Smart and Fair?
Exploring social justice in the future energy system
Project duration: June 2019 ongoing
Over the course of the next few years our energy system needs to transform into a smarter, more flexible and responsive ultra-low carbon energy system. This is part of a necessary process to fulfil the UK’s carbon emission reduction commitments.
But the associated changes will massively (and potentially rapidly) disrupt the way consumers interact with the energy system. While the changes are essential, they potentially bring with them completely new ways to generate unfairness (in terms of the distribution of costs and benefits of the new system) and to leave people behind (in terms of the complexity and cost of participating in the benefits the future energy system brings).
There is a risk that, if these changes end up leaving vulnerable people behind and creating negative social impacts, progress towards a zero carbon system will stall as public support fades. So, to avoid this risk, how could the transition be both smart and fair?
Acknowledgement of this risk is why many actors in the energy system are espousing various formulations of the principle that ‘No one should be left behind’ in the energy system transition; that all energy consumers should have the opportunity to benefit from the transition (and thus ‘keep up’) while bearing only their fair share of the costs of change.
But what, exactly, does this mean in practical terms? How can such a ‘smart and fair’ outcome be achieved (if indeed it can)? What are the implications of seeking to ensure that all consumers can ‘keep up’ or are protected in some way if they can’t?
Building on an essay written by our CEO, Simon Roberts, for Citizens Advice, CSE has established a new research programme, Smart and Fair?, to explore these key questions further. Its first phase is being generously supported by Scottish & Southern Electricity Networks (SSEN) and Western Power Distribution (WPD). This research phase will be led by Simon, with support from Nicky Hodges, Senior Researcher and Toby Bridgeman, our Lead Data Analyst.
The first phase of the Smart and Fair? research programme will develop an analytical framework and methodology designed to achieve the following objectives:
- Consider the potential social impacts of the wide range of possible system changes to provide an initial answer to the question: “What are the ways in which unfairness could be created in different future system scenarios?”
- Explore different strategies to mitigate the risk of negative social impacts – ranging from the potential to design markets to avoid them (without blunting market effectiveness) to the types of interventions which would enable ‘at-risk’ consumers to overcome them or be protected from them (by, for example, changing approaches to cost socialisation). This will answer the question: “How could the risk of such unfairness be mitigated while enabling the system change needed?”
- Design a programme of pilot activities to test the effectiveness of different approaches emerging from 2. above.
- Develop a set of guidelines for putting the ‘no one left behind’ principle into practice in the design, operation and regulation of the future energy system.
This will include establishing a picture of the financial, intellectual and technical capabilities consumers will need to ‘keep up’ in a smarter energy system and of which types of consumer are at risk of being left behind. Will more vulnerable consumers be offered the opportunity to participate in the transition and, if so, are they capable of absorbing the technical and financial risks of taking up such offers?
As Stewart Reid, Head of Future Networks at SSEN, notes: “While all the DNOs and many others have committed to the various versions of the principle that ‘no one should be left behind’ in the transition to a smarter energy system, there’s still a lot of work to do to understand what that principle looks like as we start to put it into practice. By supporting CSE’s ‘Smart and Fair?’ research, we’ll be helping to build that understanding and to develop approaches to inform our future practice.”
Echoing this need, Alison Sleightholm, Resources and External Affairs Director at WPD, said: “As the energy system gets smarter to realise the UK’s zero carbon ambitions, WPD recognises its responsibility to ensure the most vulnerable are both protected from undue impacts and supported to participate in the benefits of new services. To fulfil that responsibility, we need to know much more about the risks and opportunities involved. We’re therefore delighted to support and be involved with CSE’s new ‘Smart and Fair?' programme to explore these issues, identify challenges and propose solutions.”
The first phase of the research programme, from June 2019 – January 2020, will follow a five stage process designed to build understanding and insight of what ‘No one left behind’ looks like in practice:
- Stage 1: cataloguing the potential opportunities for households to participate in a smart energy system and detailing for each opportunity the capabilities that consumers will need to have to be able to participate that will be needed in the future.
- Stage 2: creating a ‘capability lens’ based on an assessment of the capabilities of different types of energy consumer to participate in the opportunities laid out in Stage 1, with a particular focus on vulnerable consumers.
- Stage 3: engaging with real-world examples of smart energy market design by looking at WPD and SSEN’s developing DSO market platforms as examples of smarter market design in practice, to understand the capabilities required, how vulnerable consumers’ needs are considered, the potential implications of trying to accommodate different consumer capabilities and by examining the tension between platform design that prioritises consumer access and design that optimises market flexibility.
- Stage 4: analysing the outputs of the previous stages to understand how these opportunities and the wider system change may create significant negative social impacts and leave vulnerable people behind.
- Stage 5: designing a series of pilots and a set of guidelines to test the effectiveness of different approaches and put the principle of ‘no one gets left behind’ into practice.
A number of stakeholder workshops will be held to test emerging thinking at each stage. The project team will report on the findings and recommendations from each of these stages, including a proposed analytical framework and methodology for future assessments of the social impact of transitioning to a smarter energy system.