Project Summary

Heat pumps draw a steady load from the network, but new forms of thermal storage for electric heating, such as electric heat batteries or water tanks, have the potential to shift load to off-peak periods, however, the data available is limited and flexibility products/market mechanisms do not yet exist.

The objectives of this project are to investigate the flexibility potential of thermal storage technologies, individually and in combination with heat pumps, and understand how far in time these technologies can shift electrical demand relative to customer heat demands. If successful, the solutions will help mitigate mass heat load on the low voltage network at shoulder or peak times and enable other network services such as resilience to outages, and cold start impact mitigation.

This proposal addresses two of the SIF challenges:

• Primary: Challenge 4: Accelerating the decarbonisation of major energy demands -- by increasing the use of flexibility from heat technologies to support the integration of multiple demands onto the network; and,
• Secondary: Challenge 2: Preparing for a Net Zero power system -- increasing the ability to access system support from novel demand-side heat technologies.

The Discovery Phase will be delivered through the collaboration of the following partners:

• UK Power Networks: the DNO providing key input on avoided network costs and service/incentive design;
• Baringa: a specialist energy sector consultancy who are ideally suited to lead utilising their commercial and market expertise, whilst ensuring we conduct a neutral market scan without favouring any specific technology in the Discovery Phase;
• Passiv UK: a technical heat systems consultancy suited to provide a broad perspective of heat storage solutions in the market;
• Tepeo: a technology supplier suited to provide deep expertise into heat batteries, a leading solution in this field; and
• GLA: as the local government representative to provide insight into London's multi-occupancy building customers, and the associated stakeholders.

If successful, this project will deliver the following value to its direct and indirect users:

• End consumers: maintaining comfort levels while offsetting the cost of new technology installation and lower energy bills through flexibility revenues;
• DNOs (and their connected customers): optimising network use across the day through minimising the network impact of heat technologies at peak times;
• The wider energy system: accelerating the uptake of heat technologies by evidencing the applicability of solutions to new customer segments; and
• Wider society: presenting possible market value to accelerate and offset the costs of transitioning to Net Zero.

Innovation Justification

The steady load drawn from heat pumps hinders uptake of this low carbon solution on the network as there is limited flexibility in shifting the load, for example, to avoid congestion on the network at peak times. WattHeat will investigate how heat storage could address this issue.

Enabling greater flexibility in heat demand could:

• Improve the ability to integrate new heating demand in constrained network locations
  Create network capacity to integrate wider new demands through shifting or flattening heat load
• Enable the storage of renewable generation when it is abundant with heat storage
• Provide additional resilience of heat for consumers in the event of network outages

There is currently a lack of incentives for consumers to take up more flexible heat technologies. WattHeat is innovative as it seeks to promote the uptake of more flexible heat technologies. To do so will require investigation of available technologies and their capabilities, the constraints of buildings and consumer behaviours, and the value of flexibility delivered - designing novel market mechanisms to enable market participants to access this value.

Recent work, e.g. BEIS' Heat and Buildings Strategy, has provided valuable insight into the applicability of heat solutions in buildings. However, limited insight exists into the flexibility potential of heat solutions used in conjunction with thermal storage solutions (such as hot water tanks or heat batteries). New insight from engaging with the relevant stakeholders and CBA analysis will address this.

If successful, WattHeat will deliver value by enabling more efficient use of the network for integrating heat demand, leading to reduced reinforcement requirements, lower overall network costs and fewer connection delays. This will reduce costs for consumers compared to the counterfactual, using heat pumps alone, through reduced network charges and revenues from flexibility services.

Funding this innovation through BAU allowances is difficult as the technical solutions are not sufficiently understood or demonstrated. Relying on demonstration projects from established technology suppliers could result in favouring one technology over others in an embryonic stage. The phased structure of SIF allows the project to conduct discovery of technology options, understanding the potential value to the DSO and customers.

For market participants, there is limited incentive to explore the applications of these technologies in combination given the unclear revenue opportunities that heat flexibility presents. Through this project, we aim to stimulate the development of viable propositions, commercial products, and business models, which would enable BAU delivery of these solutions.

Project Benefits

Our expectations of the benefits from increased flexibility from heat rest on an assumption that the energy market will return to a pre-crisis mode, in which consumers are exposed to variable energy prices depending on the time of use of demand.

Financial -- Future reduction in the cost of operating the network

The benefits can be tracked using the following KPIs:

• (K1) -- Capacity (kW) and volume (kWh) of flexibility provided by each solution
• (K2) -- Number of thermal storage solutions identified
• (K3) -- Estimate of network reinforcement deferral (MW and number of substations)

Our RIIO-ED2 business plan includes the DSO commitment for making greater use of flexibility to defer £410m of load-related expenditure on the network. During Alpha Phase, we will estimate the potential cost savings from WattHeat more specifically.

Financial - cost savings per annum on energy bills for consumers

The benefits can be tracked using the following KPIs:

• (K4) -- Number of households that install the thermal storage solution
• (K5) -- Average bill reduction (£/household) through shifting demand throughout the day
• (K6) -- Average revenue (£/household) gained from participating in ESO and DSO flexibility schemes

Environmental - carbon reduction -- indirect CO2 savings per annum against a business-as-usual counterfactual

The benefits can be tracked using the following KPIs:

• (K7) -- Comparison of carbon grid intensity (kg CO2) of flexible heat demand profile compared to less flexible heat demand profile (counterfactual)

New to market -- products, processes, and services

These benefits can be tracked through the:

• (K8) -- Number of DSO services, incentives, or flexibility products available for heat flexibility

We will identify and evidence high-level assumptions for KPI 1 -3, and forecast 4 - 7 during the Discovery Phase; validate these in more detail through Alpha Phase; and demonstrate them in Beta Phase. KPI 8 will be tracked over time post-Beta Phase.