Beyond smart - cgi-group.co.uk · Beyond smart Generating the demand-side flexibility opportunity for British energy. Beyond smart 2 Beyond smart 3 Contents 4 Executive summary 6

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Beyond smartGenerating the demand-side flexibility opportunity for British energy

Beyond smart Beyond smart2 3

Contents

4 Executive summary 6 Lessons for the energy sector 6 Creating a Market Infrastructure

7 Introduction

8 Establishing the environment for energy flexibility 8 From trilemma to virtuous circle10 Consumers are crucial to demand-sideflexibility10 Securing the investment for success11 Policy promotes investment in transformation11 Establishingaccessand commercial arrangements

12 Lessons from technology-enabled market transformations in other sectors

13 How mobile telephony created flexible communications13 Establishingthephysicalinfrastructure13 Changing the energy system14 Overcoming the consumer challenge16 Growingthecustomerbase,attitudes and trust

18 How the digital switchover transformed viewer expectations

20 How portable players changed the way we access music20 Bringing the world online21 Understanding your place in the value chain22 Maintaining market leadership

24 Promoting a market-driven approach24 Dealing with a changing physical infrastructure24 Maintaining the supply side26 Developing the demand side27 Working with consumers to accessflexibility28 Determining the size of the prize 30 Encouraging speedy technology adoption

31 Creating a Market Infrastructure

33 Conclusions33 Fivelessonsforaflexibleenergymarket34 The need for connected infrastructures34 Theriseofdemand-sideflexibility

35 References

Beyond smart Beyond smart

RichjoinedCGIin2007,workingacrossitssmart utilities offerings.

Hehasover25years’experienceintheutilitiessector,coveringareassuchascompetitiveenergymarkets, smart meter and smart grid strategy.

Rich is a regular speaker at utility events and has authored numerous papers and articles on smart meters andgrids,securityandprivacy,andtheeffectthatmarketstructure has on realising a smart vision.

In2016,Richauthoredthefirst“EnergyFlexibility ForDummies”bookwithWileypublishinghouse: www.cgi-group.co.uk/the-dummies-series

Heisalsoactiveintheleadershipofanumberof industry associations.

Richisaprofessionalengineerbybackgroundand has spent his career working with organisations to implement transformation.

Outsidework,Richispassionateaboutsportand coachesrugbyandskiing.Fortunately,thoseactivitiesinvolve his kids!

About the author

Rich Hampshire VP,DigitalUtilities, CGI UK@richhampshire www.cgi-group.co.uk/experts/rich-hampshire

4 5Beyond smart Beyond smart

TheBritishenergysectorfacesmajorchallengesinthecomingyearsifwe, asconsumers,aretocontinuetobenefitfromthelevelsofreliabilitywehave cometotakeforgranted.But,aswithallmajorchallenges,therecome great opportunities.

The current generating capacity is set to take a major hit,withalmosthalfofitduetoretireby2025.Thisiscoupledwithaforecastfivepercentnetgrowthinconsumptionby2030.Thismightnotsoundsignificant,butitwillhaveadisproportionateeffectonpeak demand.

Theretirementofexistingfossil-fuelandnucleargenerating capacity presents an opportunity to decarboniseelectricitygeneration.However,muchofthatretiringcapacityisdispatchableandprovidesthesystemwiththeflexibilityitneedstostayinbalanceandmakesurethatoursmartphonescanbecharged.

Thenewsourcesoflow-carbongeneration(suchaswindandsolarPV)tendtobeintermittent—which,bytheirnature,areinflexible.Thiscreatesahugechallengefortheelectricitysystem,whichneedstoestablishnewsourcesofflexibilitytokeepthesysteminbalance.

Whiledecarbonisinggenerationisreducingflexibility,thedecarbonisationofthewaysweconsumeelectricityiscreatingnewsourcesofflexibilitybeyondthe meter on the demand side. And this will see a hugeshifttowardsdemand-sideenergyflexibilityas organisations work with consumers to manage consumptionatpeak(andoff-peak)times.

How the energy system reacts and adapts to these changeswilldeterminehowsuccessfulitwillbeinsatisfying consumers’ energy needs in the decades to come.

Executive summary

Commercial arrangements Energycompanies(botholdandnew)needtheabilitytoassesstheopportunitiesandrisksinvolvedintheirenergyflexibilityinvestments.Theirabilitytoaccesssharedinfrastructures,clarity on the commercial arrangements for that access and on the technical standards needing to bemetwillmakeiteasierfororganisationstobuildtheir investment cases.

Policy Thecommercialisationofenergyflexibilityisvital.Thisiswhereclear,stablepoliciesandappropriate incentives will play a vital role in attracting investment and accelerating adoption byconsumers.

Consumers Frommeetingcustomerneedstodefiningaffordablepricepoints,encouragingconsumerstoadoptlow-carbondemand-sidetechnologiesandmakeavailabletheassociateddemand-sideflexibilitywillbecrucialinkeepingthesupplyanddemandforelectricityinbalance.

Securing investment Developingtheinfrastructureandthemeansbywhichdemand-sideflexibilitycanbeeconomicallyaccessed will require investment. And that means providing the clarity that gives investors and other stakeholderstheconfidencetoembarkontheirenergyflexibilityjourney.

To make this transition a success and ensure that the value of demand-sideflexibilitycanberealised,theenergysectorneedstocreatetherightenvironmentinwhichamarketforflexibilityservices canflourish.Andthismeansestablishinganumberofcrucialenablers:


Lessons for the energy sector

Embracingdemand-sideflexibilitywillbeperhapsthe most fundamental transformation for the energy industry since privatisation in the 1980s.

But there are lessons to take from similar transformations in other sectors.

Theseinclude:

• The move to mobile telephony Thedevelopmentofmobiletelephonesrequiredthedeploymentofabrand-newinfrastructure. Theinnovationshownacrossthemobiletelecomssectorprovidesanexamplethatenergyorganisations could follow.

• The digital TV switchover The regulatory-driven move from an analogue todigitalsystemofTVbroadcastingisaprimeexampleofpromotingtransformationthroughconsumeradoptionofnewtechnologies—something that can inspire the energy sector initsaccessto,anduseof,demand-sideflexibility.Italsoprovidesinsightsaboutthepotentialpathwaysfortheadoptionoflow-carbontechnologiesbyconsumers.

• The advent of digital portable music Leveragingamixtureofinfrastructures, fromtheWorldWideWebtocommunicationsnetworks,thedevelopmentofportablemusichasmore than one lesson to teach the energy sector when it comes to transformational change.

Creating a Market Infrastructure

Withdifferentpartiesbeingabletogainbenefit fromaccesstodemand-sideflexibilityatdifferenttimes,considerationneedstobegiventothe nature of the Market Infrastructure required to enableawell-functioningcompetitivemarketforflexibilityservices.

Asmart,flexibleenergysystemisthekeytoensuringthatconsumerscontinuetobenefitfromthelevelsofreliabilityandaffordabilitythattheyhavecometotakefor granted when it comes to energy.

A Market Infrastructure is vital to the smooth running ofthissmartsystem—creatingopportunitiesfororganisationsandcustomerstomutuallybenefitfromtheflexibilityonthedemandside.

Therearemany(potentiallyconflicting)choicesforhowBritainwillsatisfyits energyneedsoverthecomingdecades.However,whatisclearisthat consumersmustcontinuetobenefitfromthelevelsofreliabilitytheyhavecometotakeforgranted—atanoverallbillthatdoesn’tincreasinglyeatintotheir disposableincomesanddoesn’tcosttheearth,literally.

AlmosthalfofBritain’sexistinggenerating capacityisexpectedtoretireby2025.And, by2030,consumptionisexpectedtoseeanet growthoffivepercentthroughtheelectrification of heat and transport and the adoption of other low-carbontechnologiesonthedemandside. But the impact of this growth in consumption will have a disproportionate effect on peak demand.

This presents unprecedented challenges to the design and operation of Britain’s power system. ItwillbringaboutarguablythemostfundamentaltransformationinBritain’senergysystem,fromacommercialperspective,sinceprivatisationinthe late1990sor,fromanengineeringperspective, since the construction of the national transmission system almost a century ago.

The likely shape of the power system in 2030 and 2050 is well understood. This paper takes thatasagiven,butexploressomeofthefactorsthatwillenablethistransformation.Itseekstoidentify lessons that the energy sector can learn fromotherindustries’experiencewithfundamentaltransformation. It also outlines the important role that a Market Infrastructure will play in securing investment,enablingchangeandprovidinggreaterenergyflexibilityforbothprovidersandconsumers.

Introduction


From ‘trilemma’ to virtuous circle

The conventional operation of the electricity system isbeingchallengedbythegrowthinintermittent,inflexible,low-carbongenerationtechnologies(suchas wind and solar photovoltaic) on the supply side. Therearealsonewformsofflexible,low-carbonloadonthedemandside,suchasdemand-sidestorageandtheelectrificationofheatandtransport.

Thesenewsourcesoflow-carbondemand,whicharebeingprogressivelyadoptedbeyondthemeter,delivernewsourcesofdemand-sideflexibility.Thesehave the potential to turn the ‘trilemma’ into a virtuous circle.

However,thingsarenotassimpleasreplacingthelossofgeneratingcapacity(andtheassociated lossofconventionalsourcesofflexibilityinthe system)withdemand-sideflexibilityandmatchingdemandtotheavailablesupply.Iftheywere, then we would see faster progress.

Establishing the environment for energy flexibility

Theso-called‘EnergyTrilemma’comprisesthethreepillarsofenergypolicy— namelysecurityofsupply,addressingclimatechangeandkeepingenergy affordable.However,theveryuseoftheterm‘trilemma’impliesthattherearetrade-offsbetweeneachofthesepolicypillars.

Fig.1:Energyflexibilityfactorsandrelationships

Therealityis,inhighlyinterconnectedsystems thatcomprisemanyactors(suchastheBritishelectricitymarket),thatindependentlyregulatedcompetitive markets sometimes need a hand to operate effectively.

It is necessary to create the conditions for a market whereinnovativelow-carbontechnologiesbecomecommercialisedanddeliverafullrangeofbenefits to consumers.

Andthisrequiresanumberofcrucialenablersto beestablished.


Consumers are crucial to demand-side flexibility

Clearly,theselow-carbontechnologiesonthedemandsidecanhelptosatisfytheneedforflexibilityin the electricity system. But consumers need to understand the opportunities open to them should they choose to provide access to their demand-side flexibility.Onlythenwilltheadoptionoflow-carbontechnologies fully accelerate and the market for demand-sideflexibilityservicesbeestablished.

Consumer attitudes and their desire to change (orsimplytoadoptsomethingtheyperceivetobebetter)arevital.

Productsandservicesneedtobeavailableattherightpricepointstonotonlymeetconsumers’needs,butalsotosatisfytheirwants.And,ofcourse,peopleneedtohaveconfidenceinthesecurityoftheseproductsandoftheirdata,andhavetrustintheirchosen service providers or product suppliers.

Inordertoachievethis,therehastobethenecessaryinvestment to take a great idea through research and development to full commercialisation.

Ofcourse,ifthereisanobviousneed,theconsumerbenefitsareclear,there’sactivecustomerpullandaclearroutetorevenue—thenattractingthenecessaryinvestmentbecomeseasier.

Securing the investment for success

Ahighlyunbundledmarketwithamultitudeofparticipants and multilateral commercial arrangements (oramultitudeofbilateralarrangements),suchastheBritishenergymarket,canlookdaunting.

Investorconfidenceisbuiltonhavingclarityonthepolicy,legislativeandregulatorycontextinwhichtheywillbeoperating.Butitgoesfurther,intounderstandinghowtheywillbeabletointeroperatebothwithinthecontextofthesystemandwithotherparticipants in the market.

Understanding the contractual terms under which shared‘physicalinfrastructures’canbeaccessed,andthemechanismsbywhichpartiesgetpaid(acommercialMarketInfrastructure),willenablethemto understand their route to revenue and identify the potential return on their investments.

Itisthislatter,andessential,pieceofhowmarketsoperatethatisseldomdiscussed:theimportance ofdefiningthemarketrulesandestablishinga MarketInfrastructurethatenablesthemarkettooperate effectively.

The guiding principle for any Market Infrastructure shouldbethatitonlyhandles:

• activities that are common to all market participants;

• activitieswheretherearesignificanteconomies ofscalethatbenefitallparticipants;and

• wherefailuretofulfilactivitiescorrectlybyoneparticipant has a disproportionate impact on the abilityofotherparticipantstooperateeffectively,orimpactsthecustomers’experienceof,and trustin,themarket.

Additionally,theinfrastructureshouldnotberesponsibleforactivitiesfromwhichmarketparticipants can either differentiate themselves or create cost leadership.

When these fundamental principles are applied to thecreationofMarketInfrastructures,thevalueofthemarketismaximisedandthebarrierstocompetitionminimised. This makes it easier to get innovative newproductsandservicestomarket,makingitanattractiveplacetodobusinessandenhancingconsumer choice.

Fig.1articulatestheinter-relationshipbetween eachofthesefactors,aswellassomeofthefactorsvitaltocreatingmarkets,suchasstandardsandconsumer education.

Policy promotes investment in transformation

Fornascenttechnologies,clarityonpoliciesandappropriatefiscalincentivesdesignedtoacceleratetheir adoption is important. The right level of incentive willhelpthesetechnologiesbecomecommercialised.

Butitisalsoimportanttobeclearabouthowtheincentive mechanisms will reduce as the market grows.Wheneconomiesofscaleareachieved,andbecomereflectedinpricepoints,theinterestsoftaxpayers,whoareultimatelyfundingtheseincentives,needtobeprotected.

Therealchallengeinhighlyinterconnected, multi-actorsystems,suchastheBritishelectricitymarket,isenablingallinvestorstounderstandhowtheywillgetareturnontheirrespectiveinvestments,andhowtheycangainvaluebuildingoneach other’s propositions.

Establishing access and commercial arrangements

Organisations or individuals that want to offer productsandservicestoconsumers,andneedtomakeuseofinfrastructureandassetsbelongingtootheractors,needtoknowhowtheycanaccessthat infrastructure and the associated commercial arrangements. Organisations that have invested in infrastructureandassetswanttoseeresults:theywanttobeabletoseetheirroutetorevenuefrom the users of the infrastructure and assets they makeavailable.

Forinstance,isthecompanyofferingaconsumera service to manage that consumer’s demand-side flexibilityinapositiontoassesstherisksassociatedwithhowtheymakethatflexibilityavailabletootherparticipants—orhowthatvalueislikelytovarybetweendifferentactors?Withoutthatunderstanding,how can they assess the level of risk they are taking on,anddeterminewhatlevelofbenefittheycanpasstotheircustomerswhilestillmakingasufficientreturnontheirinvestmentfortheriskstheyaretaking?

Itisalsoimportanttorememberthattechnicalstandards and codes of connection are a vital part of this understanding.

Indeed,thesignificanceoftechnicalstandards shouldnotbeunderestimatedinestablishingresilientsupplychainsforproductsandservices—aswell asenablingcompetitionintheprovisionofthosegoods,whichinturndrivesdownpricesandincreases innovation.

Thisallprovidesaclearerviewofboththeopportunities and risks in the future energy markets.


Lessons from technology-enabled market transformations in other sectors

How mobile telephony created flexible communications

Fortunately,therearesomegreatexamplesoftechnology-enabled, market-level transformations that can help inform the approach to the transformationoftheenergysectorintoasmart,flexibleenergysystem.

Itisalwaysgoingtobehardtoidentifywhenatechnologybecomesmainstream.Butitissafetosaythattakingalongviewofthedevelopmentofthemobile telephonymarketshowssignificantparallelswiththewayasmart,flexibleenergysystem and a well-functioning market for energy and energy services is likely to mature over the coming decade or so.

Establishing the physical infrastructure

Afterthefirstsuccessfulmobiletelephonecallin1973,therewasaneedtodeploythefirstgenerationof physical communications infrastructure to provide the coverage required for people to make calls from wherever they needed or wanted.

Thetelecommunicationssectorhasbeencontinuallyinnovatinganddeployingnewinfrastructures—and successfully concurrently operating different generationsoftechnologies—eversince.

The clarity it has on technology standards has enabledresilient,competitivesupplychainstobeestablished.Andithasdrivencontinualinnovationinboththetechnologyandservicesoffered.

CodesofConnectionhaveenabledmultipleusersandservice providers to connect devices to the networks concurrently,withcompetitionforconsumersdrivinginnovation in the devices themselves and the services thatcanbeofferedoverthecommunicationnetworks.

Changing the energy system

Inthecaseoftheelectricitysector,thephysicalpowerinfrastructure(thewires)isalreadydeployed.However,thelow-carbontechnologiesthatarebeingprogressivelyconnectedonboththesupplysideandbeyond-the-meterarechangingthedynamicsofthesystem,dramatically.

Thesenewdemandsbeingplacedontheexistinginfrastructuremeansthatthewayitisdesigned,operated,andmaintainedneedstochangeifconsumers are going to continue to enjoy the levels ofreliability,economyand—aboveall—safetythatthey have come to take for granted.

Thistransformationinthedesign,operation,andmaintenanceoftheelectricitynetworkwillbeenabledbytheincreasinginter-connectivityofdevicesconnectedtotheinfrastructure.Thetimelyvisibilityofthedataproducedbythesedeviceswillthenenableinformeddecisionstobemadeabouttheactionstobetaken,ornot,asthecasemaybe.

Timelyvisibilityisimportant.Forsomedatastreams,that may mean near real-time. For others ‘timely’ may havelongerlatencyperiods,ormaybeprocessedclosetothepointwherethedataisgenerated(‘theedge’),withonlyexceptionsbeingmadevisible more widely.

The inter-connectivity is likely to lead to a convergence of the utilities and telco sectors. The powersystemmaychoosetoleveragetheexistingcommunicationsinfrastructures,ratherthandeployingitsowncommunicationsinfrastructures,tomakesurethatitoperatesascost-effectivelyaspossible.

Studythepast,ifyouwoulddefinethefuture.“

“Beyond smart

Confucius


Overcoming the consumer challenge

Intermsofqualityofconnectivity,functionality,sizeandpower,mobilehandsetshavecomealongwayfromthefirstgeneration‘bricks’ofthe1980stotheiPhone7,GooglePixel,SamsungGalaxyrangeorthelatestWindowsphones(phonesfromaplethoraofothermanufacturersareavailable!).

Thiscontinualinnovationhascomeabout,inpart,bytheregenerationofthephysicalcommunicationinfrastructureanditscapabilities.But it is also the level of competition in the supply chain for handsets that is driving not justinnovationinthedevices,butalsointheservicesthatcanbedeliveredviathosedevices.Handsetsarenolongerjustphones,theyarecommunicationplatforms—infact,voicetrafficacrossmobileandfixedlinefellbyaround15percentbetween2010and2015.

The key to this innovation is the way that consumers have accepted new technology into theirlives.Peopledon’tbuytechfortech’ssake.

Theperceivedbenefitsofanewdevice—whethertheabilitytoconnectwithfriends,managebankaccountsorcomparepriceson themove—arewhatdriveacceptance of technology.

As the acceptance of these devices into our lives hasgrown,thecostshavefallenexponentially —makingdevicesaccessibletothemasses.

It’shardtocomprehend,buttheaveragemobilephone has way more computing power than the whole of NASA had when it landed Neil Armstrong and Buzz Aldrin on the Moon in 1969.

Or,ifwetakethe1985Cray-2‘supercomputer’ —theworld’sfastestsupercomputeruntil1990 1,2,3. It ran with a performance of up to 1.9GFLOPS,2GBofmemory,operatedat244MHz,requiredliquidimmersioncoolingofits 200-kilowatt hardware and cost $16 million ($32mwhenadjustedforinflationto2010prices).ComparethatwiththeiPhone7,withits729.6GFLOPS,2GBofRAM,upto256GBofinternalmemory,2.34GHzspeed,around0.5Wpowerrequirement for voice calls and a price point of $849(forthetopspec256GBversion)1,4.

That equates to an improvement of 14.5 million timestotheprocessingpower,andpowerrequirements per unit of processing power that are150milliontimesmoreefficient.

Theseratiosaresomindblowingastobe almostincomprehensible.

Ifwecantakeonethingfromthem,itisthatwheretechnologiesaddressamarketneedor,indeed,anunidentifiedconsumerwant,thenthepaceofchange,thegrowthinperformanceandeconomiesofscaleareincredible.

Fig.2:Technologycostreductions5,6

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16Beyond smart

Growing the customer base, attitudes and trust

But,ofcourse,inthecaseoftheelectricitysystem,thelow-carbondevices(theequivalentofthemobilehandsets)needtobedeployedacrossthepowerinfrastructure,andmorewidelythroughoutthe end-to-endsystem.Theend-to-endsystemextendsbeyondtheexistingpowerinfrastructureintothenewforms of generation on the supply side and the new formsofdemandbeyondtheplug.

Studying the telco sector can provide insights into the establishmentofsupplychainsfordevices,theroleofstandardsinestablishingthosesupplychainsandcreating resilience across that supply chain.

Thisenablescompetitionanddrivesinnovationinthedevicesthemselves,andtheassociatedservicesoffered that deliver new choices for consumers.

Fig.3:Themobileevolution


How the digital switchover transformed viewer expectations

The transition from analogue television to digital television was ultimately driven byregulationandthedesiretoclosedowntheanaloguenetwork.However, therearepotentiallessonsfortheenergymarketabouthowtechnologyenablesmarket-level change.

From the deployment of the digital television infrastructure,totheparallelrunningofthedigital andtheanaloguenetworks,tothedevelopment andprogressiveadoptionofdigitalTVtuners,therearesomesignificantpotentialopportunitiesfortheBritishenergysystemtolearnhowtobecome smarterandmoreflexible.Here,we’llfocuson the customer aspects.

When the commercial operation of ITV Digital went bustin2002,itcouldhavebeenaserioussetbackto viewers’ trust and acceptance of the digital switchover.However,laterthatyearFreeviewwasestablished,providingviewerswithaccesstoadditional TV channels and content free of charge when they either replaced their TV with one that hadanintegrateddigitaltuner,orpurchasedasimple-to-install‘set-top-box’(whichcouldalsobe putunderneathpeople’sexistinganalogueTVs!).

TheearlyadoptersofthedigitalTVexperience—thosewhowantedaccesstothenewlyavailabledigitalcontent—didnothavetospendseveralhundredpoundsreplacingtheirexisting(potentiallyrecently purchased) analogue TV with a new digitalTV.Theycouldspendaround£80(2002prices)onaneasy-to-fit‘set-top-box’.Atacertainpoint,anynewTVpurchasedhadanintegrateddigitaltuner,so anyone needing to replace an old TV would get accesstodigitalcontentbydefault.

The importance of technical standards for the digital tunersmeanttherewassupplychainresilience,competitiondrivingdownprices,andtheopportunityfor innovation driving up functionality. This means you canpickupaset-top-boxinyourlocalsupermarkettoday,thathasmorefunctionalitythanthat£80box hadbackin2002,ataquarteroftheprice.

The major learning point from the digital TV switchover isaboutcustomerengagement.Forthesmalladditionalcostofaset-top-box,oramarginalincreasedcostofaTVwithanintegrateddigitaltuner,theviewerreceivedaccess to a wealth of additional channels and content. Thereisanimmediateperceivedbenefittothevieweraroundthelevelofentertainmentavailabletothem.

Thequestionthatthisraisesfortheenergysectoris,‘whatistheadditionalbenefit,equivalenttodigitalTVcontent,forenergyconsumersinanenergysystemthatemploysdemand-sideflexibility?’

While we have focused here on the consumer experience,therearealsopotentialparallelsinthewaythedigitaltelevisioninfrastructurewasdeployed—onaregionbyregionbasis,withtheinfrastructurebeingreinforcedasdemandgrew.Thevalueofflexibilitytotheenergysystemwillbegreatestwhereitmeetstheneed at a location within the infrastructure.

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Fig.4:ThedigitalTVswitchover


How portable players changed the way we access music

WhenthelateSteveJobssolderedaclickwheel,screen,3.5mmearphonejackandUSBinterfacetoaharddriveand,in2001,launchedthefirstiPod,didhe imaginethefundamentaltransformationthatitwouldcreateinthewaywebuyandlistentomusic?

We can now take the long view of what has happened over the last 15 years and use it to inform our thinking abouthowtheenergysectormighttransformoverthecoming 15 years.

Bringing the world online

Theportablemusicjourneystartsintheanalogueworld22yearsbeforetheiPod,whentheWalkmanbecamean80siconandestablishedthemarketforpersonal,portablemusic.

Soonafter,musicmadetheswitchtodigital,buttheuser still had the inconvenience of carrying multiple cassettesorCDstousewithportableplayers.

In parallel with these developments in the music market,therewerethreetechnologicalmarketsevolvingthattheiPodleveragedinitssuccess:

• Theinternethadbeenquietlydevelopingandwasbeingusedintheeducationandscientificcommunities through the 1970s and 1980s. But theinternetdidn’tbecomemainstreamuntil,in1989,TimBerners-LeecreatedanewwayofdistributinginformationacrosstheinternetandtheWorldWideWebwasborn.

Understanding your place in the value chain

WhatmadetheiPodasuccess,farmorethanbeingthenextbitofcooltechnologyformusiclovers,wasApple’sapproachanditsclarityaboutitspositioninthevaluechain.ViaiTunes,youcouldtransferallyourexistingdigitalmusictoyourPCand/oryouriPod.iTuneswasavailablebothforApple’sownMacOSandforMicrosoft’sWindowsoperatingsystems,solisteners weren’t locked into Apple computers. iTunes alsotransformedthewaypeoplebuyandlistentomusic;selectingpreferredsongsfromalbumsandnolongerlisteningtoanalbumasawhole.

Theuseofthestandard3.5mmjackenabledthelistenertochoosetheirownheadphones,and kick-started innovation in the headphones market—arguablyevencreatingthatmarket.

TheApple30-pinstandardconnectorenabledamarket in devices that meant you could connect yourentiremusiccollectiontoyourexistingstereo,amplifierandspeakers;oreventoyourcarstereo.

Applenotonlyunderstoodwhatitwasgreatatbut,farmoreimportantly,itunderstoodthat,byusingstandardsforitsinterfaces,itcouldconsolidateitsposition at the heart of its chosen market.

Byactivelyaddressingpotentialbarrierstotheadoptionofitstechnologyandenablingitstechnologytobeusedbycompaniesthatweretheleadersintheirrespectivepartsofthevaluechain,AppleestablisheditselfasthedefactostandardandestablisheditsdevicesasTHEbrandtohave.

• Throughthe80sand90s,thepersonal computermarketwasdeveloping,costswereplummeting,andfunctionalityandmemorystorage were spiralling.

• The telecoms sector went through a revolution in datatransferoverfixedlines,thedevelopmentofthemobiletelecomssectorandthemoveto digital telecoms.

By2000,therequiredphysicalinfrastructureswereinplaceforthenextfundamentaltransformation.TheWorldWideWebwasestablished,thecommunicationnetworkswereinplacewiththebandwidthtohandlethenecessarydatatransferrates,andpeoplehadthe means to get online in their homes via their personal computers with plenty of cheap memory storage. Adding to this was the fact that people were becomingmoredissatisfiedwitheitherhavingtoloopthesamealbumontheirportableplayerortheinconvenienceofcarryingabagoftapesorCDsaround with them.

The time was perfect for a personal music player thatcouldbeconnectedtotheWorldWideWebviayourhomePC,andontowhichnotjustafewextraalbumscouldbedownloaded,butyourentiredigitalmusic collection.

InnovationhasnotstoppedsincetheiPodarrived,butthesubsequentchangeshavebeenincrementalrather than fundamentally transformational.

The move from the click wheel to the touch screen withtheiPodTouchofferedtheabilitytowatchstored movies or catch up on TV on the move. The convergenceofmobiletelephonywithmediabroughtabouttheiPhoneatthestartof2007.Withhigherbandwidthmobilecommunicationsnetworks,3Gandlatterly4G/LTE,liveTVandstreamedmusicbecamea reality.

Permanentconnectivitythroughthemobilenetworkor the use of Bluetooth negate the need for wires everywhere. All of these things are incrementally improvingthecustomerexperience,buttheyarenotthe fundamental transformation that the iPod created in the music sector.

Overthelast15years—throughtheuseof standards—theportablemusicplayerhas evolved from a cool device into a near-permanently connected communications platform around which we live our lives.

It also provides digital innovators with the platform over which they can offer their services via a whole range of apps.

7,8


Maintaining market leadership

Asthetechnologycoststumbleandaccessibilitytothis technology widens to include a greater proportion ofthepopulation,thesizeofthemarketgrows.Simultaneously,thecostsofentryfallandcompetitorsenter the market.

And,ofcourse,withcompetitorsinthemarket,thereare increasing choices from which consumers are abletobenefit,acrosstherangeofpricepoints.

Alltoooften,youseetheinnovatorsandearlymoversfallbythewayside.WhorecallstheMPManoranyoftheotherMP3playersthatprecededtheiPod?

SohowhasApplebuiltandmaintaineditsleadingpositionoverthelongterm?Itwouldbeeasytosayitisdownto‘brand’,butcreatingabrandwithwhichpeoplewanttobeassociated—andforwhichtheyarepreparedtopayapremium—inanincreasinglycommoditised market is something that has to bebuilt.

Apple continues to innovate and drive forward the functionalityandcapability,aswellastherange, of devices that it offers its consumers.

Thereislittledoubtthatdemand-sideflexibilitywillhaveasimilar,fundamentallytransformativeeffectonthe way the end-to-end electricity system operates.

There is much that the energy sector can learn from the revolution in digital music. This includes theroleofstandards,activelyseekingtoreducebarrierstoadoption,andunderstandingyourpositioninthevaluechain.Developingcollaborativeoperatingmodelsthatenhanceyourownpropositionby working with partners who are leaders in the parts ofthevaluechaininwhichtheychoosetooperate, aswellasbuildingandmaintainingabrandwithwhichyourcustomerswanttobecomeassociated, willalsobevital.

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Promoting a market-driven approach

TheBritishelectricitymarketisoneofthemostunbundledandconsistently competitive energy markets anywhere in the world. The challenge of utilising demand-sideflexibilitytomaintainsecurityofsupplyandkeepelectricity affordableforconsumersthereforehastobeestablishedinamarket-ledcontext.

Thismeansbringinganumberofstakeholderstogethertoachievethistransformation.Theseinclude:

• TheDistributionNetworkOperators(DNOs)

• TheTransmissionSystemOperator(TSO)

• The Energy Retailers

• The Energy Traders

• The Aggregators

• TheEnergyServiceproviders,and

• The Consumers

WiththeexceptionoftheTSO,therearemultipleactorsineachgroup.Anditisquitefeasiblethat some will take strategic decisions to participate in multiple roles.

Each role could gain value from demand-side flexibilityatdifferenttimes,anditisequallyfeasiblethatoneroleoractorcouldbegainingvaluetothedetriment of other roles at certain times.

ThispresentsamajoropportunitytodecarbonisethewayBritainsatisfiesitsneedforenergybyreplacingtheretiringcapacitywithlow-carbonsources.

However,thechallengecomesfromthedifferencesbetweenthecharacteristicsoflow-carbongenerationcomparedwithtraditional,dispatchable,flexible,fossil-fuel thermal generation.

Dealing with a changing physical infrastructure

It is too simplistic to say that we already have the physical infrastructure in place for Britain’s electricity system. It is true that we have the transmission and distributioninfrastructuresinplacetogetelectricityfrom power station to plug.

However,whatconnectstoeitherendofthatinfrastructure,andwillbecomeintrinsictothe end-to-endsystem,ischanging,fundamentally.

Maintaining the supply side

Betweennowand2025,almosthalfofBritain’sexistinggeneratingcapacityisduetoretire.Overthecomingdecade,thiswillpresentanincreasingcapacity margin challenge. Capacity margin is a measureofthedegreetowhichavailablegeneratingcapacityexceedsthemaximumlevelofprojecteddemand for electricity at any given time.

Windandsolargenerationare,bytheirnature,intermittentandinflexible.Unlikesomeotherterritories,theavailabilityofenergyfromwindandsolar generation correlating with demand is not coincidentinBritain.InHawaii,increaseddemandfromair-conditioningoccursonthehottestdays,which correlates with peak output from solar arrays.

Unfortunately,Britain’speakdemandstendtooccuroncold,wet,darkwinterevenings,whichisnotconducive to high levels of solar generation!

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Developing the demand side

IfBritainistoachieveitslegallybindingclimatechangecommitments(withothersectorslookingtodecarbonisethroughelectrificationoftheirenergyneeds),therewillbeadisproportionateimpactontheelectricitysector,whichwillneedtovirtuallydecarboniseby2050.

Withtheprogressiveadoptionoflow-carbondemandbeyondthemeter,throughtheelectrificationofheatandtransport(andthelikelytakeupofdemand-sidestorage),therewillbegrowinglevelsofdemand-sideflexibilitythathasthepotentialtocompensateforthelossofflexibilityonadecarbonisedsupplyside.Thishassignificantpotentialtohelptoaddressthecapacity margin challenge.

Thegrowingadoptionofdemand-sidegeneration,suchasphoto-voltaicsolarpanelsormicro-CHPunits,and demand-side storage solutions will also start to increasevolatilityinthedemandprofilesseenbythedistributionsystemtowhichpremisesareconnected.

The information and communication infrastructure establishedthroughthedeploymentofsmartmeterstohomesandsmallbusinessesby2020willenablethose consumers who are prepared to make their demand-sideflexibilityavailable,andwhochoosetoparticipateintheenergymarket,tobenefitfromenergypricesthatreflectnotjusthowmuchenergytheyconsume,butwhentheyuseit.

Working with consumers to access flexibility

Inasmart,flexibleenergysystem,theboundarybetweenthephysicalinfrastructureandtheconsumerbecomesblurred.

Theconsumers’investmentinlow-carbontechnologies is driving the transformation of the electricityinfrastructure.However,iftheconsumerenablesthedemandfromtheirlow-carbontechnologiestobecontrolledinresponsetotheneedsoftheinfrastructure,thenthesedevicesbecomeanintrinsic part of a whole energy system.

Britishconsumershavehadlittleincentiveorabilitytocontrolwhentheyuseelectricity.Assuch,theonlyroutetheyhavehadtocontrolthesizeoftheirbillshasbeentocontrolhowmuchelectricitytheyuse,which,unlesstheydosomethingabouttheenergyefficiencyoftheirhomes,meansreducingwasteorsufferingenergy austerity.

Smart meters will provide those ‘switched on’ consumers with the means to identify when they are wastingenergy,andwheretheymaybenefitfrominvestinginenergyefficiency.However,formanyvulnerableconsumers,thedefaultwillbeenergyausterity,theso-calledchoicebetween‘heatoreat.’

TheWorldWideWebandthesupportofConsumerAccessDevicesbysmartmeterswillenableawholenewmarkettobeestablishedinenergyservices,without the need for providers of those services to becomesignatoriestotheSmartEnergyCodeortobecomeaDCCServiceUser.

Thoseconsumerswhohaveinvestedinlow-carbontechnologies(includingdemand-sidestorage)intheirhomeswillbetheonesthathavemoredemandwith agreaterdegreeofflexibility.

Itistheseconsumerswhowillbebestplacedto takeadvantageofthebenefitsofmakingtheirflexibilityavailabletotheenergysystem,should they so choose.

So,itistheconsumersdrivingthetransformationinthe energy system through their adoption of low-carbontechnologieswhoarealsotheoneswhohavethepotentialtobepartofthesolutiontothechallenges that this creates for the way in which the system is designed and operated.

Thequestionthenbecomesoneofhowtoengagethoseconsumersthathavethecapabilitytomakeamaterialcontributiontotheflexibilityoftheenergysystembyallowingsomecontrolovertheir low-carbontechnologies.

Manypeopledefaulttotalkingaboutsomeformofpricereward,butmanystudiesquestionwhetherthis is too simplistic and whether price is really a fundamental motivator that will engage people in sustained action.

When looking at other technology-driven market transformations,theimportanceofbuildingbrandloyaltywasidentifiedasanimportantfactorforsustained success. Understanding customers and proactive communication with different customer segmentsbasedontheirindividualmotivatorswillbeimportantinbuildingthetrustnecessaryforconsumers to allow their energy service provider to managetheirenergyconsumptionandflexibilityontheirbehalfandbuildenduringrelationships.


Determining the size of the prize

Therearealotofnumbersaboutthevalueofamoreflexibleenergysystem,fromtheheadlinegrossbenefitof£8bnperannum(atacarbonintensityof50gCO2/kWh)in2030to£3bn-£3.8bngrossbenefitatthelegallybinding2030targetlevelof100gCO2/kWh.These values relate to the value accruing from all sourcesofflexibilityandincludeinterconnectors,gridconnectedstorageaswellasdemand-sideflexibility10.

Demand-sideflexibilityisincreasingasaby-productofthedecarbonisationofheatandtransport.Ifthatcanbemadeavailabletothesystemsimplyandeconomically,thereisasignificantprizetobehad.And it empowers consumers to take control of theirbills.

Thesizeofbillswillnolongerbeabouthowmuchenergyisconsumedandenergyausterity,butaboutWHEN energy is consumed.

TakingNationalGrid’s2016FutureEnergyScenarios,given this paper focuses on a more market-oriented scenario,wewilllusetheConsumerPowerscenario11. In2015,23.4percentofinstalledsupplycapacitywaswindorsolar,meeting13.8percentofconsumption.In2030,undertheConsumerPowerscenario,45percentofsupplycapacitywillbefromwindandsolaranditisprojectedtobemeeting37percentofconsumption. Interconnection capacity will have more thantripledin2030to15percent,satisfyingaquarterof consumption.

Whatisnotspecifiedisthedegreetowhichoutputfromwindandsolargenerationortheavailability of import across the interconnectors correlates with peakdemands,andthereforethesecurityofthesysteminhavingsufficientsupplymarginavailablewhen required to meet that demand and keep the systeminbalance.

Thisiswhydemand-sideflexibilitywillbevitaltomeeting consumers’ peak energy demands.

Itwon’tbeenoughsimplytocreatemorelow-carbongenerationcapacity—theBritishenergysystemwillalsorelyonitsabilitytoprovide,andencourageconsumerstoadopt,flexibilitytocounteractintermittentrenewablesources.

Innovative technology companies are developing thetechnologiesthatenableconnectedappliances, low-carbontechnologies,thesmart-meteringinfrastructureandenergyserviceproviderstobeconnected. Innovation programmes and proofs-of-concept such as UK Power Networks’ LowCarbonLondonprogramme,NorthernPowergrid’s Customer Led Network Revolution and ENEXIS’sJouwEnergieMoment(YourEnergyMoment)programmeareestablishingcustomers’attitudestoallowingtheirhomestobecomepartof the energy system.

Securingconsumerconfidenceisbasedona numberoffactorsthatwillcarrydifferentlevelsofweighting with individual consumers.

Thekeyisunderstandingconsumers’specific wantsandneeds,andaddressingthosein any communications.

Buildingtrustthroughpeeradvocacyandeducation,addressingconcernsaroundcyberanddatasecuritythreats,buildingconfidenceinthetechnologyandensuring that consumers have meaningful choices in the technologies and the service providers are all important elements of winning consumers’ trust and themembracingthesenewtechnologiesintheirlives.

Achievingthisisbuiltontheuseofstandardsthatenableresilientsupplychainstobeestablishedanddrive competition and innovation.

Fig.7:Technologyadoptionrates12

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Encouraging speedy technology adoption

IfBritainistorealisethefullbenefittotheenergysystemfromdemand-sideflexibility,itisimportanttounderstandthelikelyadoptionratesoftheenablingtechnologies. The factors that will affect consumer acceptance of energy service propositions rely on activemanagementofflexibilityratherthanenergyausterityandpassiveenergyefficiency.

Fig. 7 compares the adoption rates of various technologies.Thosetechnologies,suchaselectricityandtelephone,whichrequirethedeploymentofbigphysical infrastructures and physical connections to bemadeatthepointofuse,takesignificantlylongertoachievehighlevelsofadoptionthancheaper,easier-to-access technologies.

The more rapidly adopted technologies all leveragedexistinginfrastructures,requiredlittlespecificexpertisetoaccesstheperceivedbenefit,andwereataccessiblepricepoints.Thepaceofadoption of the smartphone leveraged all of these factors,butalsoactedasaplatformforconvergenceofaccesstoanumberofpropositions—fromcalls,tointernet,tomusic.

Theadoptionratesoflow-carbontechnologies into people’s homes is likely to align with that of computers and white goods. But the adoption of the home control technologies that will make access to demand-sideflexibilitypartofawidersystemislikelytobeclosertotheadoptionofotherconsumerelectronics propositions.

Therealchallengeishowhomesaredecarbonised.Currentlyaround20,000homesarerefurbishedperannuminawaythataddressestheircarbonimpacts.Thatfigureneedstoincreaseto20,000perweekby2025ifthe2050targetsaretobeachieved,accordingto the Energy Systems Catapult.

Theroleofpolicy,regulationandstandardswillbevitaltoachievingtheadoptionoflow-carbonoptions,includingbuildingstandards,deviceenergyefficiencystandards,andpotentiallytherequirementforhomeenergy storage as a new form of white goods in new andrefurbishedhomes.

With the average life of home heating systems beingaround15years,andpeoplerefurbishingtheirkitchensevery15-20years,thatis1.35m–1.8mhomesundertakingsomeformofsignificantrefurbishmentperannum.

So,withtherightpolicy,regulatoryandstandardsframeworksinplace,theEnergySystemsCatapult’stargetofdecarbonising20,000homesperweek bybetween2025and2050startstolook moreachievable.

Policy,regulation,andstandardshavebeen successfulindrivingenergyefficiency,fromthe adoptionofdouble-glazing,toinsulation,tocondensingboilers,toenergyefficientlighting.Thisisthecasetotheextentthat—whereasinthepastahomewithsuchmeasureswouldattractapremium—today homes not meeting the standards are devalued.

Creating a Market Infrastructure

How the energy market will need to operate is generally not the focus of discussionsaboutasmart,flexibleenergysystem.But,intheGBenergymarket(withitsmultitudeofparticipantseachfulfillingverydifferentrolesandwithvariedvaluedrivers),clarityonhowthemarketisexpectedtooperateandthe obligationsofdifferentparticipantswillbecrucialtosuccess.TheimportanceofdefiningthemarketrulesandestablishingaMarketInfrastructurethatenablesthemarkettooperateeffectivelywillbevitaltoBritain’sfutureenergysystem.

• Consumerswillbeabletocontrolthesizeoftheirbillsbyofferingtheirdemand-sideflexibilitytothemarket and shifting when they import energy from the system.

• Retailerswillbeabletodelivernewservicesto theircustomers.Theywillbeabletobegintotrulydifferentiatethemselves(ratherthanbysimplyprovidingagreatbillingservice).Theywillbeabletodevelopnewbusiness-operatingmodelsthatembraceaccesstoflexibilityandenablethemto manage their operating costs and wholesale market risks.

• Energy Traders will see the opportunity to create tradeableoptionsbasedonflexibility.

• Aggregators and energy service providers will see new opportunities to deliver services to the mass market.

• The TSO will have access to new sources offlexibilitythatwillenableittofulfilitsobligationtokeepthetransmissionsysteminbalance.

• TheDNOswilltransitiontobecomeDistributionSystemOperators,makinguseoftheiraccesstoflexibilityservicesontheirnetworkstokeeptheirdistributionsystemsinbalanceanddeferoravoidthe need for network reinforcement.

Whatisclearisthat,inasmart,flexibleenergysystem,differentmarketparticipantswillbeabletogeneratevaluefromaccesstoflexibilityservices:


Valuecouldaccruetomultiplepartiesconcurrently,butitisalsoquitefeasiblethatothermarketparticipants could suffer a loss of value. What happens if the DNO has a network outage due to consumers or retailers turning up demand in response tolowwholesaleenergycostsandanabundanceofsupply?Or,conversely,whathappensiftheDNOsturndowndemandtoavoidanoutage,causingtheconsumer or supplier to miss out on consuming when thewholesalepriceislow?

In‘EnergyFlexibility:TransformingthePowerSystemby2030’,industryleadersidentifiedthemainbarrierstothemarketforflexibilityservices13.

Thetopthreebarriersidentifiedacrossthedifferentmarket participant groups all related to commercial and market arrangements.

This clearly demonstrates the need for neutral facilitation of the market for these services.

Howthatmarketistobefacilitated,andwhichroleshouldhavetheobligationtoprovidethatneutralfacilitation of the market remain open questions.

ButtheyarequestionsthatneedtobeaddressedquicklyifBritainistoachieveitslegallybindingclimate change targets.

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Fig.8:BarrierstoMarketforDemand-SideFlexibility

33

Conclusions

Five lessons for a flexible energy market

Inthesection‘Establishingtheenvironmentforenergyflexibility’,wecoveredamodelthatlookedatwhatneedstohappentotransformtheenergychallengefrombeingatrilemmaintoavirtuouscircle.

Thethreeexamplesoftechnologydrivenmarkettransformationsdemonstratesomeofthethemesthatsupportthismodel:

1. Understanding the wider context (the system of systems) in which the transformation is occurring. TheexamplehereistheiPod’ssuccessbeingbuiltonwhatwashappeninginthetelecommunications,home computing and the internet sectors.

2. The significance of standards in establishing supply chain resilience, driving down cost and incentivising innovation. TheexamplesofthemobilephoneanddigitalTVmarketsdemonstratehowprocessingpowerandfunctionalityhavespiralled—aswellashowcostsandenergyconsumptionhaveplummeted,makingthesetechnologiesaccessibletoeveryone.

3. The importance of understanding position in the value chain, actively addressing barriers and developing collaborative business models that enhance both your and your partners’ propositions. LookattheexampleofAppleandhowitenhanceditspositionattheheartofitschosenmarketbymakingiteasyforotherbusinessesthataregreatintheirpartsofthevaluechaintoleverageApple’sproducts in their propositions.

4. Understanding the consumer need. Allthreeexamplesaddresscustomerconvenience,butwhatwillbethemediaequivalentofdigitalTVfortheelectricitysector?

5. Building and maintaining a trusted brand with which your customers choose to associate themselves. TheexamplebeinghowApplehasmaintaineditsleadingpositionandattractedapremium throughbrandloyalty.

Beyond smart

34 35Beyond smart Beyond smart34

The need for connected infrastructures

Therevolutionintheportablemusicsectorrequiredthreeseparateinfrastructurestobeinplace:thecommunications infrastructure with the necessary bandwidthandlatency;theWorldWideWebtohavebeenestablished;andtheacceptanceofpersonalcomputers into most homes.

The transformation of the electricity sector into a smart,flexibleenergysystemwillfollowasimilarpath.Itwillbeestablishedonthesmartmeters,runacrosstheexistingWorldWideWebandwillflourishonthebackoftheacceptanceofflexible,low-carbontechnologies into people’s homes.

The rise of demand-side flexibility

By2030,itisquitefeasiblethatsixmillionhomescould have some level of demand-side storage.

Takingtoday’sratingsofhomestorage,thatcouldbearound30GW(almosthalfoftheprojectedaveragecoldspell(ACS)peakdemand)storinganaverageof40GWhofenergy(equivalenttotheprojectedoutputfromHinckleyPointCfor12hours),assumingauniformdistributionofstoragefromemptyto fully charged.

Lookingatitfromtheperspectiveofdemandturn-up,this would equate to more than the de-rated solar and wind generation capacity in 2030 under the Consumer Powerscenario,withsufficientsparestoragecapacityto store all the energy produced in an hour.

In‘EnergyFlexibility:TransformingthePowerSystemby2030’,industryleadersidentifiedstorageasbeingthemostsignificanttechnologyinfacilitatingthenecessaryflexibilityintheBritishelectricitysystem.Demand-side storage was the technology that they hadthehighestconfidenceinbeingmatureandcommercialisedby2030.Itwasalsonotablethatsurvey participants from the retail and trading market rolessawthegreatestbusinessopportunitiesinmakinguseofdemand-sideflexibilitytoefficientlymanage their portfolios.

Ifpolicy,regulationandstandardscanbecoherentlyaligned to deliver the physical infrastructures and devicesthatprovidethelevelofflexibilityacrossthesystemtoeconomicallymaintainsecurityofsupply,thechallengethenbecomesoneofensuringthatthemarketforenergyandflexibilityservicesoperateseffectivelyanddeliversgenuinebenefitstoconsumersbyensuringthattheirbillsaredrivenbywhentheyconsume rather than how much they consume.

But,ifwearetorealisetheopportunitytoemploydemand-sideflexibilitytoconvertthe‘EnergyTrilemma’intoavirtuouscircle,thentimeisshort.

1. Amodernsmartphoneoravintagesupercomputer:whichismorepowerful?,phoneArena,June2014 2. SUPERCOMPUTERvsyourcomputerinbang-for-buckbattle,TheRegister,March2012 3. TheCRAY-2ComputerSystem,CrayResearch,Inc.,May2016 4. iPhone7:GPU,ForsythAnalytics,May2016 5. WikipediahistoryofGFLOPScosts,AIImpacts,October2015 6. Trackingtheastoundingpaceofdigitalstorage,BoingBoing,March2011 7. WalkmantoiPod:Business-ModelTransformation,Recode,September2015 8. FromWalkmantoiPod:WhatMusicTechTeachesUsAboutInnovation,TheAtlantic,March2012 9. Powermarketforecastsforthenextdecade:topissuestowatch,ABBMarketAdvisory,September201610. ValueofFlexibilityinaDecarbonisedGridandSystemExternalitiesofLow-CarbonGenerationTechnologies, TheCommitteeonClimateChange,October201511. FutureEnergyScenarios2016,NationalGrid,December201612. AreSmartPhonesSpreadingFasterthanAnyTechnologyinHumanHistory?,MITTechnologyReview, May 201213. EnergyFlexibility:TransformingthePowerSystemby2030,CGIITUKLtd,May2016

Other references used throughout the white paper:

• E-Storage:Shiftingfromcosttovalue,WorldEnergyCouncil,January2016• Internetaccess–householdsandindividuals:2016,OfficeforNationalStatistics,August2016• Powersectorscenariosforthefifthcarbonbudget,TheCommitteeonClimateChange,October2015• SystemIntegrationCostsforAlternativeLowCarbonGenerationTechnologies–PolicyImplications,The

CommitteeonClimateChange,October2015• SmartPower,NationalInfrastructureCommission,March2016• Deliveringfuture-proofenergyinfrastructure,NationalInfrastructureCommission,March2016• ASMART,FLEXIBLEENERGYSYSTEM-Acallforevidence,BEIS,November2016• AnanalysisofelectricitysystemflexibilityforGreatBritain,BEIS,November2016• PositionPaper:Makingtheelectricitysystemmoreflexibleanddeliveringthebenefitsforconsumers,Ofgem,

September2015• ElectricShock:WilltheChristmaslightsgooutnextwinter?,BritishInfrastructureGroup,December2016

References

This paper addresses a fast-moving area of discussion and development. Between its drafting and publication, thinking has continued to progress:

• NationalGridhaspublisheditsFutureEnergyScenariosfor2017• BEIShaspublished‘Upgradingourenergysystem:asmartsystemsandflexibilityplan’inresponseto

itscallforevidenceonaSmart,FlexibleEnergySystem• TheCommitteeonClimateChangehaspublishedits‘2017ReporttoParliament–MeetingCarbon

Budgets:Closingthepolicygap’andtheassociatedreport‘Roadmapforflexibilityservicesto2030(PoyryandImperialCollegeLondon)’

Beyond smart

© 2017 CGI IT UK Limited Founded in 1976, CGI is one of the world’s largest IT and business process services providers, helping clients transform their businesses into digital enterprises. In the Utilities sector, CGI has over 6,000 members worldwide who specialise in providing innovative solutions to our clients’ most complex business challenges. CGI has been at the heart of every major change in the UK energy market since privatisation, leading the market in the provision of the technology that enable utility markets to operate effectively. In the UK, we designed, built and continue to operate the BSC Settlement systems for ELEXON; the data systems on behalf of the Data Communication Company (DCC) at the heart of Britain’s smart metering implementation programme; and the central market system for Market Operator Services Ltd (MOSL) to support the operation of the non-household English water market. CGI is enabling network operators to make Smart Grids a reality - creating a reliable, economic, sustainable low-carbon energy infrastructure.

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Beyond smart - cgi-group.co.uk · Beyond smart Generating the demand-side flexibility opportunity for British energy. Beyond smart 2 Beyond smart 3 Contents 4 Executive summary 6