Tag: Colin Nolden

Reflections on COP28’s Global Stocktake and emissions reductions

Posted on by amanda.woodman-hardy

COP28 national flags at night in Dubai.

With carbon emission of around 25tCO2 per capita (global average around 4.5tCO2eq per capita) and energy demand of around 150MWh per capita (global average around 20MWh per capita), both among the 5 highest in the world, the UAE is on a per capita basis one of the largest contributor to climate change. And the host of COP28, the 28th Conference of the Parties, the main decision-making body of the UNFCCC. This makes uncomfortable reading, especially given the lack of progress in tackling human-made climate change. Then again, it probably does not matter where COPs are held as it is the agreements which countries commit to, and their success in fulfilling these commitments, which ultimately count. The number of fossil fuel business representatives makes equally uncomfortable reading. But maybe the number of fossil fuel lobbyists is a sign that they are taking COPs more seriously and rightly recognize strong action on climate change as a challenge to business as usual. Their desire to have their voices heard is testament to their recognition of the importance the UNFCCC’s process and progress on climate policy more generally.

The event itself, meanwhile, was discombobulating. Dubai’s geography of nowhere which robs you of any sense of scale and place is replicated in its Expo2020 site where COP was held. Huge distances between everything and the closed doors behind which languished side events and pavilions, mainly of countries but also of non-governmental organisations, multinational development banks, even universities, were the polar opposite of a bazaar where exchange was facilitated at previous COPs and in the space of 100 meters you might come across the International Labour Organisation, the World Bank, Egypt, Japan, Zambia, and Portugal. Thus, COP28 was sapped of interaction where browsing is enabled, chance facilitated, and happenstance happened. Instead, it felt strangely disjointed, more like an in-person zoom conference in the desert.

But the food was good, if expensive, the streets eerily safe and clean, the organization well executed, the venue shiny and spotless, public transport clean and efficient, water plentiful, and the sun reliable. It is hard to imagine impoverished countries not choosing a similar development trajectory if they were provided the opportunity. According to some calculations, African countries are sat on $10trn worth of hydrocarbons capable of pursuing such a development trajectory while pushing global warming to 6-7 degrees above pre-industrial levels. But which alternative development trajectory are we supporting which keeps these hydrocarbons in the ground while improving living standards and increasing opportunities? Access to climate finance is essential, while debt relief is the elephant in the room (I wonder how this analogy will read if we tacitly enable their extinction through poverty?). Calculations suggest that sentencing debt costs the 58 countries that make up the Vulnerable Twenty (V20) over £100bn/a. This sum would go a long way towards greening development and keeping hydrocarbons in the ground.

Instead, the Global Stocktake, the COP28 agreement, ‘calls on parties’ to ‘tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030’. This is important as we need something to replace fossil fuels the Stocktake agrees to ‘transition away from’ and coal especially which it agrees to ‘phase-down’. While it will be virtually impossible to eliminate fossil fuels entirely from our economies, this language emphasizes the need to reduce their stranglehold on our energy systems. With emphasis placed on renewables and energy efficiency, this provides a plausible, just, and equitable transition pathway. While the statement that ‘abatement and removal technologies such as carbon capture and storage’ should be accelerated leaves a loophole for abated fossil fuel technologies, it emphasizes its use ‘in hard-to-abate’ sectors such as steel and cement. This loophole is to bring on board countries with very high fossil fuel dependence, not just for power generation but as the foundation of their entire economic prosperity.

Regarding transport, the document emphasizes the ‘reduction of emission from road transport on a range of pathways, including through development of infrastructure and rapid deployment of zero and low-emission vehicles’. This reference to infrastructure is highly relevant as it refers to mass transit systems which, according to the Intergovernmental Panel on Climate Change, are far more efficient than electric vehicles for example. Finally, ‘phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible’ should act as a financial driver of this transition. According to the International Monetary Fund, such subsidies amount to $7tn per year, or 7.1% of GDP. This implies that governments around the world effectively subsidise every tonne of CO2 emitted to the amount of $125. If we used this money to subsidise renewable energy and energy efficiency, as well as abatement in hard-to-treat sectors and eventually removals to account for historical emissions, 1.5 degrees is still alive, and African countries for example could be placed on a clean development trajectory towards prosperity and opportunity.

Despite tentative progress, however, parties failed to agree on the modalities of Article 6. Article 6 is the last building block of the Paris Agreement which has yet to be agreed on, with a rulebook in place that all parties agree on. Apparently, a bloc led by the US favours a light-touch approach akin to voluntary carbon markets. Unsurprisingly given their discreditation in recent months, a bloc involving the EU an African and Latin American states favours stronger checks and balances to avoid the creation of junk credits and discreditation of all market mechanism. A lot is at stake. Under the Clean Development Mechanism (CDM), the predecessor of Article 6, over £200bn was channelled into Chinese wind energy. For all its flaws, the CDM in this particular case supported the development of a renewable energy industry in a country which barely had a wind turbine installed when it came into force. Market mechanisms are powerful instruments which are difficult to guide but their potential to incentivize climate finance is evident.

To deliver the objectives of the Global Stocktake and the Paris Agreement, we need mechanisms to avoid free-riding which occurs when countries benefit from ambitious net zero emission mitigation activities in other countries without contributing to the cost. If market mechanisms are operationalised through climate clubs, this issue of free-riding can be overcome. This enables  ambition to be raised and collective action to be supported. Yet significant efforts are required to ensure that poor countries can benefit while excludable benefits are sufficient to ensure integrity and support higher ambition in climate change mitigation. The stakes are high and the Global Stocktake is a small but significant step in this direction. But a lot more climate diplomacy is necessary, alongside a collaborative spirit, to ensure that the transition away from fossil fuel is actions and that this transition is just.

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This blog is written by Cabot Institute for the Environment member, Dr Colin Nolden, University of Bristol Law School.

Colin Nolden
Colin Nolden

 

After COP27, is 1.5C still alive?

Posted on by janet.crompton

Try booking a train on Boxing Day in the UK and you’ll soon find out that none are running. Well, not entirely. One small railway line managed by indomitable Gauls still holds out: The Eurostar. And airports are still being served as plains are still flying. Obvs. If this is not just the present, but also our future, then Mia Mottley, Prime Minister of Barbados, is right: “We’re at 1.2 degrees now. If in 5 years we’re at 1.5, then we’re…. we’re…. I won’t use that word now.”

Apologies, I got carried away. Back to planes (flying), trains (not running) and automobiles (driving). These are symptomatic of the mess we’re in, but nothing compared to the mess we’re heading towards. And nothing compared to the mess others already find themselves in. If these current trends continues the number of refugees is set to increase from 21m in 2022 to 1bn in 2050 (Mia Mottley again). Many originate from Africa which is responsible for only 4% of global emissions (and 2% of historic emissions) and home to 600m without access to electricity.

While inanimate capital moves freely across borders, refugees are increasingly prevented from doing so. As their poverty and desperation grows in a warming world, their cost of borrowing increases as the World Bank uses per capita income as a proxy for borrowing conditions. Consequently, such countries (Least Developed Countries – LDCs) borrow at 12-14% while rich countries (the G7) borrow at 1-4%. According to Indian economist Joyashree Roy, these countries need 7% growth per year to escape their plight but if they are borrowing at +10% cost of capital, this growth will not be powered by renewables.

Neither will the focusing on the supply of renewables alone deliver Sustainable Development Goals (SDGs). Demand-side interventions are necessary to shift investment patterns and create new economic opportunities that are synergistic with SDGs. But all this depends on infrastructure access and empowerment to make the right choices, which in turn are determined by the flow of finance. To put on track for 1.5C, these flows need to quadruple to $4-6trn per year, according to Macky Sall, Senegalese President and current Chairperson of the African Union. IPCC Chair Hoesung Lee, goes one step further: access to capital is the key determinant of limiting global warming to 1.5C. Concessional access to finance was provided during COVID, as Mia Mottley pointed out, so why can it not be provided to prevent climate catastrophe?

Dr Colin Nolden (left) at COP27 with IPCC Chair Hoesung Lee and Dr Alix Dietzel

On the plus side, outgoing COP26 President Alok Sharma suggests that 90% of global emissions are covered by a net zero target. Almost 1/3rd of the global population who accumulate 55% of global GDP are covered by Emissions Trading Schemes, according to Stefano de Clara, Head of the International Carbon Action Partnership. Then again, the current average carbon price stands at $6/t. This needs to increase to $75/t by 2030 to limit warming to 2C, not to mention 1.5C, according to Dora Benedek from the International Monetary Fund.

Without such a massive increase in the cost of carbon, emissions are expected to be only 12% (6GtCO2eq) lower in 2030 compared to today. What about magic??, you might interject at this point. Current Carbon Capture and Storage (CCS) and Direct Air Capture (DAC) capacities amount to around 4 hours of global emissions and are projected to amount to around 16 hours in 2030, according to Sven Teske from the University of Technology Sydney. To keep 1.5C alive, we need to reduce emissions by 30-50% in by 2030 (Dora Benedek again). So yes to magic, but only within the bounds of Kate Raworth’s famous doughnut.

And it’s both sides of that tasty doughnut that we need to bear in mind. On the outside, quick wins are possible regarding methane emissions which are responsible for around 0.5C of the 1.2C we stand above pre-industrial levels. Around 0.1C of warming can be addressed by cutting gas flaring and coal related methane emissions at no cost, according to US Deputy Climate Envoy Richard Duke. Addressing such emissions deliver invaluable co-benefits on the inside. 15% of all deaths (7million a year) are due to polluted air, according to Jane Burston of the Clean Air Fund. Companies are having to pay a pollution premium to attract talent to polluted cities.

It’s both the out and the in-side of the doughnut we need to focus on for a just transition to happen. According to Heike Henn, of Germany’s Federal Ministry for Economic Affairs and Climate Action and whatnot, Article 6 is emerging as the mechanism to allocate those $100bn/a finance pledged in Paris which never materialised as well as the trillions needed to implement NDCs (Nationally Determined Contributions) and SDGs.

Not Article 6.2 though, which requires adjustments in GHG registries upon the transfer of a carbon credits (Internationally Transferrable Mitigation Outcome – ITMO) and is already seeing emerging economies lowering ambition in their NDCs. Article 6.4 is what I’m talking about. Although it will take years to be operationalised, its infrastructure is being developed as we speak. The Climate Action Data Trust, for example, can significantly lower transaction costs of carbon market transactions through automated Measurement, Reporting and Verification (MRV) and tokenisation to create digital carbon assets.

Now it’s down to ambitious countries to form alliances and agree on a sharing mechanism to convert the 1.5C target into demand for mitigation action distributed dynamically over time, and measure achievement and contribution using Article 6.4. “Getting to net zero is a heroic task”, according to Dirk Forrister of the International Emissions Trading Association, “and you won’t get there by going alone”.

Where does this leave 1.5C? “I find it hard to stay optimistic”, said Nichola Sturgeon on day 1 of COP27. I echo this sentiment. Yet we need to remind ourselves that the combined net zero targets, if implemented, can limit warming to 1.7C and increase, yes INCREASE, global GDP by 0.4% per year, according to Fatih Birol from the IEA. If we can’t sort this out, bins will be burning.

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This blog was written by Cabot Institute for the Environment member Dr Colin Nolden, Bristol Law School, University of Bristol.

Colin Nolden

 

 

COP27: What really happened on finance, justice and Loss and Damage?

Posted on by janet.crompton

The Cabot Institute for the Environment sent three delegates to the recent Conference of the Parties 27 (COP27). Drs Alix Dietzel (Sociology, Politics and International Studies); Colin Nolden (Bristol Law School); and Rachel James (Geographical Sciences) were present for most of the first week and Colin was there for the full two weeks. As the Institute has observer status with the United Nations Framework Convention on Climate Change, Alix, Rachel and Colin had the chance to engage with policy makers and climate policy experts from around the world to help promote climate action which is informed by the best evidence and research.

We asked them to give an update on their experience at COP27 and as a result, whether the pledges made at COP27 would mean that 1.5C is still achievable.

Drs Colin Nolden and Alix Dietzel at COP27.

Climate finance – Dr Colin Nolden

Colin’s research interests span sustainable energy policy, regulation and business models and interactions with secondary markets such as carbon markets and other sectors such as mobility. COP27 was an opportunity for him to talk directly to policymakers about implementing the Paris Agreement and to people directly affected by climate policy decisions.

Here are Colin’s post-COP thoughts:

“Alongside Loss and Damage, the main issue discussed at COP is climate finance for decarbonisation. The $100bn/yr pledged in Paris has never materialised and to add injury to insult, rich countries can borrow at 4%, whereas poor countries borrow at 14%, as Mia Motley, Prime Minister of Barbados, pointed out in her speech on Day 1. Under these conditions, investments in fossil fuel infrastructures pay off, but investments in renewables do not. An endless number of panel discussions and side events on ‘climate finance’ and ‘accelerating the clean energy/net zero transition’ are testament to this gap.

“Article 6 of the Paris Agreement is a mechanism to overcome this funding gap by providing the legal foundation to finance decarbonisation projects in a country in exchange for carbon credits provided by another. Whether these should lead to according adjustments in emissions inventories, as is the case under bilateral agreements using Article 6.2, is controversial. How Article 6.4 will deal with this issue is still unclear and is unlikely to be agreed on at successive COPs. Negotiations on Article 6 will determine the climate credit and finance architecture for years to come.”

Climate justice – Dr Alix Dietzel

Alix is Associate Director for Impact and Innovation at the Cabot Institute for the Environment and an environmental justice scholar. Her role at COP27 was to observe the negotiations and critically reflect on whose voices were heard and whose were left out of the discussion, as well as concentrating on whether topics such as Loss and Damage and just transition were being given adequate space and time during the negotiations.

Dr Alix Dietzel at COP27.

Here are Alix’s reflections from COP27:

“Despite much excitement over a new Loss and Damage fund, there is backsliding on commitments to lower emissions and phasing out fossil fuels. As an academic expert in just transition who went along this year hoping to make a difference, I share the anger felt around the world about this outcome.

“Attendance at COPs is strictly regulated. Parties (negotiating teams), the media, and observers (NGOs, IGOs, and UN Agencies) must all be pre-approved. Observers have access to the main plenaries and ceremonies, the pavilion exhibition spaces, and side-events. The negotiation rooms, however, are largely off limits. Most of the day is spent listening to speeches, networking, and asking questions at side-events. The main role of observers, then, is to apply indirect pressure on negotiators, report on what is happening, and network. Meaningful impact on and participation in negotiations seemed out of reach for many of the passionate people I met.

“It has long been known that who gets a say in climate change governance is skewed. As someone working on fair decision making as part of just transition, it is clear that only the most powerful voices are reflected in treaties such as the Paris Agreement. Despite being advertised as ‘Africa’s COP’, COP27 has further hampered inclusion. The run up was dogged by accusations of inflated hotel prices and concerns over surveillance, no chance to organize protests, and warnings about Egypt’s brutal police state.

“Arriving in Sharm El Sheik, there was an air of intimidation starting at the airport, where military personnel scrutinized passports. Police roadblocks featured heavily on our way to the hotel, and military officials surrounded the COP venue the next morning. Inside the venue, there were rumours we were being watched and observers were urged not to download the official app. More minor issues included voices literally not being heard due to unreliable microphones and the constant drone of airplanes overhead. Food queues were huge, and it was difficult to access water to refill our bottles. Sponsored by Coca Cola, we could buy soft drinks. Outside of COP, unless I was accompanied by a man, I faced near constant sexual harassment, hampering my ability to come and go freely.

“Who was there and who was most represented at COP27 also concerned me. The United Arab Emirates (UAE) registered the largest party delegation with more than 1,000 people, almost twice the size of the next biggest delegation, Brazil. Oil and gas lobby representatives were registered in the national delegations of 29 different countries and were larger than any single national delegation (outside of the UAE). At least 636 of those attending were lobbyists for the fossil-fuel industry. Despite the promise that COP27 would foreground African interests, the fossil lobby outnumbers any delegation from Africa. These numbers give a sense of who has power and say at these negotiations, and who does not.

“All this to say, I am not surprised at the outcomes. There is some good news in the form of a new fund for Loss and Damage – but there is no agreement yet on how much money should be paid in, by whom, and on what basis. More worryingly, the outcome document makes no mention of phasing out fossil fuels, and scant reference to the 1.5C target. Laurence Tubiana, one of the architects of the Paris Agreement, blamed the host country, Egypt, for the final decision.

“COP27 produced a text that clearly protects oil and gas petro-states and the fossil fuel industry. The final outcomes demonstrate that despite the thousands who were there to advocate for climate justice, it was the fossil fuel lobby who had most influence. As a climate justice scholar, I am deeply worried about the processes at COPs, especially given next year’s destination: The United Arab Emirates. Time is running out and watered-down commitments on emissions are at this stage deeply unjust and frankly dangerous.”

Loss and Damage – Dr Rachel James

Rachel is a climate scientist, focusing on African climate systems and developing climate science to inform and advance climate change policy. Her previous research has been designed to progress international climate policy discussions, including the COP process, and she has analysed the impacts of global mitigation goals, comparing different warming scenarios (1.5°C, 2°C and beyond).  At COP27, she engaged in adaptation discussions, to learn more about how science can support national adaptation planning, to guide her new research programme “Salient”, a UKRI Future Leaders Fellowship to improve climate information for adaptation, primarily in southern Africa.

Dr Rachel James (fourth from right) at COP27.

In her previous work, Dr James has also looked at how science can support policy discussions about  ‘Loss and Damage’, from climate change, and at COP27 she followed discussions on Loss and Damage, as well as taking part in a workshop to establish a network of African researchers focusing on Loss and Damage. Rachel reflects on her experience of COP and the Loss and Damage discussions:

“The COP is now a huge event, with hundreds of discussions happening simultaneously, and many thousands of people, (almost) all pushing for climate action, and acting on it in their own ways. There are lots of things going on, deals being struck, collaborations forming, alongside the official UNFCCC business.

“This was supposed to be the “COP of implementation”, as the Paris Agreement and the rulebook are already in place. Some said we were largely beyond negotiation.

“However, the Global South came ready to negotiate, particularly on Loss and Damage. They wanted a finance facility on Loss and Damage to be established. Negotiations began in the weekend before the COP, and – after negotiating all night with no food – the developing countries succeeded in getting this onto the formal agenda.

“Over the two weeks of the COP, my perception was that there was a huge shift on Loss and Damage. Once it was on the official agenda, it was much easier to talk about. It has been a very contentious issue. Broadly, the most vulnerable countries have called for mechanisms to address the fact that they are, and will continue to, experience loss and damage from climate change impacts like sea level rise and extreme weather. Those countries who have emitted the most fear this could lead to unlimited liability. When I first started working on it I’d often get a worried look when I mentioned the topic.

“In a side event during the first week at Sharm El Sheikh, I heard someone say “some magic has happened” and we can now talk about this in the mainstream. We also saw a series of announcements from countries committing finance for Loss and Damage.  Then, finally, after two weeks of negotiations ran into extra time, countries agreed to establish a fund for Loss and Damage.

“This was a huge victory for the developing countries. Lots of questions remain about how it will work, who will pay into it, and who will benefit, but nevertheless it marks a big step. Developing countries (especially AOSIS, the Alliance of Small Island States) have been working on this for decades. The negotiators work so hard, often into the night, it’s incredible.

“My overall view is that COP continues to be a difficult process, but it is shifting, maybe substantially. Many view COP as a talk shop and suggest it’s a waste of time, but I disagree. Although the process is tortuous, slow, and frustrating, it is the best one we have, and still vital. Progress is way too slow but there is progress. Every country is represented, and we don’t have any other process on climate change where that is the case. The developing countries have power in numbers at the COP that I am not sure they have in any other forum on climate change.”

Dr Alix Dietzel (fourth from right on the back row) at COP27

 

Is 1.5C still alive?

Colin: “The International Energy Agency expects fossil fuel demand to peak as early as 2025. However, with all countries harbouring exploitable fossil fuel resources racing to extract them (with our former Secretary of State for Business, Energy and Industrial Strategy Rees-Mogg vowing in September 2022 to “squeeze every last drop of oil” out of the North Sea) and key initiatives such as the Glasgow Financial Alliance for Net Zero failing to deliver on their promises, fossil fuels will not be phased out anytime soon.

“At the same time, pinning our hopes on Carbon Capture and Storage (CCS) is misguided as current capacities amount to four hours of global emissions and International Energy Agency projections suggest that capacities in 2030 will amount to 16 hours of emissions. This implies that in the absence of a sustained global financial commitment towards demand reduction or sustainable supply, limiting average global temperature rise to 1.5 above will be very difficult indeed.”

Rachel: “A key goal in Glasgow and in Sharm El Sheikh has been to keep 1.5°C alive. Some countries were attempting to backslide on mitigation goals during the final days, but in the end 1.5°C remained in the text. It’s disappointing that we didn’t see an increase in ambition from Glasgow, but 1.5°C is still there – even if “on life support”, as noted by Alok Sharma.

“It’s easy for us to do an academic analysis and speculate as to whether or not we think 1.5°C is politically feasible. But the IPCC has spelled it out clearly: every fraction of a degree of warming matters. What’s important is that we increase ambition to reduce emissions, and we phase out fossil fuels, so that we can limit global warming as much as possible.”

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This blog is written by Cabot Institute for the Environment members Dr Alix Dietzel, Dr Colin Nolden, Dr Rachel James and Amanda Woodman-Hardy.

Further reading

Read more about our experts at COP27.

Read Dr Alix Dietzel’s blog on COP27: how the fossil fuel lobby crowded out calls for climate justice

Read Dr Colin Nolden’s blog on After COP27: Is 1.5C still alive? 

Capturing the value of community energy

Posted on by janet.crompton

Energise Sussex Coast and South East London Community Energy are set to benefit from a new business collaboration led by Colin Nolden and supported by PhD students Peter Thomas and Daniela Rossade. This is funded by the Economic and Social Research Council with match funding provided by Community Energy South from SGN. In total, £80,000 has been made available from the Economic and Social Research Council Impact Accelerator Account to launch six new Accelerating Business Collaborations involving the Universities of Bath, Exeter and Bristol. This funding aims to increase capacity and capability of early career researchers and PhD students to collaborate with the private sector. Match funding from SGN (formerly Scotia Gas Network) provided by Community Energy South for this particular project will free up time and allow Energise Sussex Coast and South East London Community Energy to provide the necessary company data and co-develop appropriate data analysis and management methodologies.

The Capturing the value of community energy project evolved out of the Bristol Poverty Institute (BPI) interdisciplinary webinar on Energy and Fuel Poverty and Sustainable Solutions on 14 May 2020. At this event Colin highlighted the difficulty of establishing self-sustaining fuel-poverty alleviation business models, despite huge savings on energy bills and invaluable support for some of the most marginalised segments of society. Peter also presented his PhD project, which investigates the energy needs and priorities of refugee communities. With the help of Ruth Welters from Research and Enterprise Development and Lauren Winch from BPI, Colin built up his team and concretised his project for this successful grant application.

The two business collaborators Energise Sussex Coast (ESC) and South East London Community Energy (SELCE) are non-profit social enterprises that seek to act co-operatively to tackle the climate crisis and energy injustice through community owned renewable energy and energy savings schemes. Both have won multiple awards for their approach to energy generation, energy saving and fuel poverty alleviation.

However, both are also highly dependent on grants from energy companies such as SGN with complicated and highly variable reporting procedures. This business collaboration will involve the analysis of their company data (eight years for ESC, ten years for SELCE) to take stock of what fuel poverty advice and energy saving action works and what does not, and to grasp any multiplier effects associated with engaging in renewable energy trading activities alongside more charitable fuel poverty alleviation work.

Benefits for ESC and SELCE include the co-production of a database to help them establish what has and has not worked in the past, and where to target their efforts moving forward. This is particularly relevant in the context of future fuel-poverty alleviation funding bids. With a better understanding of what works, they will be able to write better bids and target their advice more effectively, thus improving the efficiency of the sector more broadly.

 

It will also help identify new value streams, such as those resulting from lower energy bills. Rather than creating dependents, this provides the foundation for business model innovation through consortium building and economies of scale where possible, while improving targeted face-to-face advice where necessary. It will also explore socially distant approaches where face-to-face advice and engagement is no longer possible.

With a better understanding how and where value is created, ESC and SLECE, together with other non-profit enterprises, can establish a platform cooperative while creating self-renewing databases which enable more targeted energy saving and fuel poverty advice in future. Such data also facilitates application for larger pots of money such as Horizon2020, and the establishment of a fuel poverty ecosystem in partnership with local authorities and other organisations capable of empowering people instead of creating dependents. This additional reporting will capture a wider range of value and codify it to be submitted as written evidence to the Cabinet Office and Treasury at national level, while also acting as a dynamic database for inclusive economy institutions and community energy organisations at regional and local level.

People

Dr Colin Nolden is a Vice-Chancellor’s Fellow based on the Law School, University of Bristol, researching sustainable energy governance at the intersection of demand, mobility, communities, and climate change. Alongside his appointment at the University of Bristol, Colin works as a Researcher at the Environmental Change Institute, University of Oxford. He is also a non-executive director of Community Energy South and a member of the Cabot Institute for the Environment.

Peter Thomas is a University of Bristol Engineering PhD student and member of the Cabot Institute for the Environment investigating access to energy in humanitarian relief by combining insights from engineering, social sciences, and anthropology.

Daniela Rossade is a University of Bristol Engineering PhD student investigating the transition to renewable energy on the remote island of Saint Helena and the influence of renewable microgrids on electricity access and energy poverty.

Partner Companies

Energise Sussex Coast Ltd

South East London Community Energy Ltd

Community Energy South

Contact

For more information on the project contact: Dr Colin Nolden colin.nolden@bristol.ac.uk

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This blog is written by Dr Colin Nolden, Vice-Chancellor’s Fellow, University of Bristol Law School and Cabot Institute for the Environment.

Colin Nolden

Uncomfortable home truths: Why Britain urgently needs a low carbon heat strategy

Posted on by janet.crompton



A new report backed by MPs and launched by Minister for Climate Change Lord Duncan on 15 October 2019, calls for an urgent Green Heat Roadmap by 2020 to scale low carbon heating technologies and help Britain’s homeowners access the advice they need to take smarter greener choices on heating their homes.  The year-long study by UK think-tank Policy Connect warns that the UK will miss its 2050 net-zero climate target “unless radical changes in housing policy, energy policy and climate policy are prioritised”. Dr Colin Nolden was at the launch on behalf of the Cabot Institute for the Environment and blogs here on the most interesting highlights of the report and questions raised.

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Policy Connect had invited a range of industry, policy, academic and civil society representatives to the launch of their Uncomfortable Home Truths report. The keynote, no less than Lord Duncan of Springbank, Minister for Climate Change, and the high-level panel consisting of Maxine Frerk, Grid Edge Policy (Chair), Alan Brown MP, House of Commons (SNP), Dr Alan Whitehead MP, House of Commons (Labour), Dhara Vyas, Citizens Advice, Adam Turk, BAXI Heating (sponsor) and Mike Foster, EUA (Energy & Utilities Alliance), (sponsor), had been briefed to answer tough questions from the crowd given the UK’s poor track record in the area of heat and home decarbonisation.

The event started with an introduction by Jonathan Shaw, Chief Executive of Policy Connect, who introduced the panel and officially launched the report. Uncomfortable Home Truths is the third report of the Future Gas Series, the first two of which focused on low-carbon gas options. This last report of the series shifts the focus from particular technologies and vectors towards heating, households and consumers. Jonathan subsequently introduced the keynote speaker Lord Duncan of Springbank, Minister for Climate Change.

Lord Duncan supported the publication of this report as timely and relevant especially in relation to the heat policy roadmap that government intends to publish in 2020. He stressed the importance of a cultural shift which needs to take place to start addressing the issue of heat at household and consumer level. He was adamant that the government was aligning its policies and strategies with its zero-carbon target according to the Committee on Climate Change and guided by science and policy. In this context he bemoaned the drive by some country representatives to put into question the targets of the Paris Agreement on Climate Change which he had witnessed as the UK’s key representative at the run-up to COP25 in Chile. The 2020 roadmap will report on the decisions which will need to be taken in homes and in technology networks, ranging from heat pumps to hydrogen and low-carbon electricity to support their decarbonisation. It requires cross-party support while depending on more research and learning from successful examples in other European countries.

Although Lord Duncan suggested that ‘it’s easier to decarbonise a power plant than a terraced house’, he told the audience to take encouragement from the fuel shift from coal towards gas starting half a century ago. But in this context he once again stressed the cultural shift which needs to go hand-in-hand with government commitment and technological progression, using the example of TV-chefs shunning electric hobs as an indication of our cultural affinity for gas. As long as heating and cooking are framed around fossil fuels, there is little space in the cultural imagination to encourage a shift towards more sustainable energy sources.

“The example of TV-chefs shunning electric hobs is an indication of our cultural affinity for gas”. Image source.

Among the questions following the keynote, one quizzed Lord Duncan about the process and politics of outsourcing carbon emissions. Lord Duncan stressed his support of Border Carbon Adjustments compliant with EU and global carbon policy ‘in lock-step with our partners’ to ensure that carbon emissions are not simply exported, which appears to support the carbon club concept. Another question targeted the UK’s favourable regulatory environment that has been created around gas, which has resulted in the EU’s lowest gas prices, while electricity prices are highest in Europe, due, among other things, to Climate Change Levies, which do not apply to gas, increasing by 46% on 1 April 2019. Lord Duncan pointed towards the ongoing review of policies ahead of the publication of the 2020 heat roadmap which will hopefully take a more vector- and technology-neutral approach. A subsequent rebuttal by a Committee on Climate Change (CCC) representative stressed the CCCs recommendation to balance policy cost between gas and electricity as on average only 20,000 heat pumps are sold in the UK every year (compared to 7 times as many in Sweden) yet the Renewable Heat Incentive is about to be terminated without an adequate replacement to support the diffusion of low-carbon electric heating technologies.

Lord Duncan stressed the need to create a simple ‘road’ which does not fall with changes in policy and once again emphasized the need for a cross-party road to support the creation of a low-carbon heating pathway. A UKERC representative asked about the government approach to real-world data as opposed to modelling exercises and their support for collaborative research projects as both modelling and competitive approaches have failed, especially in relation to Carbon Capture and Storage. Lord Duncan responded that the UK is already collaborating with Denmark and Norway on CCS and that more money is being invested into scalable and replicable demonstrators.

Following an admission wrapped in metaphors that a change in government might be around the corner and that roadmaps need to outlast such changes, Lord Duncan departed to make way for Joanna Furtado, lead author of the Policy Connect report. She gave a very concise overview of the main findings and recommendations in the report:

  • The 80% 2050 carbon emission reduction target relative to 1990 already required over 20,000 households to switch to low-carbon heating every week between 2025 and 2050. The zero-carbon target requires even more rapid decarbonisation yet the most successful policy constellations to date have only succeeded in encouraging 2,000 households to switch to low-carbon heating every week.
  • This emphasizes the importance of households and citizens but many barriers to their engagement persist such as privacy issues, disruption associated with implementation, uncertainly, low priority, lack of awareness and confusion around best approaches, opportunities, regulations and support.
  • Despite the focus on households, large-scale rollout also requires the development of supply chains so at-scale demonstrations need to go hand-in-hand with protection and engagement of households by increasing the visibility of successful approaches. Community-led and local approaches have an important role to play but better monitoring is required to differentiate between more and less successful approaches.
  • Protection needs to be changed to facilitate the inclusion of innovative technologies which are rarely covered while installers need to be trained to build confidence in their installations.
  • Regional intermediaries, such as those in Scotland and Wales, need to be established to coordinate these efforts locally while at national level a central delivery body such as the one established for the 2020 Olympics in London needs to coordinate the actions of the regional intermediaries.
  • Ultimately, social aspects are critical to the delivery of low-carbon heat, ranging from the central delivery body through regional intermediaries down to households and citizens.

 

Image source.

Chaired by Maxine Frerk of Grid Edge Policy, the panel discussion kicked off with Alan Brown who stressed the urgency of the heating decarbonisation issue as encapsulated by Greta Thunberg and Extinction Rebellion and the need to operationalize the climate emergency into actions. He called for innovation in the gas grid in line with cautions Health and Safety Regulation alterations. Costs also need to be socialised to ensure that the low-carbon transition does not increase fuel poverty. His final point stressed the need reorganize government to make climate change and decarbonisation a number 1 priority.

Dr Alan Whitehead, who has been involved with the APPCCG from the beginning, emphasized how discussions around heat decarbonisation have progressed significantly in recent years and especially since the publication of the first report of this series. He suggested that the newest report writes the government roadmap for them. In relation to the wider context of decarbonising heat, Alan Whitehead encouraged a mainstreaming of heating literacy similar to the growing awareness of plastic. He also stressed how far the UK is lagging behind compared to other countries and this will be reflected in upcoming policies and roadmaps. As his final point Alan Whitehead cautioned that the low-intrusion option of gas-boiler upgrades from biomethane to hydrogen ignores the fact that greater change is necessary for the achievement of the zero-carbon target although he conceded that customer acceptance of gas engineer intervention appears to be high.

Dhara Vyas presented Citizens Advice perspective by stressing the importance of the citizen-consumer focus. Their research has revealed a lack of understanding among landlords and tenants of the rules and regulations that govern heat. She suggested that engagement with the public from the outset is essential to protect consumers as people are not sufficiently engaged with heating and energy in general. Even for experts it is very difficult to navigate all aspects of energy due to the high transaction costs associated with engagement to enable a transition on the scale required by government targets.

Finally, representatives of the two sponsors BAXI and the Energy & Utility Alliance made a rallying call for the transition of the gas grid towards hydrogen. Adam Turk emphasized the need to legislate and innovate appropriately to ensure that the 84% of households that are connected to the gas grid can receive upgrades to their boilers to make them hydrogen ready. Similarly, Mike Foster suggested that such an upgrade now takes less than 1 hour and that the gas industry already engages around 2 million consumers a year. Both suggested that the gas industry is well placed to put consumers at the heart of action. They were supported by several members of the audience who pointed towards the 150,000 trained gas service engineers and the ongoing distribution infrastructure upgrades towards plastic piping which facilitate a transition towards hydrogen. Other members of the audience, on the other hand, placed more emphasis on energy efficiency and the question of trust.

Sponsorship of the Institution of Gas Engineers & Managers, EUC (Energy & Utility Alliance) and BAXI Heating was evident in the title Future Gas Series and support for hydrogen and ‘minimal homeowner disruption’ boiler conversion to support this vector shift among members of the audience was evident. Nevertheless, several panel members, members of the audience and, above all, Lord Duncan of Springbank, stressed the need to consider a wider range of options to achieve the zero-carbon target. Electrification and heat pumps in particular were the most prominent among these options. Energy efficiency and reductions in energy demand, as is usual at such events, barely received a mention. I guess it’s difficult to cut a ribbon when there’s less of something as opposed to something new and shiny?

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This blog is written by Dr Colin Nolden, Vice-Chancellor’s Fellow, University of Bristol Law School and Cabot Institute for the Environment.

Colin Nolden

Decarbonising the UK rail network

Posted on by janet.crompton
Image source: Wikimedia Commons

Caboteer Dr Colin Nolden blogs on a recent All-Party Parliamentary Rail & Climate Change Groups meeting on ‘Decarbonising the UK rail network’.  The event was co-chaired by Martin Vickers MP and Daniel Zeichner MP. Speakers included:

  • Professor Jim Skea, CBE, Imperial College London
  • David Clarke, Technical Director, RIA
  • Anthony Perret, Head of Sustainable Development, RSSB
  • Helen McAllister, Head of Strategic Planning (Freight and National Passenger Operators), Network Rail

The meeting kicked off with a broad overview of the global decarbonisation challenge by Jim Skea. As former member of the UK’s Climate Change Committee and Co-chair of Working Group III of the Intergovernmental Panel on Climate Change, which oversaw the 1.5C report published in October 2018, as well member of the Scottish Just Transition Commissions, he emphasized that the net-zero target ‘is humongously challenging’. We need to recognise that all aspects of our land, economy and society require change, including lifestyles and behaviours. At the same time, the loophole of buying in permits to ‘offset’ decarbonisation in the UK net-zero target increases uncertainty as it is unclear what needs to be done territorially. The starting point for decarbonising mobility and many other sectors is nevertheless the decarbonisation of our electricity supply by 2030 as this allows the electrification of energy demand.

The recent International Energy Agency report on the ‘Future of Rail’ was mentioned. It suggests that the rail sector is one of the blindspots for decarbonisation although rail covers 8% of passenger transport, 7% of freight transport with only 2% of transport energy demand. The report concludes that a modal shift and sustainable electrification are necessary to decarbonise transport.

David Clarke pointed towards the difficulties encountered in the electrification of the Great Western line to Bristol and beyond to Cardiff but stressed that this was not a good measure for future electrification endeavours. Electrification was approached to ambitiously in 2009 following the 20-year electrification hiatus. Novel technology and deadlines with fixed time scales implied higher costs on the Great Western line. Current electrification phases such as the Bristol-Cardiff stretch, on the other hand, are being developed within the cost envelope. A problem now lies in the lack of further planned electrifications as there is a danger of demobilising relevant teams. Such a hiatus could once again lead to teething problems when electrification will be prioritised again. Bimodal trains that have accompanied electrification on the Great Western line will continue to play an important role in ongoing electrification as they allow at least part of the journeys to be completed free of fossil fuels.

Anthony Perret mentioned the RSSBs role in the ongoing development of a rail system decarbonisation strategy. The ‘what’ report was published in January 2019 and the ‘how’ report is still being drafted. Given that 70% of journeys and 80% of passenger kilometres are already electrified he suggested that new technology combinations such as hydrogen and battery will need to be tested to fill the gap where electrification is not economically viable. Hydrogen is likely to be a solution for longer distances and higher speeds while batteries are more likely to be suitable for discontinuous electrification such as the ‘bridging’ of bridges and tunnels. Freight transport’s 25,000V requirement currently implies either diesel or electrification to provide the necessary power. Anthony finished with a word of caution regarding rail governance complexities. Rail system governance needs an overhaul if it is not to hinder decarbonisation.

Helen McAllister is engaged in a task force to establish what funding needs to be made available for deliverable, affordable and efficient solutions. Particular interest lies on the ‘middle’ where full electrification is not economically viable but where promising combinations of technologies that Anthony mentioned might provide appropriate solutions. This is where emphasis on innovation will be placed and economic cases are sought. This is particularly relevant to the Riding Sunbeams project I am involved with as discontinuous and innovative electrification is one of the avenues we are pursuing. However, Helen highlighted failure of current analytical tools to take carbon emissions into account. The ‘Green Book’ requires revision to place more emphasis on environmental outcomes and to specify the ‘bang for your buck’ in terms of carbon to make it a driving factor in decision-making. At the same time, she suggested that busy commuter lines that are the obvious choice for electrification are also likely to score highest on decarbonisation.

David pointed out that despite ambitious targets in place, new diesel rolling stock that was ordered before decarbonisation took priority will only be put in service in 2020 and will in all likelihood continue running until 2050. This is an indication of the lock-in associated with durable rail assets that Jim Skea also strongly emphasized as a challenge to overcome. Transport for Wales, on the other hand, are already looking into progressive decarbonisation options, which include Riding Sunbeams, along with four other progressive decarbonisation projects currently being implemented. Helen agreed that diesel will continue to have a role to play but that franchise specification for rolling stock regarding passenger rail and commercial specification regarding freight rail can help move the retirement date forward.

Comments and questions from the audience suggest that the decarbonisation challenge is galvanising the industry with both rolling stock companies and manufacturers putting their weight behind progressive solutions. Ultimately, more capacity for rail is required to enable modal shift towards sustainable rail transport. In this context, Helen stressed the need to apply the same net-zero criteria across all industries to ensure that all sectors engage in the same challenge, ranging from aviation to railways. Leo Murray from Riding Sunbeams asked whether unelectrified railway lines into remote areas such as the Scottish Highlands, Mid-Wales and Cornwall could be electrified with overhead electricity transmission lines to transmit the power from such remote areas to urban centres with rail electrification as a by-product. Chair Danial Zeichner pointed towards a project that seeks to connect Calais and Folkstone with a thick DC cable through the channel tunnel and this is something we will follow up with some of the speakers.

In conclusion, Anthony pointed towards the Rail Carbon Tool which will help measure capital carbon involved in all projects above a certain size from January 2020 onwards as a step in the right direction. David pointed toward increasing collaboration with the advanced propulsion centre at Cranfield University to cross-fertilise innovative solutions across different mobility sectors.
Overall it was an intense yet enjoyable hour in a sticky room packed full of sustainable rail enthusiasts. Although this might evoke images of grey hair, ill-fitting suits and the odd trainspotting binoculars it was refreshing to see so many ideas and enthusiasm brought to fore by a topic as mundane as ‘decarbonising the UK rail network’.

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This blog is written by Dr Colin Nolden, Vice-Chancellor’s Fellow, University of Bristol Law School and Cabot Institute for the Environment.

Colin is currently leading a new Cabot Institute Masters by Research project on a new energy system architecture. This project will involve close engagement with community energy organizations to assess technological and business model feasibility. Sound up your street? Find out more about this masters on our website.

Collecting silences

Posted on by janet.crompton

‘Noise’ is the Greenhouse gas (GHG) emissions which have resulted from fossil-fuel-powered economic growth which is measured as GDP for particular territories. In Figure 1, ‘noise’ is the area below the green line to the left of the vertical dotted line (historical) and below the blue line to the right of the vertical dotted line (projected). ‘Silence’ is the reduction of fossil-fuel use and the mitigation of carbon emissions. In Figure 1, ‘silence’ is the green shaded area above the blue line and below the dotted blue line to the right of the vertical dotted line.

Figure 1

To ensure that we maintain atmospheric GHG emission concentrations conducive to human habitation and the ecosystems that support us, we need to assign less value to ‘noise’ (burning fossil fuels) and more value to ‘silence’ (GHG emission mitigations). Creating a system which assigns value to ‘silences’ by turning them into investable resources requires an effort sharing mechanism to establish demand and organizational capacity alongside accurate measuring, reporting and verification for supply.

Organizational capacity for supplying ‘silences’ depends on the ability of organizations to create, trade and accumulate GHG emission mitigations. Due to the intangible nature of such ‘silences’, turning GHG emissions mitigations into investable sources requires their assetization as quasi-private goods with well-defined and delineated quasi-property rights. As preservations of the intangible commodity of stable atmospheric GHG concentrations through the reduction of pollution, such rights need to protect investment by ensuring that these private goods are definable, identifiable and capable of assumption by third parties. Such rights also require enforcement and protection against political and regulatory risk.

Commodifying GHG emission mitigations as quasi-private goods by assetizing them with well-defined and delineated quasi-property rights therefore provides the basis for the supply of ‘silences’. Rather than ‘internalising’ the cost of stabilising or reducing atmospheric GHG concentrations, this approach assigns value to GHG emission mitigations. Yet, if we want to avoid climate catastrophe according to the most recent IPCC 1.5C report and the UNDP Emissions Gap Report, GHG emission mitigations also require concretization on the demand-side. There are several examples of GHG emission mitigation and energy demand reduction assetization that can help illustrate how such systems of demand and supply can function.

Similar to GHG emission mitigations, energy demand reductions also represent the reduction of an intangible commodity vis-à-vis a baseline. While stable atmospheric GHG emission levels are the intangible commodity in the case of the former, in the case of the latter the intangible commodity is energy supply which fuels economic growth. Both require the assetization of mitgations/reduction to create ‘tangibility’, which provides the basis for assigning value. To illustrate, energy demand reductions are absent on domestic and corporate accounts and subsequently undervalued vis-à-vis increases in revenues.

Market-based instruments that succeed in setting and enforcing targets and creating systems of demand, however, can create ‘tangibility’. Energy demand reductions, for example, are assetized as white certificates representing equal units of energy savings (negawatts) in white certificate markets. Similarly, demand-side response enables the assetization of short-term shifts in energy (non-)use (flexiwatts) to benefit from flexibility and balancing markets. Carbon emission mitigations are assetized under the Clean Development Mechanism (CDM) as Certified Emissions Reductions (CERs).

Crucially, these examples shift the emphasis from the cost of pollution and the need to ‘internalise’ this cost or from turning pollution into a quasi-private good through Emissions Trading Schemes (ETS) towards the positive pricing of energy demand reductions and carbon emission mitigations. Positive pricing turns their respective reduction and mitigation itself into a quasi-private good by turning ‘silences’ into investable resources.

The main technical difficulty of establishing such systems lies in the definition of baselines and measuring, reporting and verification vis-à-vis these baselines. The difficulties inherent in this approach are well documented but improved sensing technology, such as the Internet of Things (IoT), and distributed ledgers promise greatly improved granularity and automated time-stamping of all aspects of energy (non-)use at sub-second intervals. If structures of demand are clearly identified through target-driven market-based instruments and supply is facilitated through the assetization of ‘silences’ as quasi-private goods with clearly defined and enforced quasi-property rights, a clear incentive also exists to ensure that MRV structures are improved accordingly.

Key to the implementation of such target-driven market-based instruments are mechanisms to ensure that efforts are shared among organisations, sectors or countries, depending on the scale of implementation. Arguably, one of the reasons why the CDM failed in many aspects was because of the difficulty of proving additionality. This concept was supposed to ensure that only projects that could prove their viability based on the availability of funds derived from the supply, trade and accumulation of CERs would be eligible for CDM registration.

The difficulty of proving additionally increases cost and complexity. To ensure that new mechanisms no longer require this distinction, a dynamic attribution of efforts is required. A mechanism to dynamically share efforts can also help address rebound effects inherent in energy efficiency and energy demand reduction efforts. Key is the target-driven nature of associated market-based instruments and the equitable distribution of the rebound through a dynamic mechanism which shares any rebounds (i.e. increases in carbon emissions) equitably among organisations, sectors or countries. With an appropriate effort-sharing mechanism in place, the demand and supply of ‘silences’ can be aligned with targets aiming to maintain atmospheric GHG emission concentrations in line with levels conducive to human habitation and the ecosystems that support us.

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This blog is written by Cabot Institute member Dr Colin Nolden, a Vice Chancellor’s Fellow in sustainable city business models. The blog has been reposted with kind permission of World Sustainable Energy Days. If you would like to read more on this topic, you can read Colin’s research paper here.

Colin Nolden

 

Regulatory defection in electricity markets

Posted on by janet.crompton
Graphic by Sarah Harman. Taken from energy.gov.

Electricity systems are undergoing rapid transformation. An increasing share of previously passive consumers is defecting energy demand and supply from the public electricity network (grid) as active ‘prosumers’ while technological and business model innovation is enabling demand-side resources to provide reliable and cost competitive alternatives to supply capacity.

Yet, centralised supply-focused market structures dominated by legacy infrastructures, technologies and supply chains associated with path-dependencies and technological lock-ins continue to dominate. Regulation has been designed around these existing supply-focused markets and structures rather than networks of the future capable of integrating and facilitating smart, flexible systems. Current systems and their regulatory frameworks are struggling to engage and integrate a range of technological, economic and social innovations promising consumer-oriented solutions to environmental problems.

In the UK, the Office for Gas and Electricity Markets (Ofgem) regulates the electricity and gas markets to protect the interest of existing and future consumers. Ofgem acknowledges that ‘moving from a largely centralised, carbon-intensive model to one which will be increasingly carbon-constrained, smart, flexible and decentralised is creating challenges which can only be addressed by innovation’.

In practice, the rapid diffusion of emerging digital technologies such as smart grids, smart meters and the internet of things is disrupting market structures and business models. Progress in automated and machine learning is producing exponentially growing amounts of data which facilitates the deep learning required for more accurate time series predictions. At the same time, distributed ledger technologies such as blockchain provide combined digital accounting and measuring, reporting and verification infrastructures as well as a means of developing and executing smart contracts.

Regulators such as Ofgem are confronted with the need to ‘keep the lights on’ while balancing their primary focus of regulating centralised electricity supply and trading markets with engaging with disruptive innovations. This is reflected in Ofgem’s monolithic, centralised structure, despite its commitment to facilitating smart systems, flexibility and non-traditional business models.

The question is, how can the regulator square grid code written for large-scale generators and wholesale traders with an increasing understanding of and desire to facilitate smart, flexible systems?

Disruptive technologies and business model innovation

In practice, smart, flexible systems imply the bidirectional flow of information which relies on a combination of on storage, demand-side responses, interconnection and energy efficiency increasingly facilitated by emerging digital and distributed ledger technologies. It is evident that existing legal frameworks will need to change to accommodate emerging digital and distributed ledger technologies, but regulators need to proceed with caution and change is inevitably a slow process that needs to take a very wide range of statutory and non-statutory requirements into account. Up to that point, however, the regulators’ discretionary and exempting power can and should be applied (with caution).

In Europe, Ofgem is at the forefront alongside the Dutch regulator (Authority for Consumers and Markets – ACM) in providing ‘regulatory sandboxes’ for microgrids and peer-to-peer trading which facilitates buying and selling electricity locally. These sandboxes facilitate experimentation and innovation without companies incurring or being subject to established regulatory requirements.

Despite Ofgem’s commitment to providing space for experimentation and innovation, missing market rules and high entry barriers encourage innovators to seek alternatives through regulatory defection. Two reports by the Rocky Mountain Institute, one on load defection and one on grid defection sensitised research and policy communities to economic aspects of electricity market defection. Regulatory defection is another aspect of the same issue but it deals with the broader opportunity (and concern) of economic activity shifting beyond particular regulatory spaces and boundaries. Arguments have been put forward that the trend of government withdrawing from energy policy rewards regulatory defection in electricity markets.

Concrete examples of regulatory defection in the electricity market include engaging in behind the meter generation, private wire supply and microgrids. Behind the meter generation is facilitated by a rapid fall in electricity storage costs. Batteries are now available for home installation with promises of 60% savings on electricity bills if appropriately scaled to match on-roof solar PV generation. Behind the meter generation also includes anything else that can be done to limit engagement with the grid, including energy efficiency improvements and reducing demand.

Private wire supply and microgrids require the installation of dedicated physical electricity transmission infrastructure. Private wire enables generators to sell electricity to neighbouring premises without transmitting electricity through the grid. Microgrids take private wires a step further to include a private network across multiple sites and end consumers. These arrangements are complex and require considerable skills and capacity to engage with appropriate network design, infrastructure, installation costs, land and planning requirements and operation and maintenance.

Despite this complexity, regulatory defection is underway through behind the meter generation, private wire supply and microgrid development. For example, Easton Energy Group in Bristol is at the forefront of developing a community microgrid combining solar PV generation with battery storage and dedicated transmission infrastructure as part of their TWOs project.

Energy Service Company (ESCO) business models facilitate defection by shifting the emphasis on the delivery of energy services. Rather than delivering energy in the form of grid electricity or fuel, ESCOs deliver final energy services such as lighting, ventilation or refrigeration. By shifting profitability towards the efficient provision of these services at low energy and environmental costs, ESCOs shift economic activity beyond the scope of electricity market regulation.

Combined, behind the meter generation, private wire supply and microgrids on the one hand, and ESCO business models on the other, require a rethink of how electricity is regulated. Fairness and equity need to be prioritised to ensure that the costs of running the existing infrastructure (which will still be necessary no matter how rapidly distributed systems evolve) will not be borne by fewer and less fortunate consumers that lack the capacity to defect. Therefore, new regulatory approaches are required to ensure that clean energy will be available to all at affordable costs.

Embracing disruption

One way of engaging with change is by embracing the innovations that threaten to usurp the current system. The Chilean regulator, Commisión Nacional de Energía (CNE), considers Blockchain an essential element of fair and sustainable energy markets. Its web portal Energía Abierta, the 1st open data website in South America, uses Blockchain as a digital notary. It allows CNE to certify that information provided on the web portal has not been altered and modified while also leaving an immutable record of its existence.

To this end, CNE issues ‘certificates of trust’ to give greater credibility to the portal. The aim of the portal is to increase levels of trust among stakeholders and the general public that have access to and consume the portal’s data. Another aim is that by using blockchain, greater trust in the citizen-government relationship can be created through more open and transparent governance. Ultimately, CNE expects blockchain to increase traceability, accountability, transparency and trust.

Chile has taken the lead in using blockchain as part of its regulatory framework and other countries should learn from this experience, especially if blockchain is to fulfil its potential in reducing transaction costs and managing complexity. Combining distributed ledger technologies such as blockchain with emerging digital technologies such as smart grids, smart meters and the internet of things can provide a new platform for electricity market regulation with data embodied in electricity at its core rather than electricity by itself.

The problem with regulation, however, is that it is based on experience from the past. Regulating emerging technologies and facilitating beneficial outcomes while limiting potential negative ones requires a fine balance and technological agnosticism. In this context it is necessary to bear in mind that it is not Ofgem’s sole responsibility to alter regulation. The Department for Business, Energy and Industrial Strategy (BEIS), District Network Operators, the National Grid and combined industry code panels governed by the Competition and Markets Authority and determined by the Secretary of State also have a role to play.

Regulatory defection in electricity markets will continue progressing in the absence of new market structures. Maybe it is time to rethink electricity market regulation in this space along the lines of platform regulation?

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This blog has been written by Cabot Institute member Dr Colin Nolden, Vice Chancellor’s Fellow researching in Sustainable City Business Models (University of Bristol Law School).

Colin Nolden
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