If government really values smart homes it must start from today’s realities to ensure a smooth forward pathway for consumers.
The solar and storage industries are not ahead of the curve, they are the curve. In less than ten years we’ve moved on from expensive clunky modules bolted to a roof, to sleek & affordable in-roof designs that work with battery storage to optimise self-consumption.
And more besides; clever energy management systems mean that smart homes can also integrate EVs and digitalised appliances. Technically, the first generation of smart homes are ready to roll; slashing bills for consumers, shaving local peak demand & contributing to enhanced system flexibility and balancing.
But where are the markets to buy these valuable new services? Where are the basic PPA offers for the surplus power solar homes provide?
As the BEIS Future of Small Scale Renewables Call for Evidence recognises, there is not even a basic route to market yet for small renewables without the current export payment. And the local flexibility markets that smart homes and smart providers need are painfully distant – hence our support for the OVO Flexibility First campaign which seeks to expedite progress.
So there is real dismay at the government proposals to prematurely whip the export tariff rug out from under the feet of households, atop of the expected loss of the feed-in tariff. The reason that Europe is enshrining in law the rights of households to receive fair remuneration for their surplus at market rates is because Europe recognises that solar households create real power of real value and that smart homes can create big system value, which benefits everyone. It is quite wrong to suggest that there is a ‘cost’ to the fair export payment, as the UK government has.
So when it comes to smart homes it’s a question of mind the very big gap. The electricity sector and government share a common vision of where we want to get to and quite an array of ideas are mooted in the Call for Evidence. But we have a long process to go through before it is clear even where new local flexibility markets will sit institutionally. That means that smart homes and offices have very limited markets today into which to sell their services. Aggregators have limited opportunities to participate. Investors cannot yet monetise the value of their investments.
Not only must smart homes and offices have markets in which to sell their services, it must be cheap and easy for them to bring their individually modest offer to those markets to realise their aggregate value to the system.
Behind the scenes, we at STA are running around an extraordinary maze of contradictory information on the functionality of smart meters, and whether a second MPAN will need to be raised to record exports, and where this cost will fall. Major suppliers tell us SMET1 meters cannot in practice record exports. Furthermore, to ensure that competitive markets for aggregators and innovative suppliers thrive, smart meter data needs to be accessible to third parties, something that appears to have been overlooked in data rules and the smart communication channels.
Furthermore, the Significant Code Review that should bring forward half hourly settlements needs to pay due attention to half hourly settlements for exports.
Despite government clearly stating in the last FiT consultation conclusions that it will consult in future on the relationship to smart meters and current 50% deeming for exported surplus power, it appears that changes were made to Ofgem’s supplier license conditions last year that have created unhelpful confusion for the industry & potentially a very unhappy experience for solar home owners.
The most recent consultation on the FIT scheme also indicates government backing of this license condition, contradicting their earlier promise of a consultation on this issue. This requirement is likely to deter solar owners to install smart meters, something completely contradictory to the ambitions of the government’s rollout. So there are still a lot of issues to resolve to ensure even SMET2 meters can provide the functionality needed, and cheaply.
Time is needed to resolve these complex issues. Even longer is needed for innovative aggregator and flexibility markets to develop. We are not there yet. So deeming and the fair export payment must be retained and certainty must be provided for investors ahead of the closure of FiT next March. It will be utterly absurd if instead solar householders are left spilling their power onto the network for nothing, subsidising the supplier industry.
Too often today we are working to get around nonsensical hurdles government is putting in the path of not only solar but even storage. We are not alone in trying to leap the hurdles. Innovative new entrants like Piclo are working to accelerate the opening up of smart services on local networks by making local assets visible online, and the more innovative local networks, such as UKPN, are engaging and trialling local flex markets.
So in some areas opportunities may open up earlier for some smart homes than others. Innovative electricity suppliers are in the position where they can hedge smart home flexibility against wholesale markets, so again there are some limited opportunities here.
All this is to be welcomed, but we must be sure that when it comes to smart homes every home everywhere is taken on a clear and consistent journey in which they are treated fairly and in which they will enjoy increasing opportunities to participate in the wider energy system to save both themselves and the system money.
The smart transition is too important to deter household investors and to risk an administrative mess for pioneering consumers that leaves them out of pocket. So we’ll be responding to BEIS’s consultation saying mind the gap and handle with much more care.