Barriers still exist in implementing smart local energy systems

smart local energy systems

Findings from Government-funded trials are showing that place-based energy projects could bring major benefits for towns and cities, helping them decarbonise more rapidly, support the drive to Net Zero and catalyse investment right across the UK. At the same time, the trial projects have identified barriers in the way of rolling out such systems more widely.

Two new insight reports, published by Innovate UK’s Prospering from the Energy Revolution (PFER) challenge, highlight the findings of the projects in two key areas: finance and investment, and policy and regulation.

A smart local energy system brings together energy generation, storage, demand and infrastructure and integrates them at a local level such as a town or city. By balancing supply and demand locally, this approach could reduce the need to boost national networks, while bringing advantages in energy efficiency, carbon emissions and consumer cost.

Over the past four years, the £100 million PFER programme, funded by UK Research and Innovation and delivered by Innovate UK, has funded more than 80 projects around the UK developing different aspects of local energy systems. Projects range from data management tools, large-scale installations – such as batteries, renewable energy generation and electric vehicle charging hubs – to whole city-wide local energy markets.

The first report, ‘Smart local energy systems: finance and investment‘, looks at the potential returns and finance for such systems. One project, Coventry’s Regional Energy Systems Operator (RESO), estimated that an integrated local energy system could be worth £721 million to the city. The report also finds that, while there is no shortage of potential private investment in local energy systems, investors are discouraged by unstable business models due to uncertainty and perceptions of risk.

The second report, ‘Smart local energy systems: policy and regulation‘, notes that, in the long run, localised approaches could support national policy aims, including limiting costs for customers, better energy security, levelling-up and economic development. At the same time, the trial projects have identified policy and regulatory barriers that exist, including the fact that current energy markets are designed for a centralised energy system, and the lack of a joined-up, ‘whole systems’ approach.

Rob Saunders, challenge director of the Prospering from the Energy Revolution challenge at Innovate UK, said: “It is increasingly recognised that locally-integrated approaches to energy can bring major benefits, helping local communities to prosper while also helping deliver our Net Zero ambitions. The findings from our demonstrators and design projects add strongly to the evidence of what could be achieved, but also highlight key obstacles in the way of local energy initiatives.

“Our ambition is that the learnings from these projects will prove valuable to all involved in decarbonising energy across the UK, and help in clearing the way for a new generation of locally-optimised energy systems in our towns, cities and regions.”

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