Policy, Regulation and Market Enablers

Why are policy, regulation and market enablers important for Smart Local Energy Systems?

Smart Local Energy Systems (SLES) can bring about social, economic and environmental benefits by optimising the use of local energy assets within a national energy system seeking to decarbonise at a reasonable cost.

But SLES's are poorly understood and represented in the policy, regulatory, and market rules that govern today's nationalised energy system. This results in non-technical barriers that prevent the widespread rollout of SLES; for example, a lack of incentives to balance production and consumption locally. Addressing the policy, regulatory and market rules and the barriers they create is crucial if we are to realise the benefits of SLES as we transform today's system to one that fits into a net-zero emissions world.

How did EnergyREV explore these issues?

Our team focused on identifying and analysing the gaps, barriers, and tensions SLES face within the current regime of energy policy, regulation and market arrangements. We produced a series of reports that provide a baseline of the current regime. These help us address the question: "Do we have the appropriate policy, institutional and regulatory framework to realise the technical, economic and societal potential of SLES?"

We also explored the range of benefits of SLES – what, who, where and when?

We produced a series of Policy and Regulatory Landscape Reviews (see below) which delve into the existing literature on policy, regulation and market arrangements through the lens of SLES. Using systematic search and review processes, we drew out the issues faced by SLES relating to governance structures.

We engaged with key stakeholders, including policymakers and Prospering from an Energy Revolution (PFER) projects, through a series of engagement activities:

Meetings with key government and SLES stakeholders
Governance Insights Lunchtime Seminars
PFER Policy & Regulatory Working Group
Strategic Engagement with Regulation and Policy (SERP) group

We explored future SLES governance through a series of workshops, using Decision Theatres. In these, participants from across and beyond the energy sector prioritised changes required to enable SLES to deliver benefits and mitigate risks.

What did EnergyREV learn?

Our landscape review series revealed recurring themes across different sections of the energy system which need addressing. These include:

Roles and responsibilities

The roles and responsibilities of existing actors, including the government, the energy regulator, businesses and citizens, are changing. New roles, and perhaps even new agencies, are needed. Decisions on how to manage these changes are crucial and urgent.

Emerging markets

The boundaries around and within the energy sector are becoming blurred. While energy for power, heat and transport has traditionally been separated, this is changing. For example, in the near future, a car could be powered up with electricity at work, driven home and the remaining energy in the battery used to power things in the household. Energy also increasingly intersects with other sectors, such as actors from technology companies moving into the home energy space, and energy data becoming potentially useful in healthcare sectors. These sorts of changes, often referred to as cross-vector integration, are increasingly important and provide opportunities for new value streams and innovation in business models. However, current market arrangements do not adequately support these kinds of opportunities. Changes to existing markets as well as new markets are key.

Benefits of SLES

Although individual potential benefits of SLES, like reducing carbon, improving system operation efficiency, and alleviating fuel poverty, are somewhat understood, there is less clarity on how these benefits are connected and how they are (or could be) distributed. Gaining this understanding will be essential to developing robust and effective policies.