A report by respected academics has urged government to make it easier for UK industry to provide grid balancing services and to allow them to buy power direct from overseas generators.
Professor Michael Grubb and Paul Drummond of University College London wrote the report for think tank The Aldersgate Group, highlighting the premium paid for power by UK firms versus European competitors and how to address it.
Other recommendations include: bringing onshore wind and a carbon tax escalator back to the table; continuing to build out interconnectors and; better coordination of network and generation infrastructure, with a review of transmission funding and charging approaches, including Triad.
It also calls for the creation of a zero carbon electricity contracts market.
Allowing firms to buy power direct from continental sources through interconnectors could work if the carbon price was applied to any imported power, the report suggests.
Meanwhile, it urges government to use its five-year review of the Electricity Market Reform (EMR) programme to examine how to bring more industrial and commercial companies into the capacity market, demand-side response and flexibility programmes.
Industrial firms used 26% of UK power in 2016, commercial firms 21%, yet very little of that load is currently used to balance the grid, states the report.
While some energy intensive firms have stated they have limited ability to provide flexibility, the report suggests better engaging big business could enable them to offset power costs – and potentially throw-up new ways of bundling such services in new types of industrial electricity contracts.
Establishing a market for long-term, tradeable zero-carbon electricity contracts would enable businesses holding such contracts to avoid exposure to a rising carbon price, argues the report.
“Balancing and backup costs will be minimised if the renewable energy contracts are aggregated though a ‘green power pool’, which passes these costs on to the renewable generators, whilst consumers offering demand flexibility and other system services benefit from lower contract prices,” it states.
The report recommends either the Low Carbon Contracts Company or potentially the System Operator should be charged with looking at how that might work for deployment in the mid-2020s when the carbon price escalator resumes.
See the report here.
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