Regulatory uncertainty, technical challenges and a lack of visibility over future revenues are impeding the development of flexibility services, a new report has found.
Of the nine northern European markets examined in the Energy Transition Readiness Index commissioned by Drax and Eaton, Great Britain ranked eighth in terms of its attractiveness to investors in flexibility.
The report says there is “good political and public consensus” within Britain on the need to decarbonise but says “this has not translated fully into regulatory and market change”.
Markets are “generally open to all forms of flexibility” but are “highly fragmented and complex, with specific products essentially targeted to specific technologies”.
Major improvements are planned, but “implementation is slow”. Delays in the smart meter rollout and the adoption of open data standards may also be stalling progress.
Great Britain’s scores
The ranking is topped by the Netherlands, which scored highly across market, socio-economic and technological factors.
The report says the country’s climate change ambitions are matched with “strong progress on exploiting new technologies and the associated market and regulatory reforms”.
It is followed by three Scandinavian countries – Finland in second, Sweden in third and Denmark in fourth – which also received high scores for all three categories.
Cyrille Brisson, Eaton’s vice president for Europe, the Middle East and Africa, told Utility Week that one of the key differences between those countries and Britain is the stability of regulation: “It doesn’t take people by surprise. It’s a very important criteria for investors because these are long term assets.”
Brisson pointed to Ofgem’s minded-to decision on residual network charges and embedded benefits as one which “took everyone by surprise”. He said there were several projects that were just about to be given the go-ahead but were “stopped in their tracks”.
The overall ranking
The largest power markets examined in the report – Germany, France and Great Britain – were all placed at the bottom of the ranking, but Brisson said they are by no means failing: “You look at any other corner of the world and everybody would rate lower. It’s just that France, Germany and the UK are behind the countries that are the most advanced in the world.”
Robert Hull, an independent consultant who authored the report, told Utility Week the size of these nations may be a disadvantage: “Certainly in the UK, and to some extent in France and Germany which are also very big markets, it is more difficult to get these type of changes because it is a huge industry transition.”
He said it is well recognised that the UK market is “amongst the most complex and difficult to change”.
Brisson agreed, saying Britain has a highly formal consultation process and large “vested interests”, which slow things down.
The report was published by the recently renamed Association for Renewable Energy and Clean Technology (formerly the Renewable Energy Association).
Its chief executive Nina Skorupska said: “Decarbonising power means delivering flexibility. In a world of very low-cost variable renewable electricity generation, grids need to be organised differently and some services which were once taken for granted need to be actively procured.
“Crucially, as renewable power prices fall around the world every country will be experiencing the same shift. If Britain becomes a flexibility pioneer, then a whole world of markets for exporting our products and services opens up.
“Whilst this index shows we’re lagging behind, there’s still time to bounce back.”