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Hywel Lloyd, Government Engagement Manager, Active Building Centre

Looking back at the evolution of energy systems in the UK over many centuries, the overall direction of travel has been towards greater centralisation in the production and distribution of fuel and electricity.

For people seeking to heat their homes, the pre-modern norm was to forage for wood yourself. In the era of the Industrial Revolution, this gave way to buying coal that had been extracted by corporate enterprise at a local marketplace.

In the twentieth century, electricity networks were originally administered at local or municipal level. Only under the Electricity Act 1947 were they nationalised and subsumed into a national system, after technological advances in the long-distance transmission of electricity in the 1930s enabled a large-scale network.

Similarly, coal-powered hearths were only displaced as the standard form of heating by the emergence of a national gas grid from the late 1960s onwards.

While this is a simplification of the complex evolution of the UK’s multifaceted energy landscape, the broad shape of the secular shift is undeniable. Previously an individual was personally responsible for sourcing their own fuel; today they can flick a switch and have their energy needs serviced by a combination of multinational companies and publicly owned national infrastructure.

This history remains baked into much of the thinking around the direction of energy policy in the era of climate change. Solar panels can now be found on one in every 25 buildings in the UK, but despite their widespread visibility, they are rarely seen as the main blueprint for a carbon-neutral energy system. Instead many people assume electricity generation will be concentrated even more heavily in major, green-energy facilities – be they nuclear power stations, biomass plants, wind farms or tidal lagoons – administered at a national level.

Yet the nature of many renewable energy sources is categorically different to the fossil fuels that shaped the energy systems of the twentieth century. Both wind and solar power are distinguished by their relative ubiquity. The availability of solar panels and wind turbines in domestic settings underlines how different these energy types are to coal or gas reserves, which are concentrated in challenging locations requiring significant investment and technical expertise to access.

This poses profound questions of the logic that motivated the formation of centralised energy systems. In the past it was easier to transport electricity than the underlying fuel. It therefore made sense to consolidate the tasks of extracting the fuel and generating and distributing the electricity at a national level in order to realise economies of scale. It is debateable whether this still holds true.

The advantages of a distributed system

In fact, we believe that for any energy system to achieve carbon-neutrality it must also embrace a significant degree of decentralisation. The weather and geography already bring solar, wind and thermal energy directly to the buildings that account for 40% of the UK’s carbon emissions. It would be an extraordinary oversight not to make the required investment to ensure that each building can harvest and capture at least some of what surrounds it.

Crucially, with the increased digitisation and intelligent control of the energy system we can go further and also redistribute this harvested energy, effectively adding millions of small-scale power stations to the UK’s energy network. Each building has the advantage of already being permanently wired into the system, without requiring anything to be built from scratch or new locations to be connected into the grid.

As one positive, we are starting to see a shift in thinking by both UK government and regulators in perceiving buildings as energy assets, rather than liabilities. The recently published joint BEIS / Ofgem Smart Systems and Flexibility Plan 2021, which builds on the 2017 original, recognised that ‘our future net zero energy system will comprise millions of assets’ and that ‘generation and storage are becoming increasingly decentralised, with solar and batteries being deployed in individual buildings and by local communities’.

We should not, of course, understate the significant work required to upgrade the UK’s housing, public-sector and commercial stock into ‘Active Buildings’, the smart and flexible energy assets that each generate sufficient renewable electricity for their own needs and can sell back the surplus to help power the local community. In each individual case it would require the installation of new kit, the upgrading of building fabric to optimise energy efficiency and the configuration of a smart system that intelligently manages how the technologies work together.

Yet even if the UK were to completely eschew a decentralised approach to its energy systems, much of this work would still need to take place. In a purely theoretical zero-carbon national grid supplied exclusively by nuclear power stations, biomass plants and solar and wind farms, the UK’s buildings would still need urgent refurbishment to improve energy efficiency and reduce consumption to affordable and sustainable levels.  

We are already setting to the monumental task of retrofitting tens of millions of buildings. The recent open letter to the Prime Minister from groups including Citizens Advice, Which? and the Federation of Master Builders described this job of retrofitting the UK’s 29 million homes as a ‘once in a generation undertaking’. Why, then, not use the opportunity to make buildings a net contributor of clean energy to the grid, rather than stopping short and just reducing wastage?

‘Think of the cost’, some will say, yet it would be untenable for advocates of large-scale centralised energy projects to argue that the alternatives don’t often present eye-watering costs of their own. In certain instances these will be incurred by consumers on a rolling basis, rather than as a one-off upfront investment. Hinkley Point C, set to be the UK’s first new nuclear power station in a decade, has been guaranteed a price of at least £92.50 for every megawatt-hour of electricity produced, rising with inflation. That could mean over £123 by 2025, based on CPI inflation from 2012 to 2020 and assuming the Bank of England’s target rate of 2% prevails thereafter.

By contrast, Active Buildings offer homeowners and building operators the opportunity to not only slash their energy bills, but also to earn back their initial investment and generate a tangible economic return. Fuel poverty has become ingrained within British society. There are 2.4 million households that are pushed below the poverty line in meeting their energy costs and 9,700 deaths a year caused by living in a cold house, according to research by National Energy Action. Equipping homes with the capability to generate electricity and sell on the surplus is a powerful lever for alleviating this situation. This could include DNOs funding the installation of batteries and other kit in the homes of vulnerable consumers, turning them into the vanguard of ‘prosumers’.

Flexibility as a core principle

Realistically a zero-carbon UK energy system will see a smaller number of larger, centralised energy assets working in conjunction with a much larger number of much smaller, decentralised assets. As well as sharing the generation load, distributed energy assets can help shift demand away from peak times, reducing requirements on the grid as well as for large-scale power stations. Fittingly, the R&D lab in which we develop new heat pumps and other active building technologies is based in Gloucestershire Science & Technology Park, on the site of the now decommissioned Berkeley nuclear power station, epitomising the UK’s ongoing shift away from energy centralisation.

The principle of flexibility will become just as core to our energy systems as carbon-neutrality. Because of the inherently intermittent nature of many renewable energy sources, how we manage demand for electricity is as paramount a concern as how we manage supply.

Our current ‘predict and provide’ model is prone to major inefficiencies, with wind turbine operators paid subsidies to deactivate their assets when they’re generating excess energy at non-peak hours. What if, instead, we could make use of the storage capabilities of the tens of millions of batteries that will soon be powering our electric vehicles and electric homes to take that power when it is produced, and to smooth out peaks and troughs in demand?

Motorists and homeowners could charge their cars or pre-heat hot water at discount rates at times of national energy surplus, and then sell back energy at higher rates at peak hours. This would open up agile tariff systems, such as Octopus Energy’s ‘Agile Octopus’ dynamic pricing system, to large swathes of the country. Research from our affiliate, the Active Building Centre Research Programme, has found that c.2 million new homes built to an active specification could shift as much as 12TWh of electricity load. This is equivalent to almost 4% of the UK’s total energy consumption in 2020 being moved to non-peak times, when surplus renewable energy currently routinely goes to waste.

A decentralised and flexible energy system therefore has much to recommend it: making full use of abundant renewable energy sources; piggybacking off the built environment’s existing connections to the grid and impending need for a retrofit; alleviating fuel poverty by generating returns for householders; and managing national consumption habits to significantly reduce the peak demand levels that otherwise necessitate large, high-cost power stations.

When it comes to the historic centralisation of the UK’s energy system, it’s time to start winding the clock back if we are to meet our 2050 net-zero goals.