The thinktank’s report said distributed technologies offer an alternative to the centralized utilities model which is based on large fossil-fuel based generation to meet peak demand, but that these technologies are held back by a bias in favour of the large-scale utility business model.
“It is time to break with the past and embrace the bright new future that these technologies offer,” the report said.
The reforms proposed by the report include a scrapping of the government’s capacity market in favour of a new regulatory model for the networks which addresses the need to maintain system security.
The report calls for half-hourly settlement of electricity system balancing which should be introduced for the residential sector as soon as possible to support the deployment of smart technologies, as well as a feed-in tariff to support deployment of energy efficiency technologies.
The new disruptive technologies – including solar photovoltaics, onshore wind power, batteries, smart thermostats and appliances, and highly efficient lights – could lead to cheaper, cleaner, more competitive and secure electricity system, claims the IPPR.
“But by doing so they undermine the existing utility business model, which has traditionally relied on periods of peak demand to make money,” the report said.
“Energy efficiency technologies, which have the added benefits of directly reducing consumers’ bills and reducing the requirement to transport electricity, also reduce the total amount of electricity demand that is available for the utilities to supply,” the report added.
Large-scale utilities across the world are facing financial difficulties because of the current and projected disruptive impacts of distributed electricity technologies, the report said, which adds further need for the government to adapt its policies to “new technological paradigm”.