The commitment to a net zero economy has undoubtedly accelerated of late, with governments around the world pledging to reduce carbon emissions or achieve net zero by 2050. To make these ambitious goals happen, change is undoubtedly required across the global energy system, and it is already happening. Targets are being set on decarbonising electricity, transport and heat, from banning the sale of new petrol and diesel cars to decommissioning coal-fired power plants. Meanwhile, technical solutions for decarbonising the energy sector are rapidly being deployed in varying degrees. That includes the use of variable renewable energy to generate electricity in place of coal and gas, hydrogen to power trains, switching to novel heat technologies such as heat pumps and hydrogen-fuelled boilers, and transitioning to electric vehicles. But there are limitations.
Heat pumps and electric vehicles, for example, add significant additional demand to the energy system. This leads to network constraints as our existing networks were not built to meet this new demand. On top of this, using variable renewables such as wind and solar reduces the flexibility of the power system because unlike conventional fossil fuel generators, variable renewable power generation can’t be easily turned up and down to match demand. Energy is generated when the wind blows and the sun shines, but not necessarily exactly when we need to charge our cars or heat our homes.
These issues are intensified in most emerging economies, particularly in Asia and Latin America, where decarbonisation so far has been slower, and a more rapid transition than in the developed world is now required if global heating is to remain under 1.5°C. Their current energy systems are often still highly reliant on coal and diesel generators, which ensure a consistent energy supply, however this lower starting point to achieving net zero is coupled with an increasing demand for energy as living standards improve, further increasing the size of the challenge. With security of supply a priority in these regions, uncertainty about how to operate a variable renewable-based system is impacting their decarbonisation aspirations. As a result, new fossil fuel generation is still forecasted to be developed in the next 10-20 years in the national energy plans of some countries in these regions, despite widespread acceptance that low carbon generation technologies such as wind and solar are more cost-effective. Lack of skills, supply chains and financing for the lower carbon energy options needed to operate a clean, secure and reliable system also hampers the ability to transition.
Without flexibility, net zero can’t be achieved
Introducing greater flexibility in the energy system is key to resolving these challenges, not just in the richest countries, but globally. Flexibility can be defined as the change in supply or consumption of energy in response to a market price signal to provide a benefit to the wider system. Sometimes these actions can be very short term, even a matter of seconds. That could mean for example using a battery to mitigate fluctuations in wind energy output. An example of a longer-term solution is the seasonal storage of solar energy from the summer, which can then be used to help heat our homes on cold, dark, windless winter days.
This flexibility can come from four different sources: flexible generation, utility-scale storage, demand-side flexibility and greater interconnection with other countries or states, allowing the sharing of resources. Through our work, we have found that using a combination of all four of these sources results in the lowest overall cost – which ultimately means achieving net zero at a lower cost. Flexibility can be thought of as the car clubs of the energy world. We need enough individual cars in our car club to meet demand, but we want each car to be utilised as much as possible to lower the costs for everyone. In the same way that car clubs allow greater use of each car and therefore the need to buy fewer of them, flexibility allows us to improve the utilisation of our renewable energy generation and network infrastructure, matching demand to available generation and smoothing the loads on our network. It also provides greater system stability and reliability, doubling up as the mechanic that keeps our car club from having breakdowns.
These benefits have large economic impacts. In the UK, for example, our joint industry project Flexibility in Great Britain analysed the system-level value of deploying flexibility across the heat, transport, industry and power sectors in Great Britain. The findings provide evidence that a fully flexible energy system has the potential to deliver material net savings of between £9.6 billion and £16.7 billion per annum by 2050. The analysis was highlighted in the UK Government’s Department for Business, Energy and Industrial Strategy’s 2021 Smart Systems and Flexibility Plan. Similarly, in other parts of the world our work has demonstrated that demand-side flexibility could enable the Colombian electricity system to be fully decarbonised by 2040, generating potential savings of around US$730 million per annum by 2040. This influential analysis contributed to the Colombian government decision of adopting an enhanced National Determined Contribution for COP26 in Glasgow.
A ‘whole-systems’ approach is required to enable a flexible, low carbon energy system
Globally, regardless of the location, there are benefits to thinking from a whole system perspective when it comes to enabling a flexible low carbon energy system. This means considering the interactions, interdependencies and knock-on implications of each decision that is made across the sector, including not just technical decisions but also policy, regulation and markets. Enabling flexibility involves widespread change to existing processes and policies in a time of great uncertainty. However, there are some decisions that can be taken that provide benefit irrespective of what might happen to, for example, the relative cost of hydrogen boilers vs heat pumps. Examples of these are:
- Technical: Flexibility should be treated with the same importance as low carbon generation in network-planning and operation. This includes facilitating greater digitalisation of the energy system, enabling real-time coordination between assets to operate in-sync to deliver whole system benefit. It should also include the development of solutions that work across the transport, heat and power sectors, such as hydrogen technologies and the use of heating and transport assets in virtual power plants.
- Policy: A whole system approach means that policies – across transport, heat, electricity - can’t be made in isolation. We need to have coordination between the decarbonisation strategies for these areas, enabling cross-vector solutions and integrating the need for flexibility from the start.
- Regulatory: a clear regulatory environment is needed that is consistent across the sector, for example around communication protocols and cyber security requirements, so that all energy consuming or generating technologies can communicate fluidly with each other and give network operators visibility of the loads on their networks.
- Energy markets: market price signals need to reward players who provide benefits to the system. This will also require effective coordination between market operators to support deployment of flexibility for not only their benefit but also for the wider system.
- Engaging with consumers: the roll out of flexibility needs to consider users across all stages of deployment. Understanding consumer needs, crafting appropriate narratives for different types of consumers and building them into the user experience will be key to successful deployment of demand side response, EV smart charging and use of thermal storage. We need to build the Uber’s and Airbnb’s of the energy world, making it easy for consumers to engage and benefit.
It is vital to act now to accelerate a cost-effective and robust energy transition as well as a green one.
Globally, the current commitment to net zero will be possible and cost-effective only if actions are taken to drive energy flexibility that will enable a fully integrated and dynamic energy system. In countries more progressed on decarbonising their economies, flexibility will allow them to reduce price volatility and avoid over-spending on achieving net zero. In countries still highly dependent on fossil fuels, low carbon sources of flexibility can accelerate the current plans of phasing out coal, while also reducing the total investments needed to develop or reinforce their energy networks to meet the growing demand. This will allow these countries to be bolder in their decarbonisation goals and ambitions, without potentially stifling economic growth.