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Northern Powergrid Local supply of electricity - A Commercial Innovation event

July 2017

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Northern Powergrid Local supply of electricity event July 2017

Executive summary

Northern Powergrid has been actively involved in the development of community energy since 2014,

with an ongoing relationship with Community Energy England (CEE). As part of the fifth Community

Energy Fortnight (24th

June – 9th

July), in direct response to its stakeholders needs and in line with the

sector's lobbying ask1 , Northern Powergrid held an event to explore the idea of customers purchasing

from local electricity generation.

The Local Supply of Electricity event was held on Friday 30th

June 2017, attended to maximum

capacity with a range of community energy stakeholders and local authority representatives. The

conversation was informed by several speakers who came from a variety of backgrounds, including

academic, smart-tech, community energy, and climate change campaigning, and are all experts in

their field:

Dr Stephen Hall, University Academic Fellow, University of Leeds

Dr Mary Gillie, Founder, Energy Local

Andy Kilner, CTO, Open Utility

Charles Bradshaw-Smith, CEO, Smart Klub

Leo Murray, Director of Strategy, 10:10

Presentations given by the speakers can be accessed from: www.northernpowergrid.com/your-

powergrid/article/reporting-back-from-our-local-supply-event.

The key topics of discussion around local electricity supply were:

1. Lower bills act as a reward for consumers for changing behaviour and using local systems

more efficiently

Re-localising the economic benefits of energy generation to keep income within local areas is an

important element of local supply business models. Consumers do not always act rationally in the

market as assumed - consumers require an incentive to change their behaviour in relation to their

energy use: lower bills act as a reward along with community support and engagement.

1 www.ukcec.org/community-energy-fortnight-lobbying-pack-2017

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2. Using existing network infrastructure rather than private wires increases the efficiency of

the energy system

There was a consensus amongst all speakers that existing networks should be used to operate

local supply, as it increases the operating efficiency of the entire electricity system. Instead, when

private wires are built to overcome capacity and licensing constraints, it creates inefficiencies in

infrastructure development, eventually paid for by the non-participant customer. The benefits to

investors in private wire are mitigated by new customer-facing obligations such as billing and

customer services.

3. Local supply models are not yet accessible, nor scalable

Those working on community energy projects and research were ultimately looking to build business

models which were so simple for consumers to be involved in that they would become conventional.

It was hoped that models could be created from various trials which could be adopted within any local

community.

4. Protection for vulnerable consumers must remain a priority

Full and fair access to energy markets is a key priority for Northern Powergrid and there is a

need to cater for all members of society and to protect vulnerable customers, such as low

income groups, who are not in a position to be more flexible in their approach to energy and so

benefit from innovative local schemes.

5. Transparency in the energy system could be improved

There is currently no visibility between contracted parties within energy systems. Peer-to-peer

systems, such as blockchain and Open Utility’s Piclo platform, propose to introduce more

transparency. Demand for more transparency or itemised billing with data would enable value-added

service propositions.

6. Regulation is a barrier to greater diversity in electricity supply models

While the technology exists for local supply systems to work successfully, change is required at a

regulatory level to ensure that the framework is fit for purpose – this is a key barrier facing the

community energy movement. Speakers called for a regulatory environment which allowed for

greater diversity, innovation in electricity supply models, and for alternative charging methodologies.

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7. Local supply has a wide range of benefits

A range of benefits of local supply for both the energy system and customers were identified. These

includ savings in energy bills, re-localising the economic benefits derived from renewable energy,

and the opportunity to create more resilient communities with greater community engagement.

Ultimately, local supply had the potential to contribute to meeting public social goals and was also

viewed as a solution in the wider push for decarbonisation.

Thus, local supply was considered worth pursuing. Northern Powergrid are keen to help with

progressing local supply projects and noted they are “open for business” for commercial innovation.

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Content page

Executive summary.................................................................................................................................. 2

1.0 Introduction ....................................................................................................................................... 6

Background ........................................................................................................................................... 7

Approach .............................................................................................................................................. 7

2.0 Plenary sessions ................................................................................................................................. 9

Welcome and introductions ............................................................................................................... 10

Why Local Supply – the energy whole-system pitch .......................................................................... 11

The building blocks of local markets .................................................................................................. 14

Peer-to-peer electricity trading .......................................................................................................... 17

Why Local Supply – the political pitch ................................................................................................ 18

Wrap up .............................................................................................................................................. 19

3.0 Breakout sessions ............................................................................................................................ 20

Example of projects running – Tower Power and Bethesda trial ....................................................... 21

Examples of projects running – SCENe ............................................................................................... 23

Community Energy Blockchain: Potential business models, risks and opportunities ........................ 26

Open surgery – connections and DUoS for local supply projects ....................................................... 29

4.0 Key themes ...................................................................................................................................... 30

Key themes ......................................................................................................................................... 31

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1.0 Introduction

An introduction to the event and wider

context.

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Background

Northern Powergrid has been actively involved in the development of community energy since 2014,

with an ongoing relationship with Community Energy England (CEE). While CEE represents and

supports those committed to the community energy sector, Northern Powergrid continues to

recognise the local and wider societal benefits of local supply of electricity.

As part of the fifth Community Energy Fortnight (24th

June – 9th

July), and building on previous events

on the same subject, Northern Powergrid held an event to explore the idea of customers purchasing

from local electricity generation, in direct response to its stakeholders needs and in line with the

sector's lobbying ask2. The key objective of the event was collaboration between local authority

representatives and those involved in community energy projects, to understand the challenges to

local supply and solutions to overcome these.

Explain was commissioned by Northern Powergrid as an independent research partner to capture the

key conversations and findings from the event.

Approach

The Local Supply of Electricity event was held on Friday 30th

June 2017 in York city centre, attended to

maximum capacity with a range of community energy stakeholders and local authority

representatives. The conversation was informed by several speakers who came from a variety of

backgrounds, including academic, smart-tech, community energy, and climate change campaigning,

and were all experts in their field.

Detail on the agenda for the event can be found below and full presentations can be found

at www.northernpowergrid.com/your-powergrid/article/reporting-back-from-our-local-supply-event.

Four members of the Explain qualitative research team attended the event, with one Explain attendee

at each breakout session. Notes were taken by all and collated to form the basis of analysis.

Time Agenda item

10:00am to 10:15am

Welcome and introductions

An introduction to the event was given by Jim Cardwell, Head of Trading and

Innovation at Northern Powergrid. Jim set the context for the event and

spoke about Northern Powergrid’s involvement in community energy.

2 www.ukcec.org/community-energy-fortnight-lobbying-pack-2017

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http://www.northernpowergrid.com/your-powergrid/article/reporting-back-from-our-local-supply-event

http://www.northernpowergrid.com/your-powergrid/article/reporting-back-from-our-local-supply-event


10:15am to 10:30am

Why Local Supply – the energy whole-system pitch

Dr Stephen Hall of University of Leeds discussed the current stance in the

economics of community energy and how communities could progress with

local supply.

10:30am to 10:50am

The building blocks of local markets

Dr Mary Gillie of Energy Local gave delegates an insight into local supply in

practice, with examples of current trials and challenges.

10:50am to 11:10am

Peer-to-peer electricity trading

Andy Kilner of Open Utility introduced delegates to their Piclo peer-to-peer

trading technology.

11:10am to 11:25am

Q&A

Delegates were invited to ask questions to a panel of the morning’s external

speakers.

11:40am to 12:10pm

Breakout sessions – round one

Delegates were invited to participate in a range of workshops, as follows:

Examples of projects running – Tower Power and Bethesda trial, with

Dr Mary Gillie

Examples of projects running – SCENe, with Charles Bradshaw-Smith

Community energy blockchain: potential business models, risks and

opportunities, with Joanna Hubbard of Electron

Open surgery to take questions about connections and DUoS for local

supply projects, with Mike Hammond and Emma Wilson

An Explain note taker was allocated at each workshop to capture the

discussions which took place.

12:15pm to 12:45pm

Breakout sessions – round two

Workshop sessions were repeated. A note taker was allocated at each

workshop to capture the discussions.

12:45pm to 1:15pm Lunch and networking

Delegates were invited to network and enjoy a meal together.

1:15pm to 1:35pm

Summary session

Five minute summaries of each breakout session and discussion were shared

by session leads.

1:35pm to 1:50pm

Why Local Supply – the political pitch

Leo Murray of 10:10 gave his view on local supply with a focus on political

and regulatory barriers.

1:50pm to 2:00pm

Wrap up

As a final agenda item, a closing statement and thanks came from Anne-

Claire Leydier, Sustainability Manager at Northern Powergrid.

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2.0 Plenary sessions

An overview of the speakers and their key

points from the plenary sessions, including

panel Q&A.

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Welcome and introductions

Opening the event was Jim Cardwell, Head of Trading and Innovation at Northern Powergrid, who

provided delegates with context for the discussions of the day, as well as an insight into Northern

Powergrid’s approach to community energy. The event was part of Community Energy Fortnight,

which ran from 24th

June to 9th

July, and was held with the support of Community Energy England,

with whom Northern Powergrid have an ongoing relationship.

Northern Powergrid recognised the benefits of community energy, including the returns on

investment for society and its position as a solution in the wider push for decarbonisation. However, it

was acknowledged that innovation is required in the commercial and regulatory arenas to support

community energy in the future and enable more flexible solutions; these commercial and regulatory

issues would be a focus of the day.

Examples of community energy projects which Northern Powergrid was involved in included the

Activating Community Engagement (ACE) pilot project in Weardale, which incentivised members of

the local community to demonstrate demand side response on a domestic scale. Jim also highlighted

a storage and solar study conducted in Barnsley, which investigated the network capacity benefits of

twinning clusters of domestic batteries with solar panels.

Copies of the most recent Community Energy England report were provided at the event. Sponsored

by Northern Powergrid, the report outlined the current state of the community energy sector,

discussing what has happened and what else needs to happen in the future. The key issue highlighted

was how full and fair access to energy markets could be achieved. As attendees at the event included

a mixture of those involved in community energy projects and representatives from local authorities,

Jim looked to the delegates to come up with questions and collaborate on the answers.

Northern Powergrid’s role was described as a fluid arrangement of generation and distribution. The

organisation, Jim discussed, is adapting to changes – decentralised generation and supply beginning

to follow demand. Three key pillars were identified as cost, decarbonisation, and reliability of the

system. Cost reflectivity is important and more local tariffs may be required. It was also noted that

there is a need to cater for all members of society and protect vulnerable groups who are not in a

position to be more flexible in their approach to energy.

Delegates were encouraged to use the day’s event to engage in dialogue.

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Why Local Supply – the energy whole-system pitch

In this session, Dr Stephen Hall of the School of Earth and Environment at University of Leeds

described changes in the energy system over time. We have moved from a uni-directional flow

between generation and end users to an energy whole-system, in which new stakeholders have been

created with the introduction of technologies such as smart metering. Dr Hall argued that those

within the system should be thinking about how best to integrate new stakeholders into it. A key

question is then how each new system-entrant has the ability to impact existing elements.

The complexity of the energy market mechanisms, i.e. the codes and other licencing frameworks, are

unavoidable as they are what dictates the remit of what is possible. Delegates were recommended to

refer to the publication ‘Planetary Economics’ by Michael Grubb: while the mechanism of the system

is based on assumptions about perfect competition and rationale, there is not perfect

competition in the current market. Furthermore, consumers do not always act rationally – for

example, many do not switch energy suppliers to save money, as the market assumes they will. As we

cannot assume that preferences and demands remain static, changes are required to the

network codes in response.

Delegates were encouraged to “be confident”, as the economics of now are not the economics of

tomorrow. It was highlighted that local supply is important but only as a piece of the national

system picture, which shows secure supply and low prices currently compared to other EU countries.

Dr Hall identified a need to build solutions allowing for the integration of a bottom-up system into a

top-down system, including generation and demand response, to ensure power supply at all times.

In a 2015 academic paper by Drs Stephen Hall and Katy Roelich3, it was identified that there were

many different business models for local supply, which required simplification. The four key drivers,

or opportunities, are:

Better routes to market for local generation,

Fulfilling the potential of the demand side,

Real energy efficiency gains,

Keeping the value of energy local.

3 research.ncl.ac.uk/ibuild/outputs/reports/local_electricity_supply_report_WEB.pdf

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Solutions must be built which work for both the low or ordinary income groups and the energy

affluent. The example of Robin Hood Energy was given as an organisation committed to fairer deals

on energy bills, particularly for low income groups, while Bristol Energy was cited as an example of an

organisation promoting “local renewables and stronger communities”.

Due to the complexity of the market mechanisms (codes and licences), Dr Hall stressed that it was

important for those involved in local community energy to be clear and specific about the details of

their ask: which part of the code, of the licence conditions, or of the licence exemption should be

changed and why, and to identify why local supply should be pursued from a regulatory point of view.

The Brooklyn Microgrid was an example of a project successfullyusing the existing grid in a creative

way, as Dr Hall emphasised it was important to use existing systems and find infrastructure

partnerships that work. In this project, some users were willing to pay more to benefit the local

community, and delegates were encouraged to get comfortable with consumer subsidy.

One delegate noted that the availability of licensing exemptions are a huge driver in the use of

private wires, and wondered how the two squared. Dr Gillie felt that the real driver for private wires

was the frustration of renewable sources not being provided with a true reward, and warned

about the lack of understanding around the level of responsibility and care that come with private

wires. She suggested that a fix to the economic model would remove the problem. Dr Hall noted

a need for re-engineering at an institutional level.

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On the topic of electrical vehicles, it was noted that suppliers and manufacturers are working

together to see how tariffs will be set, but are doing a bad job of talking to networks and National

Grid. Vehicle charging is changeable and can be shifted, so it is not seen as a notable problem - fixes

can be envisaged. Dr Hall felt that electrification of things like heat pumps would be a greater issue as

they are less changeable and the location cannot be moved.

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The building blocks of local markets

With a background in physics and engineering, Dr Mary Gillie, Founder of Energy Local, discussed the

practicalities of local supply implementation, drawing on her own experiences. Having identified a

need for local markets in which consumers could have an active role in the system, Dr Gillie saw an

opportunity presented by advanced metering and thus founded Energy Local.

It was recognised that local markets of elenergy are very much in their trial stage, with a focus on

creating the building blocks, for a future larger scale deployment. They are also developing new

local organisations which can reach and engage with members of communities who would

seldom otherwise be involved. Local markets operate before or after gate closure.

If achieved, the key aims of Energy Local would result in gains for local groups, suppliers, and

Distribution Network Operators (DNOs). For local groups, Dr Gillie hoped to derive greater income

from renewable energy, which would be kept locally for local benefit, reduce energy bills, and to

interact with people in communities. For suppliers, the risk of imbalances in the demand curve would

be reduced, with a smoothing of the local demand curve, while allowing for the development of a

new relationship with customers. The benefits to DNOs include greater efficiency in running

networks, with commercial arrangements that facilitate local balancing. There would also be

evidence helpful to revisit the charging methodology for network use.

Several elements which were required for local supply were identified as:

Rewards for local balancing, including in DUoS charging

Signals to indicate when demand is too low or too high, to encourage or control a demand side

response

No large costs incurred for set up

Ways to engage consumers and communities

Advanced metering to facilitate

An example of a project on Orkney Islands was used to demonstrate the success which could be

achieved in controlling loads rather than constraining generation. Nortech’s system was shown as a

solution in which networks were used more efficiently by matching up generation and demand to

reduce bottle necks.

A key challenge identified was the current capabilities of SMETS 1 and SMETS 2 meters, as these do

not provide all of the required functionality. Advanced metering, typically used by commercial

customers in the current market, is a better alternative to access the information required for Energy

Local’s system to function; it would allow contact with individual meters, real time readings,

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and innovative dashboards.

Energy Local’s vision and aims were explained, with tackling fuel poverty and keeping financial

benefits local, creating more resilient communities, central to these. The focus of Energy Local is the

problems within existing systems, including a lack of reward for matching local power, and renewable

generators not receiving their true reward.

In using Energy Local, both sides must agree on the price. Generation can be community-owned and

therefore income goes back into community, changing the dynamic of the conversation. Some

consumers want to help local people rather than lower prices. Dr Gillie asserted that the assumption

that choices were always price driven wasn’t always true, and said there were many other drivers at

play.

Delegates were introduced to an example of an Energy Local trial currently running with community-

owned hydro generation in Wales. Through the organisation, an Energy Local Club was formed

between households in the area.

One delegate looked for guidance on an example from Grimsby, involving a 15-acre plot of industrial

and domestic development around a power source. Dr Gillie felt that this could potentially fit with

their current model.

Positive results had been demonstrated by Energy Local to date, including savings in bills for local

people, greater community engagement, and greater efficiency in local networks. When discussing

which of the building blocks were currently in place, Dr Gillie identified these as follows:

Technology to match load and generation locally

Advanced meters and associated communications

New local organisations

While building blocks have progressed, including new market models, it was acknowledged that

challenges remained, including metering and Use of System charging.

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Peer-to-peer electricity trading

In this session, Andy Kilner, CTO and Co-Founder of Open Utility, introduced delegates to their Piclo

Platform, which was developed to be a leading peer-to-peer market for renewable energy in the UK.

The platform was currently operational in the UK and soon to be elsewhere in Europe.

The Eden Project was provided as an example of a venture with a strong focus on community and

driven by sustainability. It was noted that some energy will need to be bought from the grid even with

renewable energy systems, to fully satisfy demand. Therefore, Mr Kilner posed the question as to

how renewable energy can be guaranteed. The example, delegates were shown, also

demonstrated the solution which peer-to-peer renewable tariffs posed in the face of traditional

renewable tariffs, the challenges of which included:

The Renewable Energy Guarantees of Origin (REGO) certification process is opaque and

therefore not fully trusted

Enough certificates would be required to cover net demand over an entire year

There is no direct link between customers and when or where the renewable energy is

generated

Transparency over the source of power was required, as well as the ability to choose between specific

generators. With a peer-to-peer tariff, the Eden Project were able to choose to buy power from wind

turbines located nine miles away, though will only match with these when there is wind in the area.

This was an intuitive concept for consumers who previously did not understand the process.

A key challenge of peer-to-peer trading is matching with an intermittent energy source if it is not

currently generating. In automating the matching process, the Piclo technology provides a solution to

this, whilst still allowing for customer preference and influence over generator matching decisions.

For example, customers could see where energy has come from and set a preference for a generator

or type of generation, such as hydro or wind. Mr Kilner believed that the balance of automation

and choice offered by the Piclo system afforded customers with empowerment without

overwhelming them.

The current platform is licensed to energy suppliers, who can then deliver to customers. Suppliers

provide the industry standard meter data which is analysed by Piclo, and provide typical

customer-facing duties such as billing and contracts. For suppliers, Mr Kilner saw the platform

as offering an

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opportunity to enhance their local renewable generator assets, bringing their offering to life and

ultimately increasing their customer base.

It was noted by one delegate that the Piclo Platform did not specifically address the need to engage

consumers in their relationship with energy. The reason for this was a lack of appropriate metering

amongst residential consumers, and therefore concentration had been on the commercial market.

The difficulty of changing public behaviour was seen as a barrier, however Dr Gillie reiterated that

there was a need to work with local communities and work with smart metering for the benefit of

society, and thus a different way of thinking was required.

Looking to the future, it was noted that other information could be added to existing algorithms, such

as pricing, area discounts, and peer types. A cost reflective model could be created by overlaying a

map of DNO networks to map transactions; this would shape a fundamentally different model for

network charging. It was suggested that cost reflective models would improve network efficiency,

reducing congestion problems and costly network reinforcements, by incentivising the right

behaviour rather than trying to change consumer behaviour. With the existence of the technology to

enable customers to source power from local generators and support their local community, Mr

Kilner saw the next focus to be unlocking the financial benefits of local trading.

The impacts on price were discussed in relation to Energy Local projects and Open Utility’s peer-to-

peer platform. Open Utility found that it can be complicated if there is a lack of understanding of the

ramifications of consumer selection and therefore for their commercial roll-out the price paid per kW

hour was the same as the price without the service. But the system has the capabilities for

pricing however this has not been rolled out yet - this would be supplier choice.

Mr Kilner recognised that installation of private wires ultimately adds cost to the system, borne by

the end consumer, and thus it is more beneficial to use existing network systems.

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Why Local Supply – the political pitch

As the final external speaker of the event, Leo Murray, Director of Strategy at climate change charity

10:10, provided the political argument in support of local supply. It was a focus on practical and

positive collective action which led them on to community energy. As an advocate for local supply,

Mr Murray felt it was increasingly important for it to be easily accessible.

While the petition run in 2015 demonstrated that the potential for oversimplification was a barrier in

mobilising public support, local energy had the potential to contribute to meeting public social goals

and provide benefits to improve lives. Mr Murray went on to define these benefits, as follows;

Subsidy-free renewable energy is facilitated, as local energy arrangements captured a greater

proportion of margin between the generation and retail prices. By balancing in local

communities, new systems can be created, notwithstanding concerns expressed by Ofgem

that these models avoid fair contribution to network costs

Communities are rewarded for hosting renewable generators, primarily with lower energy

bills. Leo argued that in a decentralisation context benefits must be experienced by communities

to drive their consent and participation

Economic benefits of energy generation and supply are re-localised, keeping the money within

local areas

Enabled new energy company business models. It was noted that folding generation and

demand into the same entity (i.e. shared outcomes and interests) revolutionised current

models, and created greater incentives to meet needs locally. It was suggested that demand

within communities could go down year on year – a scenario not currently supported by other

business models.

Integrated storage, low-carbon heat and transport solutions - are additional incentive to meet

needs locally where possible. Demand response, becomes easier to do through an energy

community with shared interest

Secured better outcomes for domestic customers in general, including those more vulnerable.

Mr Murray proposed that community energy has the potential to look after both engaged and

disengaged consumers, suggesting the reigns within local communities could be held by the

engaged consumers to drive better outcomes at a local level. It was seen to be unrealistic to expect

households to be active market participants when it comes to electricity.

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While local supply was a promising avenue for improving outcomes for consumers, Mr Murray

acknowledged that there were regulatory barriers, in that the current framework did not allow

for diversity or innovation, and was not fit for purpose in a decentralised system. It was

suggested that the involvement of politicians was required to drive regulatory change in the face of a

compelling case for local supply and large problems with decarbonisation.

Wrap up

To close the session, Anne-Claire Leydier, Sustainability Manager at Northern Powergrid, recognised

that activity and momentum in the community energy arena was ongoing but there was a shared

responsibility for organisations to come together to enact change in the long term.

Northern Powergrid was “open for business” for commercial innovation, and the organisation will

look to amplify the message calling for regulatory change.

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3.0 Breakout sessions

An overview of each breakout session and

surgery, including key points raised by

delegates.

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Example of projects running – Tower Power and Bethesda trial

In this session, Dr Mary Gillie provided delegates with a greater focus on the rollout of Energy Local

projects and described current local supply trials.

In the Bethesda trial, Energy Local Clubs were formed, with prices agreed amongst them. Recruitment

was key - it was ensured that everyone in the community had at least some contact, for example via a

leaflet drop around the area. A key question was how the model could be made generic, in order to

be used across different areas. One hundred customers were recruited and some had experienced

savings already.

Dr Gillie was confident in this model but noted the requirement that the process must be easy and

straightforward. Therefore, they worked with charity 10:10 to create a toolkit of information,

including online accounts to opt in. A nucleus of existing organisations such as a parish council were

also needed, to contact and organise local people. The Energy Local CIC was formed – a national

organisation to which each local group would be a part of. Ultimately, their view was to forge greater

links with energy suppliers.

In their Tower Power project, Energy Local worked with Community Energy Scotland. This project

included those on prepayment meters and therefore getting meter information presented a hurdle,

however updating credit once a day meant that the fuel vulnerable could be included.

Topics and queries raised by delegates were as follows:

As the trial was run through the Cooperative energy supplier, one delegate enquired whether a

supplier was always required, and how these were chosen. Dr Gillie responded that a local

supplier was needed, as the communities have the power and make decisions as a club. It was

noted that these business models were also new to suppliers and thus education was part of the

process

Concerns were expressed that capability was defined by having an advanced meter, with a need

to switch out “dumb” meters like SMETS 1 and 2, however advanced meters may not be used in

the future. It was suggested that innovative business models were required without stipulating

meter requirements

One delegate asked about timescales for ongoing trials – new members were to be recruited in

September 2017, with a hope that trials would have national scope as soon as possible

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As the Energy Local trials looked to use pre-existing assets, it was recognised that much of the

value benefit was seen on the supply side rather than the network side, given that UoS made up

around 15% of bills. It was emphasised that if supply were to be balanced locally, reinforcement

to the network would not be needed, and as the assets were not running as hot they would last

longer, representing value

One delegate queried if the focus was to be shifted from load to generation – Energy Local were

looking for a change of mindset by the regulator, Ofgem

It was considered logical to incentivise behaviours as other people must be brought into the

conversation. Energy Local aimed to make it simple to understand for consumers by using

familiar ideas, and worked to build trust and reasoning over time. It was noted that local

authority groups could facilitate local supply within communities, and provide resources such as

buildings

It was noted that certain use of private wires was dangerous and illegal

Looking from a long term economic view, it was discussed that some generation sources such as

wind generation could be made viable without subsidy with the Energy Local model as plenty of

demand existed; solar and hydro power were also working towards that point

In discussing how Energy Local worked with suppliers within their model, all billing was done by

the supplier, with energy used and generated worked out across the community group resulting

in cheaper costs. Power not generated locally was also provided by the supplier

A target for Energy Local was identified as scalability, with Mary hoping for a community model

which could be cut and pasted across local areas, though there were implications of this

It was discussed that a balance was required between providing energy at the cheapest cost and

predictability of demand. Ideally, it was suggested, behaviours would be changed and habits

kept to drive greater predictability

Mary stated there was an assumption that behaviours could be incentivised in the long term but

felt that the community incentive maintained them to a greater degree than financial benefits.

Building on this, conversations with Ofgem were ongoing regarding incentivising in the charging

methodology to ensure that it was fair but rewarded people for doing the right thing. It was a

chicken and egg scenario in that there was uncertainty over which should come first, policy or

local supply trials

A further aim was to build in prepayment elements, as there are frustrations in local

communities where renewable energy is collected but they can’t purchase directly

More information on: www.towerpower.scot/ and www.energylocal.co.uk/cydynni/

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Examples of projects running – SCENe

In this session, delegates were introduced to Project SCENe at Trent Basin in Nottingham by the CEO

of SmartKlub, Charles Bradshaw-Smith.

About SmartKlub

The vision of SmartKlub was to transform how communities power themselves, with their mission to

switch cities onto collaborative ways of achieving their energy needs, with the best partners, for social

good. Examples of innovations projects in which SmartKlub is involved:

- CAPE (Community Action Plan for Energy - can group buy energy) platform in Milton Keynes

- Supply chain co-opetition in Leeds, (First Klub)

- ICP (Investor Confidence Project - EU funded), UK-GBC and Smart Cities Institute

- Smart Klub Scotland

About Project SCENe (Sustainable Community Energy Networks)

A collaborative project that seeks to accelerate the adoption of a different way of generating and

supplying heat and electricity to homes and commercial buildings, by producing and using energy

locally with minimal or no use of the national grid. It began with a brown field development in the

Trent Basin and collaboration partners with expertise in the energy supply chain. Novel consumer

engagement tools were used, and with funding from Innovate UK the project tests business models

for use by any developer, as they tried to make them more mainstream and accelerate adoption of

Community Energy Systems. Asset and customer management are handled by an Energy Services

Company (ESCo).

The key innovation of the project was described as ensuring the system was hassle free for the

developer and consumer, with financial stability. Community and buyer engagement was considered

essential – the process can be seen in the diagram below.

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The problems seen in current eco development involved private wires and long-term contracts,

typically scaring developers and consumers due to upfront costs and lock ins – SCENe was the

opposite of this. For SCENe, the key issue was balancing Research & Development with commercial

targets, and Charles recognised the need to remain pragmatic in their approach. The different stages

of the project were described, including the most recent community centre portal, with the current

project running until June 2018.

Key aspects of the model were:

No lock in for customers to private wires, with private wires only used for running batteries and

heat stores

While there was partnering with Robin Hood Energy on some elements, including billing and

managing any energy surplus, customers were free to choose supplier they wished as all was

connected to the grid

Energy Centre simplicity

Income increases as the system is optimised

Residents did not need to be with Robin Hood Energy, as the model acted as a layer on top of the

supplier – in exchange for lending their roofs and community, they will get share of surplus

generated. This could be in the form of a cheque for the value of the surplus, or through Robin Hood

Energy using their prepayment tariff, the ‘Nottingham Tariff’, which offers a standing charge discount

and any additional surplus amount off their bill. For customers to have a choice of supplier, they must

still be connected to the grid to prevent being locked into a private wire arrangement.

In terms of the benefits experienced by those involved, the target was identified as material

difference to users’ annual energy spend of 25%, with revenue made through sending surplus energy

generation onto the grid. There was no obligation for community members to engage and thus they

can choose whether to be involved in decision making and monitoring, or can choose to have no

involvement. Data could also be collected from communities as a whole with ongoing monitoring.

One delegate understood that the model was tightly linked to the network selling price and wondered

how the best deal was achieved. Charles explained that not all energy was sent to the grid, for

example storing it in batteries and thermal stores, though relationships with suppliers will impact

prices.

Queries were expressed around the types of consumers choosing to buy the properties, and whether

their interest would be in living in it themselves or selling on as an investment. It was noted that the

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homes were largely targeted at ‘empty nesters’ and SmartKlub sought to make the process as easy as

possible for buyers.

The vision for ESCO was to enable communities to embrace renewable energy in order to lower their

carbon footprint and energy costs without any hassle for the homeowner or the developer. For

communities, this meant no finance or administration, but with flexibility to join and engage as

desired, while receiving returns. On the developer side, this again meant no finance but installation

via a contractor.

The lease is 20 years with a five year extension option. Owners have the right to remove panels for

maintenance or extension for two to three months, and a right to move panels if requested by their

mortgage company. All homes have the same PV panels so this shouldn’t impact selling. The ability to

optimise will determine surplus shares. It was asserted that National Grid will change the rules in

future so there is a need to be innovative and to guarantee some return.

Homeowners aren’t responsible for maintaining PV and other elements – it is contracted that

SmartKlub were to be responsible for maintaining the solar panels and replacing these if required.

Delegates asked Charles about future maintenance costs – five year maintenance deals had been

negotiated and therefore costs were already known, however it was hoped that there would be

economies of scale for maintenance by that time.

Charles summarised Project SCENe as a real energy project, and SmartKlub sought to create

innovative business models for social good and derive benefit from generation. It was discussed that

there would be scope to retrofit solar panels and systems to pre-existing communities, and there was

already a project in view for this with developers and housing associations.

Each ESCO can evolve at the pace of its community, with members shaping its direction, and with

possibility to invest or expand its scope within clear boundaries. There was currently no demand side

response, however demand response schemes were seen for the future to be introduced in steps.

More information on: http://www.projectscene.uk/

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Community Energy Blockchain: Potential business models, risks and opportunities

In this session, Joanna Hubbard of Electron introduced delegates to the organisation and its

technology. Electron are a team of blockchain, energy and e-trading professionals using decentralised

technology to advance the shared infrastructure of energy markets. Their focus is the design of

efficient, robust and innovation friendly systems to support the industry’s transition to smart grid

infrastructure and new market norms of decarbonisation, decentralisation, digitalisation and

democratisation.

A blockchain was described as a protocol that allows participants to agree on the state of a system

without resorting to an intermediary, enabling instead industrial applications to co-ordinate

and co-operate efficiently.

Trial products provided by Electron included the following:

Meter registration platform: A shared registration platform for all UK gas and electricity supply

points to facilitate faster switching. This technology is now being extended to cover new types of

assets

Flexibility trading platform: A common trading venue for all demand side response actions to

enable collaborative trading in the current hierarchical system as well as peer-to-peer and micro-

grid trading

Smart meter data privacy: Encryption techniques that can enable parties to extract value from

smart meter data without compromising users’ data privacy

The two stages of blockchain involve first defining the assets, starting from the bottom up, to

understand if it is community-owned, using a supplier, or constrained, and second defining a

virtual ecosystem for the blockchain. The three key pillars are:

Define the set of assets (asset register) and register them onto the platform – this is a

register for all domestic supply points to, for example, enable faster switching. No one owns

the blockchain, you get identification over ownership to request use. Assets and ecosystems

join up eventually and assets give certain rules to define how they want to trade. This creates a

level playing field

Data – a certain level of granularity of data will be required. This is currently not part of the

blockchain but Electron plan incorporate it in the future. There is no central platform and no

one owns the data, which you can retain or sell, so various value recovery methods though the

monetization of data are possible,

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Trading – The point at which we can demonstrate fairness, and can be made suitable for

micro-payments. How you engage, and encourage interaction creates the participants' trust.

Systems can be developed by adding new Internet of Things (IOT) devices, energy management

devices, and machine learning.

The benefits of a blockchain were seen as the lack of a privileged intermediary, which in turn created

trust, transparency, and neutrality through a peer-to-peer system. Bitcoin was cited as the first

instance of this technology, in which pre-existing technology was combined to allow transfer of value

without relying on banks or fiscal policy. Automation was seen as another benefit, and blockchain was

described to have the capability to create a more inclusive and efficient market to enable

decentralised coordination. Direct arrangements with DNOs are fine for local authorities, Ms

Hubbard told delegates, but were perhaps not scalable for new entrants or individuals coming up in

the market.

Providing consumer protection was discussed. In Electron’s projects switching is enabled and Ofgem

have the ability to conduct checks on how vulnerable customers are being treated.

It was noted by Dr Stephen Hall that there was currently no visibility between contracted parties so it

was unclear who is contracted for what is in the market place. The blockchain system introduces

more transparency. Ms Hubbard likened it to an itemised phone bill. There was still a central point

of oversight and accountable parties, and the competition element of the process would come into

play once the platform was up and running.

Demand for more transparency or itemised billing with data would enable value-added service

propositions and Ms Hubbard suggested that the current electricity supply model is likely to

change towards a service model, with greater ease of tailoring customer supply. It was also suggested

as transparency in margins and revenues grow, there demand for cheaper prices will increase.

There was concern expressed by one delegate around the concept of trust and MsHubbard reiterated

that third parties were not required in the blockchain system. Delegates also queried how fairness

was ensured in the system. Ms Hubbard explained that this was through coordination between

the parties involved, including the network operator and supplier, based on the value they are

looking to get from it.

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Delegates were keen to understand how the system could be made easy, given that two thirds of

consumers do not swap their supplier each year, and how adoption could be driven. It was discussed

that this could be via a bottom-up or top-down approach, with consumers coming to Electron to say

they are engaged.

Ms Hubbard highlighted that as Electron were a technology partner their job is to deliver the

technology to the industry: one on-going project is looking at how two suppliers can supply one

meter point, to enable switching to a local energy supply and then back to regular supplier –

community asset led by community provider. You can’t have two suppliers supply to the same meter

currently.

Queries were raised around the signing up of assets, given that there was no central ownership.

Ms Hubbard highlighted that it was not possible to sign up just any asset, it would be necessary to

confirm possession of an MPAN number according to verified supplier data, driven by the

Government.

While the innovation of Electron’s systems were clear, Ms Hubbard summarised her session by

highlighting that through the three different community energy models they were exploring, the focus

was on returning value to local communities.

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Open surgery – connections and DUoS for local supply projects

Mike Hammond, Head of Connections at Northern Powergrid, and Emma Wilson, ICE and Connections

Stakeholder Advisor, ran an open surgery, inviting attendees to visit them for a one to one

conversation in regards to connections and DUoS (Distribution Use of System) for local supply

projects. In total six attendees visited the session and discussed individual issues and specific project

queries with connections experts. Examples of the one to one conversations that took place include:

A community representative planning on building partial built homes on an existing site with the

view of making the homes as sustainable as possible including solar on all the roofs. The

attendee was looking to understand the options available to connect the site and the best way

to do this considering whether a private wire would be more effective or whether they should

connect to the Northern Powergrid network. The Northern Powergrid representative advised

that they could visit the site and come up with a number of options.

A community representative exploring a number of options for local energy projects, but

specifically looking to understand the factors that impact on whether a connection application is

successful or not. The attendee asked whether having local demand on site which is balanced

with any additional generation, overcomes any issues regarding network constraint. The

Northern Powergrid representative advised that this is taken into consideration and that a local

commercial engineer could come out for a site visit to explore this in detail. However, in

summary when applying for a new connection they would apply for the net difference between

the local demand and local generation and so it is beneficial if the local demand offsets the

generation. The site in question was a 24/7 working site with no seasonal variation in use, which

was ideal. It was suggested that the attendee apply for a budget price online and then a full

application, however a site visit could be arranged with a designer.

In the final plenary session Emma provided a summary of the session. Here she emphasised that

Northern Powergrid were keen to help with progressing local supply projects, including through the

provision of resources for stakeholders, and provided a number of connections surgeries which can be

attended to discuss other technical issues regarding connections. The dates of these sessions can be

found at the following link: www.northernpowergrid.com/customer-events-and-surgeries

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4.0 Key themes

Detail on the key issues highlighted during

the event.

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Key themes

1. Lower bills act as a reward for consumers for changing behaviourand using local systems more efficiently

It was discussed by Dr Stephen Hall and reiterated by others that consumers do not always act

rationally in the market as assumed, for example many will not switch energy suppliers to save money

as the market expects them to. It was highlighted that consumers require an incentive to change their

behaviour in relation to their energy use.

While some speakers saw this from a cost and pricing perspective, with lower bills acting as a reward

for changing behaviour, others felt that the community support and engagement factors were the key

driver. Re-localising the economic benefits of energy generation to keep income within local areas

was seen as an important element of local supply business models.

Pursuing the balancing of local generation with supply within local areas is not driven by the desire to

avoid grid charges, but to reward communities for using local systems more efficiently. Leo argued

that in a decentralisation context benefits must be experienced by communities to drive their consent

and participation.

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2. Using existing network infrastructure rather than private wiresincreases the efficiency of the system

There was a consensus amongst speakers that existing networks should be utilised for local supply,

which would increase the operating efficiency of the entire electricity system. Instead, when private

wires are built to overcome capacity and licensing constraints, it creates inefficiency, with costs

ultimately borne by the customer. The benefits to investors in private wire are mitigated by new

customer-facing obligations such as billing and customer services.

Successful examples included Brooklyn Microgrid - a project using the existing grid in a creative way -

to demonstrate the importance of using existing systems and finding infrastructure partnerships that

work. In this project, some users were willing to pay more to benefit the local community, i.e.

consumer subsidy.

3. Local supply models are not yet accessible nor scalable

Those working on community energy projects and research identified that, while these were working

well in the trial stages, they were ultimately looking to build business models which were so simple

for consumers to be involved in that they would become conventional. In line with this, it was hoped

that models could be created which could be adopted within any local community.

This notion was linked to building relationships with suppliers, communicating the benefits of local

supply to consumers effectively, and pushing for regulatory change. It was also noted that vulnerable

consumers should be supported and protected through any changes.

4. Protection for vulnerable consumers must remain a priority

Full and fair access to energy markets was a key priority for Northern Powergrid and a need was

identified to cater for all members of society and protect vulnerable groups, such as low income

households, who are not in a position to be more flexible in their approach to energy.

It was recognised by Energy Local that local markets were developing new organisations which can

reach and engage with members of communities who would seldom otherwise be involved. However,

concerns were expressed around protection for vulnerable consumers, particularly in using peer-to-

peer systems which were perceived to carry inherent vulnerability.

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5. Transparency in the energy system could be improved

There is currently no visibility between contracted parties within energy systems and therefore it is

unclear who is contracted for what in the market place. Peer-to-peer systems, such as blockchain and

Open Utility’s Piclo platform, create more transparency.

Demand for more transparency or itemised billing with data would enable value added service

propositions and it was suggested that the current electricity supply model will move towards a

service model, with greater ease of tailoring customer supply. It was also suggested that with

transparency in margins and revenues, there would be increased demand for cheaper energy prices.

6. Regulation is a barrier to greater diversity in electricity supplymodels

While it was demonstrated that the technology exists for local supply systems to work successfully,

for example Open Utility’s peer-to-peer trading platform, speakers acknowledged that change is

required at a regulatory level to ensure that the framework is fit for purpose – this was seen as a key

barrier facing the community energy movement.

Speakers called for a regulatory environment which allowed for greater diversity, innovation in

electricity supply models, and for alternative charging methodologies. Leo of climate change charity

10:10 felt that there should be involvement at a political level.

7. Local supply has a wide range of benefits

Across the event it was demonstrated that local electricity supply has a range of benefits for both the

energy system and customers, with the potential to contribute to meeting public social goals and

improve lives.

Benefits perceived at the customer level included savings in energy bills for local people. Greater

income could be derived from renewable energy, which would be kept locally so the economic

benefits were felt there. Local supply presented an opportunity to tackle wider social issues such as

fuel poverty and to create more resilient communities with greater community engagement.

For suppliers, the risk of imbalances in the demand curve would be reduced, with a smoothing of the

local demand curve. The benefits for DNOs would include greater efficiency in running networks..

For the wider energy industry, local supply had the power to facilitate subsidy-free renewable energy,

as local energy arrangements captured a greater proportion of margin between the generation and

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retail prices. By balancing in local communities, new systems and new energy company business

models with shared outcomes and interests can be created, creating greater incentives to meet needs

locally. It was suggested that demand within communities could go down year on year, improving

energy efficiency. Ultimately, local supply was viewed as a solution in the wider push for

decarbonisation.

Given the array of benefits for the energy system and customers, local supply was considered worth

pursuing. Northern Powergrid are keen to help with progressing local supply projects, including

through the provision of resources for stakeholders, and noted they are “open for business” for

commercial innovation.

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