A NEGAWATT MARKET FOR SUSTAINING ENERGY
SERVICES SECURITY IN THE UK
Reem Yusuf and Yael Parag
Socio-Technical approach for the Security of Energy Services (STESS) Project
Funded by the EU FP7 Framework
Environmental Change Institute (ECI), University of Oxford
Interdisciplinary Center (IDC) Herzliya
6th International Scientific Conference on Energy and Climate Change
Athens, Greece - October 10, 2013
ENERGY SERVICES SECURITY VS ENERGY SECURITY
Demand
Socio-Techno-Economic Vs Techno-Economic
Supply
Energy Services Security (ESS): “the extent to which the population in a defined area
(country or region) can have access to affordably and competitively priced,
environmentally-acceptable energy services of adequate quality” (Jansen, 2009:7).
The security of energy services presents a more appropriate term than energy
security, as the ultimate energy policy goal – and challenge - is providing consumers
with adequate and reliable energy services.
SOCIO-TECHNO-ECONOMIC APPROACH (STE) + MULTI-LEVELPERSPECTIVE (MLP)  ENERGY SERVICES SECURITY (ESS)

STE can help overcome possible barriers to energy conservation, energy
efficiency , and carbon emission reduction mechanisms;

MLP allows for a comprehensive analysis through applying a systemic approach
taking into account energy providers, consumers and their intermediaries;

The two approaches tackle the financial and technological barriers that are
challenging but they also manage the complexities of consumption behavior;

Here, we focus our attention on the role of energy consumers, those within the
residential and commercial sectors as perceived by the UK government through its
most recent energy and climate change policies.

We then analyze consumers’ interlocking and potentially transformative roles by
way of their potential involvement in new energy markets and initiatives
AN INTEGRATED DEMAND-SIDE APPROACH FOR NEGAWATT MARKETS
Energy
Efficiency
Demand
Response
Negawatt
Market
Behavioral
Change
Self
Generation
& ICT
Economically incentivizing energy users to change their consumption behavior is a way
for facilitating the Integrated Demand-side system (above) and the notion of sufficiency.
This can be achieved at least-cost through creating an energy savings market or the socalled Negawatt market.
WHAT IS A NEGAWATT MARKET?
A NEGAWATT MARKET… A WIN-WIN SOLUTION
 treats a unit of saved energy as a commodity with a discounted
price tradable between consumers, utilities, and generators;
 enables creating new incentives for reducing demand for electricity;
 allows for further flexibility in generating off-grid energy and offgrid energy services which grant households more freedom to pick
and choose which energy service to save and when to do so;
 acts as an enabling mechanism for creating new markets and niches
needed to prevent further technological lock-ins and opportunities
particularly necessary during the current economic downturn.
ADVANTAGES OF A NEGAWATT MARKET
 involves the entire supply chain plus consumers from all sectors
including households;
 transforms energy users from being merely passive consumers to
active participants;
 provides incentive for continuous reduction in energy consumption
rather than incentives for technology adoption;
 helps promote off grid and decentralized energy generation;
 fosters public engagement in electricity generation and in the sector
as a whole
WHY A NEGAWATT MARKET FOR THE UK?

Projected electricity demand increase, due to electrification of transport and heating;

Decline in capacity: Fifth of existing power plants (coal, oil, nuclear) are to cease operation by
2020 (total capacity loss of 19.1 GW) as they are either reaching the end of their lifecycle or
because they do not comply with environmental regulations set by the Industrial Emissions
Directive. Further closures are expected by 2023;

UK’s Continental Shelf reserves depleting leading to further reliance on import;

the need for large investments in low carbon generation to reduce carbon emissions;

reduce at least 34% of GHG emissions below its 1999 baseline by 2020 and 80% by 2050 with
the power sector to be largely decarbonized by 2030;

Under UK’s Renewables Roadmap, 15% of total energy consumed is expected to be
generated from renewable sources by 2020

Electricity prices are projected to rise based on some global natural gas price increase
scenarios, high costs of Carbon Capture and Storage, cost of renewable energy

Approximately GBP 110 billion of investment is needed in the electricity sector alone by 2020
UK ELECTRICITY MARKET REFORM, 2011
• Begin at
15.70/tCO2 in 2013
rising to 70/tCO2 in
2030
• Based on EU ETS
• Put a fair price on
carbon
• Incentivize
investors in lowcarbon generation
Carbon
Emission
Reduction
• Set at 450g
CO2/KWh
• Limit new coal
plants's emissions
• Through an auction
based market-wide
capacity
mechanism
Carbon Price
Floor (CPF)
Emission
Performance
Standard
(EPS)
Capacity
Mechanism
Feed-in-Tariff
Contract for
Difference
(FiT-CfD)
Energy
Supply
Security
• Reduce investor
risk
• Stabilize revenue
from low carbon
generation
ASSOCIATED CHALLENGES
 UK’s total generation capacity is 90.2 GW out of which 20% is of a capacity
margin. With an estimated energy deficit of approximately 19.1 GW
(around 1/5 of the total installed capacity) due to power plant closure, the
country’s de-rated capacity margin will drop to less than 5% by 2020
 While the introduced set of mechanisms can assist in overcoming some
energy supply challenges, it disregards energy demand reduction as a way
of achieving the government’s targets at least-cost and in the short-term.
 There is no transparent market in savings, although it is believed that
there have been bilateral trades between suppliers, as well as sales of
insulation measures to suppliers from the managing agent for
Government funded programs” (Eyre et al, 2009:435). The policy
mechanism is designed to influence investment in energy efficiency
technology, rather than the effective use of that technology once installed.
SOLUTION:
COMBINED DEMAND-SIDE & SUPPLY SIDE FOR ENERGY SERVICES SECURITY
 The security of energy services requires integrating both supply-side as
well as demand-side approaches that when combined allow for greater
involvement by engaging intermediary actors capable of supplying energy
services.
 While a Negawatt market can significantly reduce CO2 emissions and
reduce electricity costs, it can also open opportunities for greater energy
services security, reduce needed investment in infrastructure and power
stations, which can all assist the UK in meeting its carbon emissions
reduction and energy security targets in the short term and in a costeffective way
PROPOSED ELECTRICITY MARKET FOR THE UK
Electricity
Market
Supply
Capacity Market
Generation
Capacity
FiT CfD
Non-Generation
(DSR, Storage,
Connection)
Demand
Carbon Price
Floor
EPS
Negawatt
Market
Personal Carbon
Trade
Energy
Efficiency
Demand
Response
Behavior
Change
Thank you