants attention to use the financial services industry as an analogy. Some people are just happy to have it taken out of their salary and don't look at it again until they are coming up for retirement. Other people want to day trade and get really involved. And we're learning that's the same in the energy industry. And if you've got a balanced community with a number of people wanting to take more of a role and others that are happy to follow that works really well.

[00:25:30.440] - Charles Bradshaw-Smith

 They all have a say in the direction that we steer the energy system. I'm sure of that. But generally, they're happy to get involved, understand some of the complexities and as we build services onto our basic proposition they're very happy to influence those which is good news. I think from a much, I think our aspiration to activate citizens to get involved I think over the last four years we've proved that that's something that will happen people will get involved.

[00:26:08.930] – Jon Slowe

Charles can I ask you about ownership, so to what degree are in your in your Trent Valley project that you explained is the solar panels and the battery and the system owned by the community and if it is where does that capital come from?

[00:26:31.880] - Charles Bradshaw-Smith

Okay so we're taking this stage by stage at Trent Basin so one of the parameters we were given by the developer on site was that we couldn't force people to invest or join in or sign 25 year energy contracts and be locked in etc etc. The developer is a real developer wanting to sell their homes to plan etc etc. So, the normal business of being a developer and selling the homes at the right cost at the right time is what prevails and steers a lot of the projects we've started in very gentle way.

[00:27:14.150] - Charles Bradshaw-Smith

So, to begin with we financed through innovate UK funding the assets and we run them on behalf of the community using their roof space and ground space.

Jon Slowe - Yeah.

Charles Bradshaw-Smith - It'll growing where heat is the next thing that we're doing so we're still expanding the proposition. And basically, we're creating arbitrage opportunities both sides of the meter. And we have an Ofgem derogation to allow us to do that with combined billing. So they're not expected to put any money in day one but as they see the project working and us delivering a surplus and we share the surplus with the community each year they can start to buy in if they wish to.

[00:28:00.590] - Charles Bradshaw-Smith

 So, our foundation investor has to be prepared to sell stakes in the energy company as the community gets more confident. They of course will get their surplus whether they buy it or not, but they would also get a dividend if they decide to buy in.

Jon Slowe - Thinking about Jeremy’s axis then you're starting maybe at the vertical axis and he's starting more towards the bottom but you're enabling your customers, you are enabling people to move upwards and take a bigger ownership in this project.

 Charles Bradshaw-Smith - And that goes all the way, you know they can incrementally buy in and even locals it doesn't have to be residents who have a house that uses the local energy system it could be other local investors who don't want to invest in some wind project far out at sea they'd rather invest in their local communities.

[00:28:57.630] - Charles Bradshaw-Smith

We allow those two types of investor, but they could even take over the energy project. So, the agreement we will have with our foundation investor is that they have to be prepared to sell up to 49% of the scheme. So, they've still got control and then the community if it wishes to can launch a takeover bid and buy the other 51% and have full control. So, you know we want it to be very transparent like that. So, the community doesn't feel they're going down a one-way street. But they have the ability to run the operation.

[00:29:34.800] - Charles Bradshaw-Smith

 They don't have to do that, it will work. And one of the other things we've done is the foundation investor gets a fixed return for their investment and it’s the residence even if they're not equity holders that get the variable return based on the performance of the esco. And that's based on SmartKlub’s ability to arbitrage in the different energy markets and also based on the resident’s behaviour, whether on their in-home apps that they've got on the way that they wish to participate in reducing their carbon footprint etc etc. So hopefully we've got aligned objectives to make this work.

[00:30:15.210] – Jon Slowe

So, I think what we are seeing and what we will see is a lot more innovation and learning and various different ways forward being tested around these these ownership models. And now time is always is getting the better of us, so those people that listened to the last podcast will be pleased to know that my talking new energy crystal ball is fixed because I've given up using it to try and peer into the future to see what Brexit may hold for the UK. I think it's a thankless task, so bring out the crystal ball and let's use it to look into the future for local energy systems and look out say to 2025.

[00:30:58.590] – Jon Slowe

 And I'd like to ask each of you for a brief comment. So, Sam, where do you think Centrica will be with local energy markets, local energy systems in 2025?

[00:31:13.110] - Sam Wevers

So totally agree that your crystal ball can't predict Brexit, I think it'll be a very valuable crystal ball if it did. I think looking forward in the energy system it is quite clear that there's going to be fundamental change and that the systems are going to be more local and that the technology is going to be more automated and that consumers are going to have greater control. So, the question is how we get there? I think. And by 2030 as an example Centrica is looking to deliver 7 gigawatts of flexible and low carbon generation.

[00:31:45.160] - Sam Wevers

 We're becoming an energy services and solution companies we're doing VPP’s, we’re doing EV management, we're doing Hive/Centrica innovations. You know the platform economy is coming to energy, it's come to transport, it's come to other places and we're trying to stay ahead of that game. Flexibility is key to driving that shift to low carbon markets and the LEM as you know at its core about unlocking flexibility to do that. So, we want to see LEMs, you know across the world with different configurations, you know flexibility and energy being traded across transmission distribution with the full range of microgrids energy communities, fleets of EVs, fleets of homes, industrial flexibility, renewable storage all trading amongst themselves and with network companies.

[00:32:31.710] – Jon Slowe

Okay. Well let's hope that you succeed in that. And Cornwell I think it's a fantastic project and a pioneering project from what we see across Europe that will help move the market in this direction.

Jon Slowe - Jeremy

Sam Wevers - No shortage of ambition.

Jon Slowe - No, great! Jeremy from your looking across Europe a very difficult question, but how in 2025/ 2030 if you want, how prevalent do you think local energy systems, local energy markets, communities will become? Will they still be something people are talking about and the odd innovation here or there?

[00:33:09.940] – Jon Slowe

Or do you think we'll see projects popping up more and more frequently in inverse markets?

[00:33:15.530] - Jeremy Harrison

I think we're already seeing quite a dramatic evolution of the local energy systems. Initially it was all about resilience and island communities where they had weak connections and they needed to have balance generation to overcome the problems with grid failures and that's already evolving from that into empowering renewables and communities. And I think that what we're seeing now at the European level particularly is a focus on the communities’ things like community self-consumption. And I think that one of the really positive things that we can start seeing happen what Charles described is this partnership between the public and private sectors.

[00:33:58.840] - Jeremy Harrison

 I think there's always a danger that you can be politically dogmatic about whether it should be public or private. And in practical terms it's great if you can leverage the resources of communities. But at the same time also use the existing technical and practical resources of the private sector players and I can really, well I'd like to see you have coming together even more to optimize the value of consumers and industry as well.

[00:34:25.420] – Jon Slowe

Okay. So, you see the market really moving already and then by 2025 it will be established and flourishing in certain sectors in certain ways in certain countries.

[00:34:34.230] - Jeremy Harrison

Yes. But there are still some quite significant regulatory challenges about how you optimize this, how you charge fairly for the year, the system Sam referred to it earlier about you know how you avoid conflicts between services you're selling the transmission level but using the distribution level

Jon Slowe - So there's still quite a lot to do.

[00:34:51.890]

Jeremy Harrison - Yeah absolutely.

Jon Slowe - Yeah. Okay. And lastly Charles what will SmartKlub look like in 2025?

[00:35:00.990] - Charles Bradshaw-Smith

Well hopefully we'll be managing thousands of escos like Trent basin on behalf of communities all around the country and in Europe. I buy into absolutely what Jeremy's just described about the future. I think the regulatory aspect is key, I would like as soon as possible, the UK’s regulator to look at the idea of virtual private networks on the public wires. I think that's, I know it's very complicated. And whilst they're doing kind of round one of the fairer charging on the distribution and use of service charge, I think it's disappointing that they haven't tried to tackle the VPN question at the same time because they're inextricably interlinked.

[00:35:57.440] - Charles Bradshaw-Smith

 If we're to have a smart grid and a smart system and a kind of liquid market that Sam is trying to create, we need to avoid having too many microgrids and private wires where people are either building walls around their community or duplicating copper that the DNO has already invested in, we need to open that up to enable that smarter optimization potential. We don't know the way the technology is going to go yet and if we're not careful we could be going up some blind avenues.

[00:36:41.410] - Charles Bradshaw-Smith

This is my concern so let's open up the DNO wires to virtual private networks and then I think we can be really creative in the way communities can come together and the flexibility becomes available. Without that, without the capital to rewire Britain as it's called, we're not really going to get to the stage where we can have stable local networks that can accommodate huge amounts of electric vehicles and heat pumps for instance.

[00:37:07.700] – Jon Slowe

Okay. Well as always in the energy sector there's regulation and policies and standards are an integral part of how things will develop. But and I think it's clear from listening to everyone today and from what we see that there's going to be more and more localisation.

[00:37:26.750] – Jon Slowe

Sam and Charles thanks for sharing your thoughts on your experiences on how you’re playing into that localisation theme.

[00:37:35.720] – Jon Slowe

Thanks, Jeremy, for helping to bring some sense of dimensions and virtual axes for us to think about, to make sense of this. And as always thank you to the listeners, our listeners for joining. We hope you've enjoyed the podcast and learned more about the localisation of energy and I look forward to welcoming you back to the next episode. So, thanks very much Sam.

[00:37:59.990]

Sam Wevers  - Thank you.

Jon Slowe - Thank you Charles.

Charles Bradshaw-Smith  - A pleasure

Jon Slowe - And thank you Jeremy.

Jeremy Harrison - Thank you

Jon Slowe - And goodbye to everyone and see you on the next episode. Goodbye.

[00:00:04.560] – Jon Slowe

Welcome to Talking New Energy, a podcast from Delta-EE, the new energy experts. We will be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition. Hello and welcome to the first episode of series 3 of Talking New Energy.

[00:00:27.560] – Jon Slowe

We've got some exciting topics and guests lined up for the coming weeks as we continue to explore how the transition from old to new energy gathers pace.

[00:00:36.570] – Jon Slowe

For whoever is new to the podcast my name is Jon Slowe host of this podcast and a director at Delta- EE. We're recording this episode today in the first week of September. And being in the UK it's slightly ironic that the topic for today's podcast is the influence that Brussels and the European Commission, European Union has over the energy sector.

[00:01:01.220] – Jon Slowe

They're certainly having a big influence over the UK political scene at the moment. Even if they won’t, or maybe they won’t, when the UK leaves. But that would be a very different podcast.

[00:01:14.120] – Jon Slowe

So, let's turn our attention back to energy and away from the UK's political woes at the moment.

[00:01:24.110] – Jon Slowe

So, the focus of today will be Brussels and what policy coming out of Brussels and out of the European Commission means for the energy transition in Europe.

[00:01:33.470] – Jon Slowe

I'm joined by three guests. Let's start with two based in Brussels. So, hello Frauke

Hello John.

Frauke, you run a trade association called smartEn.

[00:01:47.970] – Jon Slowe

Can you just tell us a in a nutshell what is smartEn and what it does and the members that you represent and what you do?

[00:01:55.500] – Frauke Thies

Sure. So, smartEn stands for Smart Energy Europe and we are the European Business Association for digital and decentralised energy solutions in a decarbonise interconnected European system.

[00:02:08.370] – Frauke Thies

So, unlike your typical business association representing a specific sector be it solar, heat pumps, batteries etc. At smartEn we see our role as really taking an integrated perspective at looking, how the different solutions can interact in in the energy system.

[00:02:24.570] – Jon Slowe

Does that mean your membership is quite wide then? Because if you're a storage association your members tend to be battery companies for example. What's your membership like.

[00:02:35.760] – Frauke Thies

Yes indeed.

[00:02:36.330] – Frauke Thies

I think you're right it is quite wide in the sense that we look at various players both on the technical and service side providing decentralized digital energy solutions. So, our membership includes innovators from aggregators, energy suppliers, data management and finance research. So basically, yes all business players somehow involved in the digital decentralized dimension of the energy transition.

Great.

And a lot of new market entrants I should I should emphasize.

[00:03:15.180] – Jon Slowe

Yes certainly.

It's not just one set of players in the energy market today there's a whole variety of players coming from different angles, so thanks Frauke. My second guest, hello Federica.

Hi, good morning.

So, Federica similar to Frauke, you run a trade association the European heating industry and this one may require a bit less explanation, but can you tell us a bit about your association and your members and the job you're doing for them.

[00:03:49.120] - Federica Sabbati

Yeah. So, the European heating industry association is if the industry association of the manufacturers of, well, as the name says heating appliances. Our members are big market leaders in Europe for all heating technologies. So, from those that produce so-called heat generators, all technologies for that. So, boilers to heat pumps, solar thermal, biomass boilers and micro combined heating power, hybrids all sorts of technologies that you need to generate heat both in a domestic but also in a commercial and industrial setting. We also have tried to convert the entire heating system in a building.

[00:04:31.500] - Federica Sabbati

 Therefore, we have also manufacturers of components and system integrators such as smart meters, the thermostats producers and finally the so-called heat emitters. Therefore, manufacturers of heaters, under floor heating and cooling technologies so as to have really to cover the entire heating system as well as a portfolio of technologies for heating in buildings.

Jon Slowe - So everyone involved in keeping our buildings comfortable and pleasant to be in across Europe.

Federica Sabbati - This idea I should say is also hot water and hot water production so it's not just keeping yourself warm but actually allowing you to have a nice warm shower in the morning.

[00:05:18.750] - Jon Slowe

Very important. Frauke, Federica could you give our listeners a very brief feel for your day job? So, you are in Brussels, you are representing a sector or a group of companies around a specific theme. You're trying to represent their interests in how policies are developed. There'll be no such thing as a typical day, but what might a day or week involve? Or how can you help us understand what the day job is like.

[00:05:53.950] - Frauke Thies

If I give it a try. So, I think much of our day job involves talking to the European institutions be it the European Commission, European Parliament also the national representations in Brussels and in member states, to understand what is going on, what are the priorities that the institutions see coming up in the energy field and what are they working on. And then of course to express our views towards them and our views means the views of our members. So yes, part is talking to basically the decision makers but then in order to be able to express our views of course the other big part is interacting with our membership in committees and task forces and working groups in conference calls, understanding what their needs are, what the barriers are that they are facing in the energy system in regulation and bring these messages to decision makers.

But of course, also convey to our members what is happening in Brussels, what are the next steps on the agenda and understand their views and opinions on it. So in a way I see our role both as shaping the European agenda, bringing to decision makers what the market, what the sector needs and suggesting new policy initiatives but also influencing the agenda that's already there and bringing our members input to the discussions that are already happening on the Brussels agenda.

[00:07:26.560] – Jon Slowe

Federica, I guess that those discussions and that influence can take the form of a conference and one to one meeting a variety of different forms of discussing and influencing.

[00:07:38.180] - Federica Sabbati

Exactly, yeah exactly. I mean there's different formats, of course the one to one meeting you know, you start with a one to one meeting because you are in Brussels because the network is so large but then you go on to the conferences and workshops and big stakeholder meetings where actually the commission is required to listen to all of the stakeholders, all the organisations whether it's industry whether it's consumer organizations. The representatives of member states that have a stake in a certain and policy.

[00:08:19.930] - Federica Sabbati

And I should add, I think our day/my day is very similar to how Frauke described it because it's really, we are really looking at a very strong link with our own members. So, we spend a lot of time with our members understanding what their needs are. And we also spend a lot of time understanding what the European legislator is intending to do and is doing in order to explain it to our own members. The legislation on technologies such as heating technologies is very technical from one side, but it increasingly becomes also political and it is something that you need to be present in Brussels to really capture and then influence.

[00:09:10.660] - Federica Sabbati

I should add one other element, because it's linked to the type of membership that we have we don't only have as members companies, but we also have national associations of leading companies in the various markets. So I think for us I think it is important to keep that link to the national markets, because I think this is one of the topics that you mentioned at the beginning, the legislation that is passed by the European Union is actually having a very strong influence to what happens in the national market supports is important to keep that link very strong through our national associations.

[00:09:43.360] – Jon Slowe

Well let's pick up that link now. So, it's not always straightforward I think if you're working in one particular country to understand the influence that European legislation of policy has and coming back to what I said I wouldn't do many I think many people in the UK haven't fully understood it or appreciated but we'll live with the decision we've taken probably.

Lukas, could you sorry, my third guest Lukas Bergmann colleague here at Delta. Lukas could you highlight an example of the influence that Brussels has had, if we look at where we are today in the energy sector to help our listeners understand how important European legislation can be.

[00:10:33.310] – Jon Slowe

If you're in one particular country.

[00:10:35.230] - Lukas Bergmann

Yes certainly. I mean we have to probably differentiate between two different types of impact direct impact from regulation.

[00:10:45.400] - Lukas Bergmann

So, for example energy efficiency related regulations like eco design which everybody will know from disappearance of incandescent light bulbs or from the disappearance of, or the demise of non-condensing boilers from the heating markets these days. But then we also have.

[00:11:07.200] – Jon Slowe

So, on that one Lukas, If I'm in one country and I can't buy an incandescent light bulb that's not down to necessarily decision my government took, that's down to legislation coming out of Europe.

[00:11:19.360] - Lukas Bergmann

Exactly. This is basically down to energy efficiency standards that have been set out on European level and that apply directly in every European country.

[00:11:29.010] – Jon Slowe

Okay thanks.

[00:11:29.840] - Lukas Bergmann

And then on the other hand, we've got directives and they basically, they just set a framework for member states for pieces of legislation, that the member states have to implement but they only provide a guideline on how those should look like or what the targets of those legislation should be. And a very good example here is for example the Energy Performance of Buildings Directive which has been setting the target for member states to achieve nearly zero energy buildings in a new build, which in future is going to push them towards achieving a renovation of the building stock as well.

[00:12:14.150] – Jon Slowe

Okay. So those new build regulations if we look across Europe, they're all moving in the same direction. They may be implemented slightly differently but the fact they're moving all in the same direction arises from that European directive.

Lukas Bergmann - Yes exactly.

Jon Slowe – Okay, so quite significant influences then on policy.

[00:12:37.780] - Lukas Bergmann

Yes and they have really been, I mean these examples that I've just named they have really been shaping the market with the types of products that you can put on the market etc..

[00:12:49.120] - Lukas Bergmann

And this is not only the case for products like heating or light bulbs etc. There's is also the case for how players like energy suppliers can operate.

[00:13:00.840] – Jon Slowe

Yeah. Okay. Or even network companies having to be separate business entities from a vertically integrated utility.

Lukas Bergmann - Yes.

Jon Slowe - Yeah.

[00:13:09.550] - Jon Slowe

So, I think that is a fascinating time to look at how Brussels will shape our future. When we look at the transition from old to new energy, the current market roles, the current market structures are in many ways going to be thrown up in the air and how they come down will depend very much on the framework laid out at a European level.

[00:13:35.500] - Jon Slowe

So, I'd like now to look at how European legislation and regulations and policy is likely to shape the transition from old to new energy. Frauke, can I start with you and your focus on digitalisation, decentralization and flexibility. How, the market role for an aggregator for example weren't thought of when the electricity market structures were devised probably 20 years ago.

[00:14:08.080] - Jon Slowe

So, can you help us understand how Europe is likely to influence electricity market structures or energy market structures going forward.

[00:14:20.440] - Frauke Thies

Yeah sure. I think especially in the fields that you mentioned, we've had quite some big developments in Europe especially over the last two years, with the beginning of 2019 seeing the adoption of a big European clean energy package for all Europeans it's called. Which is a package of various directives and regulations as explained and from our perspective in terms of the energy transition, in terms of consumer empowerment digitalization there couple of very interesting dimensions. One is that this package ensures in the first place that active energy consumers and energy communities have the right to exist have the right to self-generate electricity, to install storage and so on. But also to access all markets to have fair access conditions to networks and so forth, cost reflective network tariffs or things that are not a given in many European countries today that need to be implemented.

[00:15:23.610] – Jon Slowe

Okay, so if we take that one Frauke, then looking at if you're in one particular country Portugal, Romania France, wherever it is and you're not able to do certain things as an active energy consumer with a battery with a solar panel with smart charging or an electric vehicle, then your country will be forced to enable you to participate more in the energy market.

[00:15:53.680] - Frauke Thies

That's right. So, that's the principles that the European framework sets. It doesn't say in detail on how countries have to make it possible, but they have to make it possible within the logic of their national frameworks.

[00:16:09.090] – Jon Slowe

OK. And the consequences is they don't make it possible? Does that, what happens in thopse sort of circumstances?

[00:16:15.940] - Frauke Thies

Well the theoretical formal approach is always that, that companies or people can go to the European, well through the legislative process, legal process not legislative, legal process. In the end to the European Court of Justice which can essentially force a country to implement the legislation most often it doesn't come to that which is a very lengthy process. Most often it's basically the cooperation with the European institutions. Also, the cooperation across member states that leads countries to already implement legislation. Most of the time it does get done anyway. But of course, there are cases when countries are particularly slow.

[00:17:00.850] - Frauke Thies

And to be fair, the European enforcement process can be powerful, but it can also take a lot of time.

[00:17:09.380] – Jon Slowe

Okay. So, let's assume people play by the rules and active energy customers or energy consumers communities find it much easier to take more ownership to participate in electricity markets to develop both PV storage themselves for example.

[00:17:25.480] – Jon Slowe

What else do you see either out of that the Clean Energy Package or key issues shaping the future of the energy system.

Frauke Thies - I think another very, very big part is a general market-based approach for the European energy market, energy system and a very important new dimension access in oil markets for decentralised solutions. So, what does that mean it means on the one side that for instance system operators, network operators should procure services via the market. And then for all markets whether it's for system services or whether it's the wholesale markets, all markets should be open to decentralised solutions including to pooled resources.

[00:18:18.600] - Frauke Thies

 That means that, entrance barriers need to be removed. The markets have been defined sometimes 50 or more years ago based on the technologies we knew at the time. So, in some markets you have entrance thresholds of even 50 megawatts which makes no sense anymore in today's reality. So, what the new legislation is saying that these entrance barriers need to be removed we need product definitions that reflect the needs of the systems rather than the capabilities of all technologies.

[00:18:50.590] – Jon Slowe

So, this will have the effect of opening up markets to more players or making it easier for customers to participate in markets.

[00:19:00.030] - Frauke Thies

That's right. And also, there are some specific provisions for that. So, for instance that countries need to have a framework for independent aggregators of demand response to be able to access the market, which is by far from being reality in many European countries today. There are very concrete elements there.

[00:19:22.020] – Jon Slowe

And how soon will we see that in manifesting itself in countries Frauke? You said it's been agreed at the European level or being agreed at the European level. If you're in a particular country in Europe how long would you have to wait before it.

[00:19:40.800] – Jon Slowe

Becomes a reality?

[00:19:44.070] - Frauke Thies

It depends on the specific provisions we're talking about. So, when we're talking about for example the changing of product definitions in markets it's relatively fast because here, we're talking about a regulation that directly applies to national law.

[00:20:02.700] - Frauke Thies

So, for example member states already have to report in January next year how they want to eliminate wholesale price restrictions.

Jon Slowe - Okay.

[00:20:16.810] – Jon Slowe

Some aspects are faster, and some will take years and years to manifest themselves.

Frauke Thies - Yes, some will take two, three, even four years and in some cases. But the most important provisions actually, are starting to be implemented and I think one thing is the deadlines that are set by European law, but the other thing is what happens in reality, and what we see in reality is that member states often already start to look into transposing things into international law, while the new legislation is still being negotiated. So even before the package was adopted a couple of Member States moved into the direction of where the European legislation was going because they knew that that was what was going to be coming.

Jon Slowe - What countries would you identify as examples of really progressive, who are embracing this approach that the European Commission is laying out?

[00:21:13.500] - Frauke Thies

Well there are so many dimensions,

Jon Slowe - I know, it's difficult question.

Frauke Thies – It is difficult to say, yeah, I think it really depends on what it is. For example, when we are looking at the role of distribution network operators or distribution system operators in procuring flexibility and using really the market for better congestion management for a more efficient system management.

[00:21:25.950] - Frauke Thies

I think the UK is a leader, who has changed incentive structures already long before the European legislation established that we needed to change incentive structures away from a complete cap ex approach. So yeah here the UK is a leader.

[00:21:55.590] - Frauke Thies

When we look at access for instance for demand response aggregators to the market, we can rather look to countries like France, Switzerland, Belgium who have looked into very specific frameworks on how to make it possible for aggregators to access the market without depending on a prior agreement of a customer supplier was often a competitor. So they are, yeah, it's a different set of countries. And so, we could go on, but we will always find some examples on one thing and some on another.

[00:22:28.130] – Jon Slowe

Okay. So, Federica let's look now at the heating sector. In some ways I think the heating sector has been the poor relation in energy policy and it's not got the attention that electricity and transport have got, but can you tell us a bit about how much attention the heating sector is getting in Brussels and what the focus of that attention is?  

[00:22:54.340] - Federica Sabbati

Yeah so, you're right. The heating sector has been a bit of a forgotten sector for several years, in terms of specific policy and that's probably due to the fact that it's just very difficult to regulate and fragmented. Imagine having to regulate the millions of single-family houses or apartments and consumers. It's certainly been a challenge but in the last few years there has been an increased attention on this sector and in fact in about five years ago the European Commission actually published a heating and cooling strategy so really a paper, a broad paper that would give a direction to how to deal with this sector in view of one very important objective which is the decarbonisation, so the reduction of CO2 emissions for the building sector.

[00:23:50.370] - Federica Sabbati

And this indeed is the big headings under which we are working, the decarbonisation agenda decarbonisation with a target date, a target date for Europe that Europe has set for itself in 2050 by when, by which date we need to have, we as Europe needs to have basically cut CO2 emissions by almost 90% by almost the entirety in comparison to the1990 levels.

[00:24:19.770] – Jon Slowe

Federica, how is that manifesting itself in terms of impacts on the heating markets and how do you think this will be the big impacts in the next year?

[00:24:32.080] - Federica Sabbati

Well the European Commission has basically been working on both fuel policy, so how to decarbonise electricity first, it's been a long time already in the making and more recently decarbonisation of gas. So, all sorts of options for renewable gases, biomethane and hydrogen is picking up again as is a hot topic in Brussels but specifically and this of course is a very big impact on the hidden market. And then of course with a much more direct impact there is product policy on technologies for heating and cooling. So, for heating specifically there has been the eco design policy that was mentioned earlier which sets minimum standards of efficiency.

[00:25:18.180] - Federica Sabbati

 So, if you don't have a heater that has sufficient efficiency level you cannot place it on the market anymore and this is why we don't have a standard boiler for non-condensing boilers anymore on the European market, except for some specific exceptions, because of certain types of buildings. Which is a little bit of what actually the UK has done several years ago already. This is now actually a policy throughout the European Union and this you know to go back to your initial points about you know, talking about the influence of Europe on Member States during Brexit times was very interesting because I think a lot of these policies, have actually on the heating sector, have actually been taken by UK policies which was actually the first country who had a heating strategy upon which the European Union has based its own,

[00:26:09.520] - Federica Sabbati

heating and cooling strategy. Well I think it's a little bit of irony there.

[00:26:13.960] – Jon Slowe

I hope Federica you don't forget us if we do end up leaving the European Union. But Lukas, you've been working in the heating sector for a long time, any sort of observations on what Federica has been saying?

[00:26:28.550] - Lukas Bergmann

Yeah, I mean it's been quite clear that the biggest movements in the heating markets over the last couple of years have been triggered by changes in EU legislation and in particular the [illegible 26:40] sector where it is or has been the easiest to legislate but also by other product policies.

[00:26:52.070] - Lukas Bergmann

But, Federica, I've got a question for you.

[00:26:56.020] - Lukas Bergmann

So, you said that one of the challenges around heat is that it is very, very close to the consumers, consumers are really at the heart of the heating sector. And we've heard from Frauke that the role of the consumer is changing and then that there is empowerment of the consumer on the European level. And it would be interesting, what's your view on how this empowerment that is currently happening more in the electricity side of the sector, how is that going to affect how people might be heating their homes in the future or how is the role of the consumer changing on the heating side?

[00:27:39.980] - Federica Sabbati

So certainly, there is the phenomenon that's going on of digitalisation or a smartening of the energy system, it is hitting also or it is defining in fact, more and more for the heating markets as well, so heating technologies nowadays are not just a heat generator but they are part of the system and the smart heating is now a definition that is fitting more and more the technologies that are put on the market. So, it's not just a boiler, not just a heat pump that gets put on the market but increasingly there is a smart heating control that you can operate as a consumer from home.

[00:28:26.600] - Federica Sabbati

But of course, also from outside your home. Meaning you're going on holiday turn off everything come back and then turn on your heating at a distance before you arrive home to get a warm house. But it's also increasingly, there are increasingly waves, for the professionals to help out to have a role in the world, in how the heating system is working in your homes. You can have maintenance or preventive maintenance done remotely by the installer by the maintenance company on the heating system so that, you know, it prevents breaking down of certain parts, it can prevent the customer remaining without any heating for a day, because you can see the part at fault and that you can send the installer/ the maintenance guy with the correct piece to replace it.

[00:29:19.760] - Federica Sabbati

 So, there is much more involvement possible both from the side of the consumer and how the consumer can actually simply enjoy its comfort at home. But there is also much more interaction with the grid possible with smart devices that can potentially talk also with the grid and therefore give signals until we have a role also for thermal storage which is of course one of the big challenges, challenge of being energy storage, particularly in an increasingly renewables dominated world. You need to store energy and there are technologies from the heating sector, that can help therefore mitigate that issue.

[00:30:05.080] - Federica Sabbati

So, both in terms of you know hot water storage or heat pumps electricity-based appliances.

Jon Slowe – Federica, you talked earlier about and Lukas you've mentioned the ratcheting up of standards for product efficiency. They'll reach a point at which those standards struggled to be made any stricter, there are theoretical limits about how efficient an appliance can be. Federica you mentioned fuel is being decarbonise, whether that's green gas or renewable electricity, so we can decarbonise the fuels, we can to ratchet up the efficiency of the appliances. Federica, how much do you see controls being a focus?

[00:30:45.500] - Jon Slowe

So, as you mentioned the integration of electric heating and smart grids for example. Is that a, do you see the control side being a focus of Brussels policy?

[00:30:59.000] - Federica Sabbati

Yeah definitely, Increasingly in the focus because, exactly because of this reason, that they realised that there is a potential for energy efficiency, for empowering the consumer and therefore there is increasing focus on capital 31:22 in technology which has reached the limit of efficiency, with smart controls, that would enhance even more the efficiency of the of the whole system. And therefore, there is policies that are being discussed at the moment, this would set eco design standards also for building automation and control systems for example. And so increasingly we are looking at legislation that looks at the full system and not just parts of it.

[00:31:52.850] – Frauke Thies

Yeah, I think Federica you're mentioning a very important keyword there in that system efficiency because I think indeed there is the product efficiency as such and then the interaction of everything into a smart system.

[00:32:04.280] - Frauke Thies

And I think this is what's driving quite a lot of developments in the heating sector now. I thought it was interesting, so Federica you mentioned a lot about what is possible now on the heating side for customer engagement for better services which is great stuff going on. And then I think looking at it from the electricity side, it's also, in a way on the one side it seems necessary, we need to go into it because the heating sector together with the transport sector by the way, offers a great flexibility potential to also help integrate variable renewables in the electricity side.

[00:32:46.580] - Frauke Thies

So, for instance to use the heat storage while my solar panels are producing and I have a lot of electricity surplus so that my boiler is warm and I can have a hot shower or a warm house in the evening when the sun has set as an example. So, I think yeah, it's becoming also necessary that the sectors interact more, and heating becomes smarter to interact with the decarbonised system. But I think it's also becoming a lot more attractive in the sense that, well as a consumer for instance, I may want to link my heating system, my electric vehicle, whatever it may be with my own self generation unit of sorts or whatever I may have, but also from a systems perspective as we are moving into smarter market signals, as we're moving into more flexible pricing or the possibility to value my flexibility to the market via an aggregator, I may very well want to use my heating unit to get money for steering flexibly without my comfort being impacted in any way.

[00:34:00.320] – Jon Slowe

I think what we're starting to see now is a blurring of the sectors or to use a word that's quite common now sector coupling or more integration of different energy vectors. And we'll be looking at the topic of this and home energy management in podcasts in this current series. Time is unfortunately as always getting the better of us. So, I normally at this point in proceedings bring out our Talking New Energy crystal ball. However, it's broken at the moment because I'm trying to use it to predict what would happen in the UK Parliament this week and it broke!

[00:34:36.020] – Jon Slowe

 So, I'm going to have each of my guests,

[00:34:41.960] – Jon Slowe

to very briefly, one thing that people should look for and pay attention to in Brussels at the moment.

[00:34:49.340] – Jon Slowe

So, keeping it brief what would be one area, topic, piece of policy that you'd encourage people to look at and keep their eyes open to?

Federica Sabbati - So maybe I start from the side of heat, in what is really popping up at the moment is the topic of the renewable garden, there is going to be a new gas package here in Brussels they call it ‘Package’ which means just for a bunch of laws that will look at this and I think for a sector which has been and is still quite dominated by gas this is going to be an interesting element to look at.

[00:35:31.100] – Jon Slowe

Okay. Thanks.

[00:35:32.010] – Jon Slowe

Renewable gases, Frauke

Frauke Thies - Well we touched a lot upon the questions of consumers and the new role of customers and the role of sector integration. And I think these are some of the big themes that are going to stay with us. And what I would like to look out for is for the new European Commission, the new commission president Ursula von der Leyen, announced a couple of very interesting things. A European climate pact with regions, local communities, civil society, sustainable European investment plan and numerous other initiatives. And what I would like to see is how this brings forward electric vehicle infrastructure building renovation and other aspects to really make this sector integration, sector coupling advance and help real consumer engagement in the energy transition.

[00:36:22.650] – Jon Slowe

Okay. Thank you. And last but not least Lukas.

[00:36:26.110] - Lukas Bergmann

Yeah, from my perspective I think one of the very interesting things that have come out of Brussels that will lead to action in the member states over the coming years, is from the energy eerformance of buildings directive the renewed focus on renovation.

[00:36:43.600] - Lukas Bergmann

Member states are now obliged to provide strategies for renovating the buildings stock out to 2050 and to reduce carbon emissions from existing buildings.

[00:36:56.800] – Jon Slowe

And we all we all know that existing buildings make up the vast majority of carbon emissions in the building sector.

[00:37:04.330] - Lukas Bergmann

This is really going to shake up the market.

Jon Slowe - Okay well we'll have to leave it there.

[00:37:12.460]

So, thank you Lukas, Federica and Frauke very much.

[00:37:17.600]

Lukas Bergmann - Thank you.

Frauke Thies - Thank you.

Federica Sabbati - Thank you.

[00:37:20.470] – Jon Slowe

And thank you as always to our listeners. We hope you enjoyed this podcast and excuse my comments about the UK political situation, and we welcome you back next week.

Thank you and goodbye.