“Uncertainty” is the word of the moment. Politicians and media from right and left have been talking about it. Not least it was a recurring theme during last Wednesday’s Business, Energy and Industrial Strategy Select Committee meeting, which addressed questions about the future direction of our energy market at a time when many of the big industry players are looking to some of their newly empowered consumers for a steer on what to expect. Does understanding consumer choice really provide a complete picture for future investment in the UK’s energy infrastructure?
The UK energy system has traditionally been viewed as an industry that is pretty resistant to change. With electricity being produced and distributed by large-scale infrastructure owned by a few key players, the energy market was often depicted as supply-driven — to be regulated and controlled by the State as appropriate. However, over the last decade a surge of small-scale, green energy technology options, such as solar photovoltaic cells (PVs), which are increasingly now driven by the unsubsidised choices of individual consumers, has disrupted such assumptions about the workings of the UK power market.
Last Thursday, a number of power sector organisations met to present their responses to the Green Alliance’s report which addressed this issue: “how consumer choice is changing the UK energy system”. Representatives from National Grid, OfGem, Western Power Distributions and Bloomberg New Energy Finance delivered their views on the challenges and opportunities presented by the transition to a decentralised, digitised and decarbonised future. The collective view appeared to be that change is underway and it is unstoppable. As system and distribution network operators and regulators, they needed to somehow “step up” and manage this transition.
However, the manner in which they should “step up” was unclear. They disputed who should coordinate this effort and set out some kind of strategic vision.
Green Alliance advocate an “independent system designer” to provide technical analysis and option testing of the best ways to integrate small energy into the overall system. However, others on the panel seem to suggest that this was inappropriate. They needed to listen to consumer demands and let the strategic vision come from them. The question appears to be that, if we are moving to a more market-led system, what kind of market should be fostered?
This discussion went back and forth on the extent which free-market principles should be left to do their thing in this new, emerging form of the energy market. However, it was centred on a limited view of the “individual”. Individuals were presented as empowered through their ability to defect from the grid, exiting the mainstream market through consumer choice. And when panel members said we should seek direction from them, they referred to evaluating customer satisfaction.
However, with crowdfunding platforms such as Abundance making it possible for those same consumers to express their opinions about green energy options in other ways, are they missing a bigger picture? By investing through such platforms, individuals facilitate the expansion of these alternative technologies in collaboration with other individuals, as communities. As a consequence, those big industry players will need to take into account so-called “defection” from the grid in other ways and with other potential consequences.
If organisations like the National Grid and Western Power Distributions really are looking to consumers for the strategic vision before committing to any form of infrastructural overhaul, it was clear from the discussion that they would do well to look at the ‘nudges’ provided by consumer-led investment choices over the means of production not just the shape of consumption.
The panel stated the need to collaborate with each other in managing the transition to a decentralised, digitised and decarbonised system. They also stated the need for greater collaboration with individuals as consumers. However, they also need to collaborate with individuals as investors, consumers and above all as members of communities.