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The UK government could deliver cheaper electricity bills to households and businesses by pursuing a decentralised energy strategy with solar and storage at its centre, a new report has claimed.

‘The Decentralised Energy Transition’ report has been co-authored by Lightsource Renewable Energy, Foresight Solar and Good Energy, with research co-ordinated by Big Four consultancy group KPMG and inputs from global technology giant Tesla and DNO UK Power Networks.

The wide-ranging report proposes a future strategy at government level which it claims would help the UK meet several energy market dilemmas by reallocating funding for solar currently available under the Levy Control Framework, and not exceeding it.

Its main recommendations consist of a re-working of future feed-in tariffs for solar and a time-limited incentive for households to purchase domestic storage solutions. Its feed-in tariff recommendations (below) offer a significant increase on those currently proposed by the Department of Energy and Climate Change for next year, but includes them ending a year earlier than DECC envisages.

2016/17 2017/18 2018/19 2019/20
<4kW 7p 6p 5p 0p
4-50kW 6.5p 5.25p 4.25p 0p
50 – 250kW 5.5p 4.25p 3.25p 0p
 250 – 1000kW 3p 1.75p 0.75p 0p

These tariffs would be combined with a time-limited deployment “grant” for storage, similar to the scheme introduced in Germany, which would comprise a one-off payment of £300 per kWh of discharge capacity made available to residential customers. Deployment grants would be capped at £1,500 per customer, with an overall total spend up to 2020 of no more than circa £300 million. The report states that funding for this programme would be found by re-directing existing innovation funding from both UK and EU innovation funding sources.The report states that all installations under 4kW would be for domestic installations, while all those above would fall under the commercial and industrial installation bracket.

The report does however state that these measures would have to be supported by the introduction of time-of-use tariffs and half-hourly metering for domestic customers by 2018/19, to allow them to benefit from more economical rates and the UK to address grid management issues.

In addition, DNOs and TSOs would have to be incentivised to support more widespread deployment of decentralised energy solutions, which the report says could be achieved with a regulatory mechanism that would allow them to own and operate energy storage as a regulated network asset.

If self-consumption increases as a result of the incentivised growth of storage, the report estimates that £60 million would be required to support roughly 100,000 3.5kW solar PV installations each year – with a total capacity of 1.1GW over the period of the tariffs – which would fall in line with DECC’s statement within its recent FiT consultation that a maximum of £100 million of additional expenditure is available until 2018/19.

The report goes on to state that the longer-term effects would be a significantly lower LCF in the 2020s than DECC currently forecasts – currently £15 billion per year by 2025 – owing to increased self-generation and a lesser need for large-scale deployment.

Central to the report’s argument is the government’s need to significantly reinforce the national grid if the UK is to meet DECC’s forecasts for required large-scale energy deployment by 2035. Of the 100GW required, 47GW is expected to come from renewables.

The National Grid currently expects to spend some £882 million on system balancing costs this year alone, a figure which the report expects to fall dramatically if storage technologies with two-way flow of energy enabled were to be more widely deployed.

Another central theme is the creation of “whole house” solutions or “smart homes”, which would combine solar PB installations with storage, hot water heaters and smart grids to create a more comprehensive energy efficiency product. Data compiled by Lightsource demonstrates that while more traditional PV solutions meet 20-35% of a regular household’s energy demand, a “whole house” solution would meet 60-90%.

The report comes just days before the feed-in tariff consultation deadline and after Good Energy released its own report, which called into question the validity of claims that the LCF is set for an overspend.