Energy trilemma for the 21st century

Mr Ian  Marchant, Dunelm Energy, United Kingdom

The supply side of the energy industry has, for far too long, dominated the nation’s energy policy agenda.

While the three issues of affordability, security of supply and sustainability are certainly a useful framework, it is invariably a supply side policy discussion that follows:

– Sustainability: Low verses high carbon generation.

– Security of supply: How secure the capacity margin on the network is.

– Affordability: How cheap or expensive the unit price of generation is.

This supply side trilemma is important, but it is only half of the story. We need a demand side trilemma.

Demand Side Trilemma:

Policy on energy demand needs to balance the following three forces:

– Flexibility: The extent to which consumption can be controlled as opposed to dictated or incentivised. The cost of providing flexibility varies hugely, yet consumers remain unaware due to fixed tariffs.

– Meeting of needs: How much energy is required to heat homes, charge phones, power lights, provide hot water, without simply using more energy.

– Affordability: How cheap or expensive the unit consumption level is. It will be increasingly important to look at the three energy bills in aggregate; power, heat and transport fuel.

Equal emphasis must be placed on both trilemma’s, as they sit along side each other in the policy debate.

Solving the Trilemma’s – Enablers

Energy policy can look so complex as to be unsolvable, and adding another layer to the mix, as we do here, may seen counter-productive! We suggest however three enablers – explained in more detail on the page opposite – that will, if properly used, make policy development solvable.

Technology

Although digital technology has readily transformed many aspects of life, it has had limited impact on the energy industry.

We identify 3 emerging trends that could change this in the years ahead:

•           The constant reduction in the costs of communication, data storage and sensors and the increasing power of data analytics

•           Advances in computer processing power:

.           having made augmented reality a real reality

.           making artificial intelligence and machine learning more and more applicable

•           the creation of 3D printing, nanotechnology and advanced material sciences

Market design

You get what you design for.

A fundamental rethink of all the industry codes and regulations, in all three parts of the industry; generation, networks and retail is required to levelise the playing field towards the demand side.

The market must be re-designed so that it helps, as opposed to hinders, aims such as National Grid’s to rely mostly on demand side balancing actions by 2030.

Resource efficiency

We need to move beyond encouraging loft insulation and LED light bulbs.

We must look at the true obstacles to energy efficiency, which are usually not monetary but involve decisions about aesthetics, convenience and trust. Our policy landscape on the demand side should be as creative and differentiated as it can be on the supply side; different policies for new build houses and the existing stock, differentiation between owner occupied and rental, and of course between domestic and commercial.

We must work to put demand and supply on an equal footing within energy policy. In fact, let’s make demand preeminent and put the customer at the heart – truly moving towards democratising energy.

This new energy demand trilemma of flexibility, meeting of needs and affordability will greatly help to achieve this refocus.