Can 'Smart Grid' Stop Energy Bills from Soaring? ENERGY ANALYSIS

Article excerpt

Byline: Robert Lea

WHEN Ofgem issued its inflammatory research recently to argue domestic energy bills might rise by more than 60% in the next seven years, a fuse blew at the Department of Energy and Climate Change.

"Not true" was the gist of the comments from the civil servant deputed to rubbish the story: this will not happen because even if energy prices rise, domestic consumption will fall as a result of the arrival of smart metering.

Nothwithstanding that this is kinda ironic -- given the chronic Labour policy vacuum that has delayed the advent of smart metering by at least five years -- do the functionaries at DECC have a point? The Ofgem analysis -- and its scary spectre of the [pounds sterling]2000-ayear household energy bill -- has helpfully shifted debate in the industry from not whether we can plug the energy gap but to how much it will cost to do so.

There is an argument that the energy gap -- the fear that the lights might go out some time in the next decade -- has already been bridged.

Steve Holliday, the chief executive of National Grid, is a vigilante fighting against energy industry complacency.

But even he concedes that so long as we don't get hit by successive arctic winters and there is not a catastrophic failure of our existing nuclear and coalfired fleet then the lights should comfortably stay on.

His reasons are threefold: the amount of new gas-fired generating plant due to come on-line in the next few years; the wising up of household consumers -- "people are waking up to the fact that plasma TVs eat three times as much energy as LCD tellies"; and the arrival of the smart grid in the energy industry.

Smart meters, smart grids are the shorthand for the upcoming revolution in the nation's electricity networks: the equivalent transformation from the old-style telephone exchange to broadband.

The smart or intelligent grid enables suppliers and generators to use digital technology both to control consumption and encourage localised energy production.

Smart meters in the home enable communication between supplier and consumer and the user to regulate their consumption.

The smart grid also enables the rise of "distributed generation" or local electricity power production either within the community or even in the home that can be sold back into the grid.

The result will be no need to have major power stations churning out energy all day even during non-peak hours. The result will be much greater flexibility, real-time variable power-pricing, better efficiency, much-decreased cost. Gurpreet Gujral, research analyst at the City broking house Ambrian Partners, has seen the future.

"The rate of evolution of an industry is known as the industry clockspeed" says Gujral.

"The utility industry is regarded as having one of the slowest clockspeeds in the world because of the scale of capital expenditure, the importance of energy security and the lack of incentive to change.

"The current grid needs to be rewired from analogue to digital format to create the smart grid which is able to integrate any device that consumes, generates or controls power. "We see a move away from large-scale centralised power sources towards smaller, lowcarbon power sources located closer to points of consumption.

The emergence of this is akin to the computer industry moving from mainframe computing to laptop and desktop access. …