Written evidence from the Association for Decentralised Energy (ELV0053) 

About the Association for Decentralised Energy

The ADE is the UK’s leading decentralised energy advocate, focused on creating a more cost-effective, low-carbon and user-led energy system. The ADE has more than 150 members active across a range of technologies, including both the providers and the users of energy equipment and services. Our members have particular expertise in demand side response (DSR) and storage, industrial energy including combined heat and power (CHP), heat networks and energy efficiency. The following sets out our key concerns from across this membership.

Overview

We applaud the Committee for launching an Inquiry into the transition to EVs. Given ADE member’s focus on energy flexibility, we are closely involved in ensuring that the widescale rollout of EVs acts to bolster the electricity system rather than burden it. Indeed, National Grid modelling estimates that between smart charging and vehicle-to-grid (V2G) use at peak times could bring up to 27GW of capacity to the system by 2035 compared to goals for 50GW of offshore wind by 2030. This capacity comes from the flexible nature of EV electricity use which is a critical enabler for delivering net zero. Energy flexibility is essential in order to keep electricity supply and demand matched, or balanced, at all times and to respect the capabilities of the physical network. This will be achieved through electrical assets, such as EVs, changing the amount of electricity they produce or consume in response to signals, largely price signals, reflecting the needs of the grid at any given time. Promoting the uptake of low carbon forms of flexibility as the only way to reach net zero in a cost-effective manner is a core tenet of the ADE’s vision and we are closely involved in the initiatives underway to achieve this.

Therefore, the focus of our evidence will be on the questions relating to the barriers and opportunities EVs offer to decarbonisation of the electricity system, beyond their decarbonisation of transport. The prevalent issues can be characterised as follows:

1. Ensuring an appropriate regulatory framework to enable EV flexibility; and
2. Opening electricity markets to EV participation.

Recently published research found that household flexibility, largely supported by EVs, would avoid the need to build four new gas-fired power plants in 2030. The rollout of EVs will drastically increase the demands placed on our electricity system and without proper government regulation for EV smart charge points or positive market signals for EV flexibility, they will essentially become a parasitic load.

Experience of using an EV

18. What are the main challenges that UK consumers face in their use of EVs? And 19. What are the main benefits that UK consumers could realise from using an EV?

Benefits

While other stakeholders are better placed to discuss the benefits of using an EV from a transportation and fuel cost perspective, we will explore the energy benefits of flexible EV use. There are three primary sources of flexibility an EV may provide:

1. Smart charging: Where a customer agrees with their energy supplier or dedicated flexibility provider to charge their vehicle when electricity prices are cheaper or where they can participate in electricity system balancing services. The flexibility provider generally has the capacity to remotely control when the EV charge point is importing power and can therefore turn down, or turn off, the charger when electricity prices are highest eg at peak times of demand (weeknights at 4-7pm). This saves the customer money on their electricity bills or they are actively rewarded through an agreement with a flexibility provider. These agreements generally involve the customer indicating to the service provider, via a mobile app or website, when they want their vehicle charged by and when they will need it so that the customer is not left without a charged vehicle. Certain tariffs already on the market estimate an average of £800 in whole home savings with smart charging.
2. Charging to maximise domestic renewable electricity: Where a customer not only agrees for their flexibility provider to smart charge in accordance with electricity price signals but also to prioritise times of high renewable generation. This additional layer of ‘smartness’ ensures the EV charge point is switched on when all, or the majority, of electricity generation is coming from renewable sources, such as sunny or windy periods. Turning up electricity demand at these times has the benefit of making best use of renewable energy sources in order that they are not switched off, or curtailed, if there is not enough energy demand to use their power.
3. Vehicle-to-grid: Where a customer agrees with their energy supplier or dedicated flexibility provider to use their car battery as a source of energy storage that can both import and export electricity. Unlike smart charging, V2G actually allows the vehicle to sell power to the electricity grid when the car is fully charged and electricity prices are high. This is combined with smart charging so that the vehicle imports power when prices are low and sells power when prices are high. A recent study of over 300 EV V2X customers found that an average of £420 was saved per customer was saved on annual bills.

Many energy suppliers already offer bespoke tariffs to EV-owning customers that guarantee cheaper prices when EVs are optimised to charge overnight. The government’s EV Smart Charging Action Plan estimated that an average driver could save £200 per year from smarter charging and a high mileage motorist could save up to £1,000 per year.

Challenges

To ensure demand side flexibility can be properly valued and rewarded, a regulatory conflict must be resolved. The development and deployment of innovative technologies that will bolster system security depend on regulatory clarity, certainty, and proportionality. 

Current Context 

Government ambitions for a secure, net zero, and cost-effective electricity system rely heavily on the rollout of low carbon assets that can function in a smart way such as EVs. However, due to regulations held over from an EU Directive, over 99% of assets may be prevented from being paid for smart performance. 

How electricity is traded is rapidly changing and therefore the means for measuring it is evolving in parallel. Our electricity bills are calculated through an electricity meter that measures all electricity used on the premises, called a boundary meter. However, ‘smart’ low carbon assets such as EVs may be fitted with dedicated meters that only measure electricity imported or exported by that asset, allowing customers to optimise appliances in an intelligent way and be rewarded for that performance. While government policy has championed the uptake of these assets, the regulations that govern electricity meters have not kept pace. The Measuring Instrument Regulations 2016 (MIR), retained from an EU Directive, contradict government more recent legislation on smart assets, including the EV Charge Point Regulations 2021 and the Energy Security Bill 2022. The ADE, National Grid Electricity System Operator (NGESO), the Energy Tech Group and other industry stakeholders have been working with DESNZ and OPSS to address the issue but this remains unresolved so far.  

Proposal 

Amending the MIR to exclude meters regulated elsewhere, such as the EV Regulations or under the Energy Bill, will unlock multiple benefits, including: 

•     Ensuring the £140m spent by Government to accelerate smart EV charging rollout  and £30m on innovation funding for vehicle to grid technologies is not wasted by replacing all devices. 
•     Lowering the cost of net zero and delivering up to £10bn in annual savings as set out in the Smart Systems and Flexibility Plan.  
•     Ensuring the 600,000 heat pumps set to be deployed per year from 2028 are able to function in a smart way, delivering savings for the customer and the wider system. 
•     Helping UK industry participate in the net zero transition and ensuring security of supply by adopting smart processes. 

•     Strengthening the UK’s energy sovereignty and security by making better use of homegrown electricity generation.  

National and regional issues

29. What are the challenges or concerns around grid capacity in relation to significantly increased EV adoption?

Depending on the crucial policy choices made in the near future, the large scale adoption of EVs may either be a help or a hindrance to the grid. Although grid buildout is essential to support the decarbonisation of transport, the physical capabilities of the grid and its impact on generation sources is being overly emphasised which inadvertently overlooks the foundational importance of being able to operate the grid in a secure, efficient, and eventually decarbonised manner. The critical nature of changing electricity use, as well as building more wire, was emphasised by the Network Commissioner in his recent report, where his second recommendation declared the need for balancing market solutions to grid capacity shortage. It is the duty of policy makers, including government, the regulator, and system operators, to ensure that EVs are able to participate in guaranteeing security of supply, making best use of new renewable generation being built, and lowering energy costs for households. Currently the grid is kept balanced by System Operators, predominantly NGESO, paying electricity generators to adjust their generation to keep aligned with demand at all times through balancing markets/services. The attached graph depicts the technology mix providing the primary balancing services to in recent years.

Decarbonising the electricity grid necessitates a simultaneous decarbonisation of how we balance supply and demand. However, renewable generation sources cannot be as easily instructed as traditional gas and coal plant – we can’t order the wind to blow or the sun to shine. Therefore, flexible sources of demand will need to actively participate in balancing markets. Although a single EV may not have a large enough electrical volume to impact the grid on its own, tens or hundreds of thousands of EVs bundled together could reduce peak demand on the electricity system by 65% in 2030. Today, entry to these markets pose significant barriers to EV participation. Without significant reform of electricity market arrangements in the short-, medium-, and long-term the benefits EVs can bring to decarbonising not just transport, but also the electricity system, will be unrealised. Thus, the transition of the ESO into a wholly public body under the Energy Bill and DESNZ’s Review of Electricity Market Arrangements demand transformative changes to the accountability of market makers and the adaptability of vintage structures that never envisioned the participation of millions of distributed assets, such as EVs, in the electricity system. The ADE recently published a paper, ‘Finding the Balance for a Net Zero Future’, which sets out our detailed proposals for reforming balancing markets, including the removal of barriers for including EVs.

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