The energy system dilemma


What will it take for today’s disparate energy sector to become a whole energy system? Duncan Botting, Managing Director at Global Smart Transformation and Chair of the IET Energy Sector Panel and Member of the IET Policy Panel, explains.


The link between society and energy is set of complex processes, reduced to ‘manageable’ groups. We have energy sources, such as oil and gas (fossil), nuclear and renewable fuels as well as transport mechanisms to deliver these to end users - our transmission and distribution systems - including wires, pipes, road, rail and air. End-users are provided with ways to use these elements in their daily lives, via electrical and gas appliances, transportation vehicles, heaters, coolers and more. Then we also layer complex market structures and regulation over these physical assets, while adding commercial arrangements between the stakeholders to provide products and services. But the complexity doesn’t stop here.


Today, environmental needs are imperative to the production, transmission, distribution and use of products and services. Factor in societal acceptance along the way, and our breathtakingly complex landscape is complete. A recent chart from the Department of Energy and Climate Change (DECC) attempts to capture the complexity, detailing the energy flows from primary fuel through conversion and transformation to end-users, in the latest 2014 published data.


According to DECC statistics, the conversion and losses between “energy in” and “energy out” is more than 50%. The approximately 48% of initial input energy that reaches end-users is then subject to the efficiency of their vehicles, electrical and gas appliances. For example, waste heat is a key loss in the data presented and set to become a massive challenge for the UK, as heat demand peaks at 300GW on the coldest days at end-user premises. But while the energy flow chart provides insight to the links between energy conversion and use, we still treat each element as a distinct silo, barely integrated with the whole


energy system. Yet, the energy system is exactly that - ‘a whole system’ - and integration is imperative, a requirement just being realised in the UK Energy Sector.


In order to deliver the ‘smart’ integration between the various segments of the Energy Sector, communications, connectivity and data transfer challenges must be addressed. In the telecommunications sector, concerns over data, privacy, cyber security, and more, have been at the heart of the sector’s revolution. But privacy, cybersecurity and critical national infrastructure, pose a major challenge for an energy sector transitioning to an integrated whole system.


Investors are always challenged when risk and uncertainty reaches a certain level. Today, the energy system is a, relatively known risk but the rapidly changing dynamic described here, is not well understood by investors. And as such, clarity will be needed on new policy, regulation, business models and more. However, risk is an opportunity and many new investors are keen to understand how to take advantage of these changes.


Education matters


Much of our education is structured to deliver into the silo-based world of yesterday’s energy system. A large legacy of experience of ‘how things were done before’ must be merged with ‘how can we change things without breaking the old system as we go’.


This transformation has been described as converting a Boeing 747 to an Airbus A380 in flight and without understanding how the design will change on the way. Yet the electricity sector has already taken a small step towards this new world. In 2015, DECC commissioned the IET and Energy System Catapult to consider the new functionality for a future power system architecture to deliver society’s needs based on legally binding carbon targets. As part of this Future Power System Architecture (FPSA) project, rigorous system engineering techniques were used, for the first time, to discover the new and enhanced functionality


Energy Flow Chart 2014 (million tonnes of oil equivalent)


Energy Flow Chart 2014 (million tonnes of oil equivalent)


Stocks Gas


Primary Supply 201.0


36.6


NATURAL GAS 77.6


41.0 66.4 66.5


Primary Demand 201.4


Petroleum Natural Gas Coal IMPORTS IMPORTS1 Electricity Bioenergy2 Manufactured Fuels3 Crude Oil and NGL Refined Products


HYDRO, WIND, IMPORTS & SECONDARY ELECTRICITY


IMPORTS IMPORTS 0.5 0.5 40.6 0.3 IMPORTS


IRON & STEEL 1.4


3 Stocks 2.3


COAL 35.2


DEEP MINED 5.0


OTHER 28.0 2.0 IMPORTS


ELECTRICITY 19.5


3.6HYDRO & WIND 13.8


NUCLEAR 7.9


BIOENERGY 11.0


10.7 10.7 3.2 IMPORTS 0.4


Product Stocks


0.5 0.2 0.4 0.1 19.2 19.3 6.5 4.1 0.2 19.3 39.4 52.6


TRANSPORT 54.2


31.9 31.9 5.4 25.0 POWER STATIONS 4.3 4.6 1.3


0.4 1.2


TRANSFORMATION 30.7 OTHER 11.0


2.2 1.9


26.1 0.1


7.5 4.3


7.7


1.5 0.9


0.7


OTHER INDUSTRY 22.6


Coal 18.8 2.2 4.8 0.5


that would be required to enable and manage the changing electricity system to 2030. Analyses highlighted the loss of system inertia, an increase in intermittency and variability of renewable generation, a need for the end-users to take more active roles, a loss of predictable load profiles; the list goes on. Change is not expected, it is already happening, and some of the functions considered are becoming a reality already. Indeed, Distribution Network Owners (DNO) are already starting to actively manage networks, becoming Distribution System Operators (DSO). But how will new stakeholders - from commercial and social aggregators to community energy managers - ensure whole system security and integrity? And where does the responsibility for the design, technical coherence and ongoing growth of the whole system lie? Indeed, the electricity system is only a sub-system of the energy system as a whole, and while the FPSA project made a start, understanding the wider implications is a greater challenge. To this end, the Smart Grid Forum, chaired by DECC and Ofgem, is considering widening its remit to “Smart Energy”, including more than electricity. And change is afoot. Ofgem has already reorganised itself internally to cover a whole systems perspective while DECC is consulting a Smart Energy policy. Meanwhile, National Grid has confirmed its strategy will be based on the use of Smart Demand by 2050, and not simply more large generation. To help understand this transformation, the IET Energy System Insights Supplement has asked leading practitioners for help. In this supplement, they will provide their personal insight to how whole energy system analysis could be used to help transition today’s silo-based models, markets, regulation, commercial, technical and societal legacy infrastructure into a future-enabling, cost- efficient, energy saving, low carbon, fair, sustainable and societally acceptable service. The challenge is multi-faceted and myriad questions exist. For example, what market structure is needed to facilitate this new reality? How can we combine the legacy infrastructure of legislation, regulation and long term commercial contracts with the fast changing landscape we find ourselves in? Also, given that market structure and regulation define technical winners and losers, do we know what the technical challenges are under a changing market structure? And, at the same time, what will be the impact of environmental mandated targets on the commercial and technical solutions available be? Still, society poses the largest challenge and the biggest opportunity. Yes how well do we know our target audience, and how much does this group know about our sector? And, if they don’t know what they want, how can they ask for it?


31.8


Primary demand 73.1


43.7


PETROLEUM 134.3


Primary supply 72.8


OIL REFINERIES 67.9 23.9 9.4


0.4 2.6


0.2 1.7


DOMESTIC 38.2


The following articles shine a light on the current status of the energy system, and consider the future challenges and opportunities for the whole energy system.


58.9 4.1 7.0


Crude Stocks


Gas Coal Bioenergy Electricity EXPORTS AND MARINE BUNKERS 73.2 FOOTNOTES:


1. Coal imports and exports include manufactured fuels. 3. Includes heat sold.


2. Bioenergy is renewable energy made from material of recent biological origin derived from plant or animal matter, known as biomass. 4. Includes non-energy use.


This flowchart has been produced using the style of balance and figures in the 2015 Digest of UK Energy Statistics, Table 1.1.


CONVERSION LOSSES 43.7


ENERGY INDUSTRY USE AND DISTRIBUTION LOSSES 14.9


NON-ENERGY USE 7.6


33.9 27.3


8.3 8.3


0.4 1.5


0.4


OTHER FINAL CONSUMERS 19.0


Duncan Botting is Managing Director, Global Smart Transformation Limited Director of the European Utility Telecoms Council Founder member of the DECC/OFGEM Smart Grid Forum and co-chair of WS9 – Technical Innovation and Growth.


TOTAL FINAL CONSUMPTION4 142.8


INDIGENOUS PRODUCTION AND IMPORTS 277.7


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