SSH2: Insights from the wider economy

Published: 1 July 2019

Introduction

Decarbonising heat is the biggest challenge the UK faces in terms of transforming the energy system to meet carbon reduction targets and achieve our clean growth ambitions.

Energy Systems Catapult is delivering the UK’s largest smart, consumer-focused project aimed at overcoming the barriers to the decarbonisation of residential heat – the Smart Systems and Heat (SSH) programme.

SSH Phase 2 (2017-2019) focused on running consumer trials of smart energy services, exploring new business models and market structures (including interoperability) and developing Local Area Energy Plans within three local authorities areas. SSH2 was funded by the Department for Business, Energy and Industrial Strategy.

 

In exploring and assessing new market structures to help decarbonise heating, the SSH programme undertook research in a range of non-energy sectors in the wider economy, where analogous transitions have taken place.

Moving to low carbon heating solutions will require not just technical innovation, but also new relationships between the energy system and the people who use it. In particular, the energy market traditionally has been producer orientated and ‘top-down’, with electricity, gas and oil produced and charged on a volume basis, rather than based on outputs or experience.

But as new technologies are developed, and new data streams become available, opportunities are opening up for new relationships between energy service providers and customers. Realising these opportunities may require new market and delivery structures.

The purpose of this report is to set out the key messages from this research.

Key points

Six case studies were undertaken, with a number of common risks and opportunities identified from the transitions of other sectors:

  • Better and more cost-effective services. The transition in other sectors has led to a wider range of services, with greater personalisation and enhanced offerings. Costs have also fallen in some cases.
  • Impact on lower income customers. New, more complex, value propositions may entail risks to lower income customers, particularly if they entail cross subsidisation from basic to enhanced services.
  • Involving industry in the transition. Drawing in the expertise of industry and gaining its buy-in are crucial.
  • The importance of interoperability. Technology and market complexity may create barriers the uptake of new technologies. Facilitating interoperability is likely to be very important.