To deal with these mounting pressures, it will be important to further integrate energy, water, and communication systems. One initiative that plays into this is Ofgem’s requirement that electricity and natural gas networks adopt a whole system approach to business planning. This sounds wise but is challenging in the present regulatory and market environment.
The vertical transmission-distribution system debate is something of a tug-of-war around roles and functions. It is almost impossible for an individual distribution network owner to be impartial and adopt a true whole system view on matters such as the future distribution system operator model or hydrogen transmission’s future.
Likewise, for the gas-electricity horizontal dimension, this cuts across regulatory boundaries and requires solutions involving commercial and planning trade-offs to optimise customer solutions that may be solved by gas, electricity, or a combination of the two. Who arbitrates what is the right answer?
Despite the challenges, there are benefits in making a whole system approach work. By combining the best features and economics of gas and electricity, we can improve the energy system’s resilience at a lower cost (not to mention the other potential benefits related to decarbonisation). Weaknesses in the electricity system – for instance, lack of storage – can be supported through better integration with gas.
Navigant’s work in sector coupling highlights technical options that can improve system resilience over time. However, many of these options require an ongoing commitment to innovation, particularly in transport and heat. A more combined approach to network innovation strategy is an important step to recognise that solutions including power-to-X, hybrid heat pumps, heat storage, and microgrids require a collaborative approach rather than a separating wall between the two systems.
Clear responsibility and incentives are also important requirements. A business plan requirement is a start, but leadership, co-ordination, and the right incentives for all parties are also necessary. One option is for a well defined whole system operator role, whose responsibilities would cut across boundaries to achieve optimal solutions. While there is plenty of activity drafting business plans, this ball remains in Ofgem’s court. As energy systems evolve and the dramatic effects of climate change on resilience gather pace, it is one task that deserves priority.
For further information, visit: navigant.com/energy