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Edge Debate 24 : 42 Energy step change – the view from the future

Edge Debate 24 : 42 Energy step change – the view from the future. Matthew Rhodes. PRESENT. 89m t CO 2. Current UK annual value flows. 58m t CO 2. £7.0Bn. Demand for energy services. Retail and service costs. Network costs. Wholesale costs. 1975PJ p.a. 1200PJ p.a. £3.7Bn. £6.2Bn.

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Edge Debate 24 : 42 Energy step change – the view from the future

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  1. Edge Debate 24 : 42Energy step change – the view from the future Matthew Rhodes

  2. PRESENT 89m t CO2 Current UK annual value flows 58m t CO2 £7.0Bn Demand for energy services Retail and service costs Network costs Wholesale costs 1975PJ p.a. 1200PJ p.a. £3.7Bn £6.2Bn £7.5Bn Delivered £16.7Bn System cost £23.7Bn+147m tCO2 £6.3Bn All figures are values per year Domestic infrastructure investment (excl. fabric) FUTURE 62m t CO2 Optimised UK annual value flows* 40m t CO2 £1.8Bn Demand for energy services Retail and service costs Network costs Wholesale costs 1380PJ p.a. 1350PJ p.a. £2.6Bn £5.8Bn £5.3Bn Delivered £21.9Bn System cost £23.7Bn+102m tCO2 £10Bn Domestic infrastructure investment *Using DEFRA 30% economic potential for current energy efficiency technologies only by 2020 There are two ways of running the domestic energy system Sources: OXERA, DTI, Ofgem, NGT, AMA and Defra. Customer infrastructure costs exclude maintenance.

  3. The problem is that one works best as a regulated, centralised system and the other as a localised free market 89m t CO2 58m t CO2 PRESENT £7.0Bn Traditionally costs reduced through standardisation and scale Demand for energy services Retail and service costs Network costs Wholesale costs Markets agency regulates suppliers in interests of customers 1975PJ p.a. 1200PJ p.a. £3.7Bn £6.2Bn £7.5Bn Delivered £16.7Bn Optimisation by standardisation Demand is asset to system £6.3Bn Domestic infrastructure investment (excl. fabric) FUTURE 62m t CO2 40m t CO2 £1.8Bn Every home is different Demand for energy services Retail and service costs Network costs Wholesale costs Optimisation by differentiation Customers are assets to the system 1380PJ p.a. 1350PJ p.a. £2.6Bn £5.8Bn £5.3Bn Delivered £21.9Bn Markets agency cuts transaction costs in interest of customers System cost £23.7Bn+102m tCO2 £10Bn Domestic infrastructure investment

  4. Energy carrier supplier Services integration Financial services supplier Technology provider Network optimisation capability By thinking from the future we can see what is needed Market for energy performance assets £5.3Bn supply of services Asset characterisation process £100Bn supply of access to performance asset Customer assets Behavioural promises Energy performance Location Reliability/trust/values £10Bn £5.8Bn cf. London Stock Exchange - £150m p.a. to run. 90k terminals and 59m trades 2700 companies

  5. Automated survey Systematic use of IT enables low cost valuation of local circumstance. From a customer perspective it has to be very simple Products and services Energy mortgages – flexible payments reward energy-optimised behaviours Market mechanism (“c-grid”) – recognises value of optimally-located and motivated energy performance assets Combining energy and financial services creates incentives for individual customers to raise their hands I can pay off my mortgage faster by making my house available on the “c-grid” and become secure for the future 1 2 3 Brokerage and exchange mechanism Market-based optimisation ensures low transaction costs for suppliers Personal services intermediary Energy, finance, asset management 4 5 Now I don’t need to worry about energy, but I quite fancy owning my home sooner by turning the lights off more often.

  6. Confident and capable local technology integrators and suppliers of consolidated energy and financial services products Making it happen Available distributed energy technologies and micro-economic conditions Information technology tools Independent market-making agency guaranteeing liquidity Objective vision

  7. End of slides

  8. Example costs of energy at point of use for one house in Smethwick *net of grants and subsidies

  9. We know the opportunities are out there c-grid…. Valuing and making visible potential, objectively e.g., 4 bed detached 1970 family home. Traditional model New model 25 yr mortgage £100k 25 yr energy costs £39k Monthly services payments £650 finance, £130 energy - £780 6% cost of capital, no energy inflation 25 yr mortgage £104k 25 yr energy costs £24k Monthly services payments £772 (£678+£94) +motivation Measure investment impact on chart Cavity wall insulation <£1000 Solar thermal <£3000 Microgeneration £1000-£10000 Sample measures It’s all about finding those who can gain most first, expanding scope as costs fall and benefits rise.

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