By Hylton Millar, KPMG in the UK
Technological breakthroughs around the world are changing consumers’ relationship with energy. People are moving from passive receivers of energy from distant terminals to actively controlling their energy requirements including generation on site. Cities can be at the heart of this transition providing the joined up thinking required to deliver decentralized energy at a community level.
Rapid falls in the costs of solar panels and battery storage, combined with the roll out of smart meters and the continued development of demand side response (DSR) technologies provide the basis of a very different way of producing and consuming energy in the future. Promoting decentralized energy use at a municipal level, either by individuals or on behalf of the community, offers the prospect of lower energy bills for households and businesses.
Installing solar panels on the roofs of community and residential buildings, for instance, provides around 40 percent of a building’s electricity needs1 . In trials, when solar panels were combined with storage and smart water systems generating their own hot water, that figure increased to 80-100 percent. City authorities are well-placed to co-ordinate the use of this technology across their public buildings and social housing to provide a city-wide benefit.
A number of large multi-national industrial and commercial consumers have already taken steps to reduce their reliance on a centralized system by taking their energy-generation in house. As a result, they are able to enjoy lower and more stable energy prices whilst ensuring security of supply. With increased municipal generation and supply cities can enjoy the same benefits.
City leaders also need to ensure that their buildings are as fuel-efficient as possible. Insulating homes helps avoid locking in fuel poverty for the next generation. Nationally, the UK government has cut funding for energy efficient home improvements whilst at the same time relaxing building regulations – risking a legacy of inefficient buildings across Britain with implications for fuel poverty. But locally, council-led initiatives such as Warm Up Bristol are moving in the other direction to ensure this does not occur.
Installing smart meters is another step towards using energy in the most efficient way. All households in the UK are due to have smart meters by 2020, based on government policy, and this will allow for the creation of more nuanced tariffs that reflect demand at different times of day.
I would advise councils to invest in storage capacity. Developments in lithium ion batteries mean the cost of storage is likely to fall. California, for example, has recently mandated the purchase of 1.3GW of storage which should enable economies of scale to kick in for production. The ability to store electricity and then use it when required so as to avoid the higher demand reflective tariffs will increase the value of the electricity generated locally.
The final piece of the jigsaw is ensuring that the local low voltage grid network remains fit for purpose as distribution network operators (DNOs) evolve from being the custodians of relatively dumb assets to managing complex systems with thousands of connections and electricity flowing in every direction. The use of smart grids and grid level storage should help with this transition.
The UK market is progressing towards decentralization with the advancement in technology and increasing consumer awareness and involvement. City leaders can harness this shift towards a more consumer and community-driven market to deliver lower costs for energy users whilst achieving decarbonization targets and ensuring security of supply.
1Energy usage in households with Solar PV installations (PDF 768 KB)