Project Summary
Propositions for residential batteries are targeted at affluent customers, with large batteries that are expensive. However, no simple tools exist to support customers in choosing the optimal mix of low carbon technologies (LCTs) to suit their needs. Smaller, cheaper batteries coupled with solar arrays or other LCTs may make for more investable propositions with shorter payback periods. They are also accessible to more customers and more easily integrated into the electricity system. SizeWise seeks to define the optimum use of batteries with LCTs for different households and develop tools to make it easier and more affordable for customer to engage.
Innovation Justification
The key innovative aspect for this project is in developing new insight and data on how home batteries can optimally support the integration of home LCTs, and how business models can be evolved to enable more investable propositions through right-sizing batteries and optimising their use for a range of customer types and needs.
Innovative aspects include:
· Generating new insight into the optimal sizing and operation of home batteries in combination with a range of LCTs and customer/home archetypes, building on existing work from Ofgem and ClimateXChange and the Microgeneration Certification Scheme;
· Identifying barriers that inhibit large scale uptake of home batteries, including technical barriers relating to network integration and market barriers relating to the investability of propositions, and proposing solutions to these barriers;
· Identifying propositions that are more suited to the needs of consumers at lower cost and with a more attractive return on investment that appeal to investors and market participants who wish to support large scale rollouts of LCTs, particularly to LIV consumers at risk of being left behind the energy transition.
The counterfactual is a slower uptake of home batteries – initially by the affluent, and then other (but potentially not all) customer segments, with associated potential for sub-optimal sizing of installations, restrictions on equitability of access for customer types, and the potential for new and unpredictable peak loads in the network, necessitating additional network investment per battery on average.
The technology for this project exists, hence integration and technology readiness levels are IRL6 and TRL6. The project will focus on developing the commercial readiness of DSO incentives, propositions, and business models, which currently stand at CRL2 and will need to move through CRL3 in Discovery and further through Alpha and Beta phases.
Whilst the technology exists, given low uptake of home battery technologies and nascency of propositions it is too risky for service providers to invest at scale in propositions across all customer types. If viable propositions can be demonstrated and the investment case validated, this could build further interest from service providers, encouraging further investment.
A full demonstration is necessary to prove viable propositions that enable investment and uptake of home batteries as the solution needs to be delivered by market participants. The SIF Beta fund sizing matches the size and scale compared to other innovation funding sources.
Impacts and Benefits
The Flexibility in GB report by Imperial College and the Carbon Trust estimates flexibility can drive annual savings of £16.7bn per year by 2050, with the majority of additional flexibility vs. today coming from smart use of domestic assets.
Today, only motivated, and more affluent customers are engaging with flexibility propositions, with others left behind. This will need to be solved to deliver these benefits.
For networks, limited data exists on the economics of domestic batteries and their effect on the network, and future combinations of batteries and LCTs that will exist in homes. Limited visibility of the growth and use of these technologies has the potential to create new peak loads, driving network reinforcement and supply issues, such as voltage fluctuations or power interruptions, particularly at LV.
SizeWise aims to drive the following benefits through improved battery propositions:
Financial - future reductions in the cost of operating the network
The improved understanding of how combinations of batteries and LCTs affect the network and the resulting flexibility could enable DNOs to avoid or reduce net peak load increases, alleviate voltage fluctuations, and avoid unpredictable or new peaks. It will also inform strategic investment planning and deliver savings through reduced reinforcement.
Financial - cost savings per annum on energy bills for consumers
The insights and propositions developed will inform consumers of the optimal sizing and combination of LCTs and provide optimisation strategies to reduce energy costs and earn revenues. This will make LCTs more attractive to new investment and encourage new propositions for all consumers.
Financial - cost savings per annum for users of network services
The optimisation strategies and potential flexibility will enable energy suppliers, aggregators and DNOs to access flexibility at a lower cost due to increased competition.
Environmental - carbon reduction – direct CO2 savings per annum
Consumers will have access to LCT combinations that enable them to maximise their self-consumption of solar generation and consumption of low carbon energy from the network when available.
Environmental - carbon reduction – indirect CO2 savings per annum
The use of flexibility from consumers provides carbon reduction from avoided new infrastructure and offsets the use of higher carbon solutions in the wider system.
Revenues - improved access to revenues for users of network services
The project will assist market participants in understanding how to access the most optimal combination of cost savings and revenue streams in the management of home batteries and LCTs.
