Digital Energy Transition - Data in the Energy Sector

Digitalising the energy system is a crucial step in achieving net zero. It allows us to build in the efficiency and new technology, and extract the insights required, to direct the energy transition. While this transformation is underway, there is currently a spotlight on the lack of data sharing and visibility of key information within the energy sector. The Energy Data Taskforce identified the depth of this problem in 2019.

This is inhibiting the pace of the digital overhaul that is required, preventing new market entrants and the discovery of smarter solutions. Unless rectified, it may limit our ability to manage an ever more multi-faceted energy system, and the effectiveness of incoming energy policy designed to decarbonise our economy.

There have been some initial responses to the issue, both regulator and industry driven, but 2021 will see a raft of Government strategies and initiatives launched. Many of these will seek to normalise the wider sharing of energy data, and require those operating in the sector to manage their data in a new way, under the watchful eye of an increasingly data focused regulator.

In this instalment, we look at how 2020 emerged as the launchpad for a more digitally driven transition in the UK, why data is one of the key drivers in that transition, and how the Government is building key energy policy around the digitalisation of the energy system. We will also set out what those operating in the energy sector and beyond can expect in 2021.

2020 - A deepening transition

Encouraging progress

The move to a low-carbon economy has been well underway in the UK for some time, with the country decarbonising faster than any other G20 member since 2000.² However 2020 delivered an acute boost as new and encouraging benchmarks were set, indicating the prominence and future potential of the transition.

Between April and June 2020 the UK managed a historic 67 consecutive days without using coal for energy,³  and the amount of renewable capacity connected to the UK electricity grid in June reached 48 GW, compared to 8 GW in 2009 – a 500% increase.⁴  By December, renewables accounted for 40.2% of total generation, up from 8.2% in the same quarter in 2010,⁵  and power generation from coal was down 30% on the same period in 2019⁶  (the Government announced earlier in the year its intention to remove coal from the energy mix altogether by 2024).⁷

Across OECD Europe, renewables overtook non-renewable energy sources for the first time in May, producing 50.4% of total electricity production.⁸  Across the OECD as a whole, in the first three quarters of 2020, renewable production accounted for 31.4% of electricity produced, up 7.4% on the same period in 2019.⁹

These figures have been due in part to COVID-19 impacting recent energy demand. The International Energy Agency flagged that "the power mix has shifted towards renewables following lockdown measures due to [among other things] depressed electricity demand", and that "electricity demand and mix go back to previous trends with lockdown releases".¹⁰  However the milestone figures have demonstrated what is to come. (See our guest article from Arenko Group on the impacts of COVID-19 on the transition.)

COVID-19 has of course also created difficult economic conditions in the UK, and there has been mounting pressure on the Government to secure a green recovery. Having already amended the Climate Change Act 2008 in 2019, to legally bind itself to a 2050 net zero target,¹¹  in December 2020 the Government announced the UK's second Nationally Determined Contribution ("NDC")¹²  to the UNFCCC¹³  as required under Article 4 of the Paris Agreement.¹⁴  This increased the UK's commitment to reducing economy-wide greenhouse gas emissions as against 1990 levels from at least 53% (as set under the previous NDC), to at least 68% by 2030.¹⁵

This is currently one of the highest NDCs in the world and commits the UK to cutting emissions at the fastest rate of any major economy.¹⁶  By contrast, the EU increased its NDC from 40% to 55% by 2030 (against 1990 levels),¹⁷  Australia has not offered any improvement on its NDC of 26-28% by 2030 (against 2005 levels),¹⁸  and while the incoming Democrat administration has indicated that the US will re-join the Paris Agreement, it is not clear if it will offer an increase on its previous NDC (of 26-28% by 2025, against 2005 levels).

Policy goals

Such milestones and targets suggest that we are on the right path, but it is policy that will lay the practical foundations for the transition to grow in 2021 and beyond. The Climate Change Committee recently stated that "the 2020s will be crucial in mainstreaming net zero solutions… the scale up over the coming decade will arguably be the most challenging part of the programme, and the most fundamental to delivering the net zero 2050 target. Delivering that scale up will depend on effective policy being developed in the coming year".¹⁹

The Government has been developing that policy with one eye on the upcoming UN Climate Change Conference in Glasgow in November 2021. It issued a flurry of funding announcements throughout 2020. This included funding for, among many other things, EV charging infrastructure,²⁰  energy-tech start-ups²¹  and home efficiency improvements.²²  Towards the end of the year, it announced the Ten Point Plan for a Green Industrial Revolution,²³  the Energy White Paper: Powering our Net Zero Future,²⁴  and the National Infrastructure Strategy.²⁵ 

The key date that has emerged across these policies is 2030. By then the Government aims to have achieved the goals summarised in the table below. However there is a vast amount of practical detail still to be confirmed, and this will be established through consultations, calls to evidence and as yet unknown strategy decisions, many of which are due in early 2021.

Data-driven transition

One of the primary tools available to us in implementing these policies effectively, and achieving net zero, is the intelligent collection and sharing of data. The Energy Data Taskforce ("EDTF") released a landmark report in 2019 emphasising that open data is "crucial to building a smart system that supports achieving decarbonisation objectives".²⁶

Direct impact – on a more general level, maximising the potential of data will directly contribute to net zero goals as it is the medium through which the overarching benefits of digitalisation are incorporated across processes and systems: connectivity, efficiency, optimisation, prediction and insight. As an example, the application of digital twin technology to wind farms has led to improvements in operations, maintenance, reliability, lifespan, and an increase in annual energy production of up to 20%.²⁷ 

Decentralisation - another inherent benefit in adopting a data focused approach is that it facilitates wider integration. Energy systems are becoming increasingly intricate and multi-factorial, with a growing number of distributed energy sources, participants, business models, digital technologies and solutions in play (see the example of a smart grid in Figure 1). Technology is also beginning to mainstream the bi-directional flow of power back into the grid from consumer level via domestic battery storage and generation such as solar, and vehicle to grid technology.

As the system becomes more and more complex, it requires digital solutions that can integrate and manage the whole, and it also produces a snowballing mass of data and new data categories. This could prove pivotal in achieving net zero policy if this data can be captured and the available insights extracted.

In light of this, Ofgem has made data sharing and digital infrastructure a core component of its operations and regulatory decisions, with the regulator taking the view that "the smart creation, collection and use of energy system data is fundamental to managing this complexity".²⁸

Whole system view – gathering data allows us to visualise and monitor the totality of the transition in real time, from greenhouse gas emissions to consumer behaviour, energy system weak points to opportunities for new solutions. With a clearer view we can determine the direction in which the transition is moving, and the effectiveness of implemented policy. The greater the degree of visibility, the more business and policy makers can move away from a costly reactionary approach, to one built around accurate prediction.

Furthermore, the 'energy' transition is not located at a singular point, or purely in the energy sector itself. The transition is a cross-sector transformation of how our energy is generated, monitored, stored, distributed and consumed, and this requires fundamental change elsewhere, in our wider infrastructure, including transport, the built environment and industry. As a result, the widest aspect possible is required to track and coordinate this. Innovate UK states that "integrated approaches across energy, transport, telecoms, water and other sectors are becoming increasingly important. The interactions and optimisation of infrastructure types across sectors will be vital to achieve deep decarbonisation".³⁰

Policy – the value and importance of data is also inherent in policies where it is not immediately apparent. This is the digital undercurrent that is key to all of the Government's net zero policy goals. So while the Government has identified areas that are on first review more data-centric, such as smart tariffs and appliances, e-mobility, smart electricity grids, and vehicle to grid technology, there is also a vital role played by data across all of the other policies.

By way of example, a cornerstone of the Government's strategy is the incorporation of more renewable power sources into the energy mix like solar and wind. These renewable sources are by their nature intermittent (and increasingly decentralised), and so can be problematic to coordinate, and their output difficult to predict and incorporate into the grid in a stable way.

Achieving this requires intelligent management and forecasting, aggregated control across multiple assets, and a variety of real-time smart solutions including flexibility services, demand side response, and battery storage, which often form the constituent parts of the increasingly common virtual power plant. Applying a data rich approach to this problem ultimately allows us to capitalise on those new renewables, while maintaining a balanced grid.

Figure 1 - an increasingly smart grid

 

The energy system's data problem

The EDTF has highlighted that the "move towards a modern, digital energy system is being hindered by poor quality or missing data, while data which is valuable can be hard to find or subject to restricted access."³² The Government believes this "limits effective digitalisation of the sector, which is a key driver for the transition to an energy system that can achieve net zero ambitions."³³

The data in question, energy system data, is made up of facts and statistics collected together in an accessible digital format which describe the energy system and its operation (current, historic and forecast), including: the presence and state of infrastructure; operation of the system; associated market operations; policy and regulation.³⁴

The EDTF warns that a failure to respond to the challenge of harnessing this data's potential and embracing data sharing "carries significant costs and has substantial implications", including a slower and more expensive transformation, increased risk to system stability, reduced innovation, divergent standards and data management approaches, fragmented datasets and reduced efficiency.³⁵ 

It also identified barriers to data sharing. A key barrier is corporate culture, which drives a preference for data hoarding over sharing, and a preference for command and control (derived from a tendency towards risk aversion), rather than collaborative and data driven solutions. It is also difficult to build a business case for collecting data where the costs and benefits of doing so are distributed unevenly across many organisations.³⁶ 

In addition, the EDTF noted that "the lack of a sector wide data strategy has resulted in a complex data landscape with many data silos, a plethora of bespoke data agreements and overly complex data processes which underpin the sector’s functions."³⁷

The EDTF made recommendations to normalise successful data sharing based on two key principles: filling in the problematic gaps in data by digitalising the energy system, and maximising its value by embedding the presumption that data is open (see Figure 2). The 'presumed open' principle is designed to reverse the current default for data accessibility from closed to open. To create the maximum impact, open data "should be discoverable, searchable, understandable, adopt a sensible approach to structures, interfaces and standards and ensure that it supports a secure and resilient energy system."³⁸

Figure 2 - the move toward a modern, digitalised energy system (The Energy Data Taskforce)³⁹

 

What has changed so far?

Government response

To date the EDTF's work has resulted, among other things, in the formation of the Government's Modernising Energy Data programme (made up of the Department of Business, Energy & Industrial Strategy ("BEIS"), Ofgem and Innovate UK) which implements the EDTF's recommendations. Innovate UK also runs Modernising Energy Data competitions to encourage data sharing solutions.

The latest competition, Modernising Energy Data Access, was launched "to improve the level of data interoperability across the energy sector through the creation of a common data architecture, which has the ability to integrate with the core building blocks and any other data provider or consumer across the energy sector and beyond."⁴⁰

BEIS, Ofgem and Innovate UK also commissioned the Energy Systems Catapult to draft the Data Best Practice guidance to help organisations operating in the energy sector to understand how they can manage and work with data in a way that delivers the vision outlined by the EDTF.⁴¹ This guidance is complimentary to existing regulation and more authoritative guidance, such as that produced by the Information Commissioner's Office.

Core to this evolving guidance is the principle that data relating to common assets should be presumed open, unless an objective justification, identified through a triage process, can be given (see the box below). The aim of the data openness triage is to "systematically find issues which should inhibit open data, identify the ‘least impact’ mitigation technique(s) and make the process transparent."⁴²

Regulatory action

On 8 December 2020 this 'presumed open' principle was built into the RIIO-2 price controls for transmission and gas distribution network companies, and the electricity system operator. Ofgem included two data related licence obligations in these price controls, commencing 1 April 2021, which are designed to support "the delivery of a digitalised energy system".⁴⁴

Under these obligations, network companies are to:⁴⁵

1. use energy system data in accordance with the Data Best Practice guidance. In particular, the guidance will include the principle of energy system data being treated as 'presumed open'; and
2. publish their digitalisation strategy every two years, and a digitalisation action plan every six months or such other period as directed by Ofgem. This is based on an existing Ofgem requirement, but has now been built into price controls. 

Emerging data sharing examples

Electralink - (created in 1998 by the UK’s electricity Distribution Network Operators, "DNO") is working on the development of its Flexr service. This is a data uncovering and sharing service that will connect the data held by all big 6 DNOs and their distributed energy resources customers. It is designed to support further development of the existing data driven services in the flexibility market, including trading, aggregation, optimisation and balancing functions. Electralink created this "with the likely increase in obligations to share data and deliver greater flexibility in a coordinated way"⁴⁷ in mind, and expect it to function as a tool that accelerates decarbonisation, innovation and the energy transition.⁴⁸

The Distribution Connection and Use of System Agreement – the multi-party contract between the licensed electricity distributors, suppliers and generators in Britain. This has been amended to require each DNO, (and the smaller independent distribution network operators), to create a public standardised register of all sites larger than 1 MW with distributed energy resources that are connected, or have an agreement to connect, to their networks and influence the power system.⁴⁹

The Balancing and Settlement Code ("BSC") – the legal document which defines the rules and governance for the balancing mechanism and imbalance settlement processes of electricity in Britain. This will likely be amended, as recommended by the BSC Panel, as "the BSC does not fully adhere to open data principles". The amendment aims to ensure that all data held by BSC Agents and Elexon (the BSC manger) is assumed open unless there is a reason otherwise. The Panel (or delegated sub-committee) would determine if there is any reason not to make data available through a process of triage and categorisation. This amendment will be implemented by 25 February 2021 pending Ofgem's decision arriving on or before 15 January 2021, otherwise this will be the 24 June 2021.⁵⁰

What to expect in 2021

Incoming Strategy

We will see a burst of data-focused strategies and initiatives either launched or progressed through 2021, which those in the energy sector will likely be required to contribute to, and prepare for. Many of these will build on the EDTF's work, and continue to embed a data-driven approach into the energy system:

• the UK's first Energy Data Strategy – the Government will publish an energy data and digitalisation strategy, created in partnership with Ofgem, due Spring 2021. This is intended to facilitate the creation of "world leading digital infrastructure for our energy system"⁵¹. Having such a strategy was described as "crucial" by the EDTF⁵²;
• a national Energy Data Catalogue – led by the Office for National Statistics, this will be designed to make data more visible and reduce the costs of accessing the information "by requiring organisations holding energy system data to contribute metadata about their datasets"⁵³. A prototype will be launched in Summer 2021;
• an Asset Registration Strategy – led by BEIS, this is intended to coordinate the registration of energy assets, and improve the reliability of data and the efficiency of data collection. Currently there is a growing number of disparate asset registration platforms available, which unless aggregated in some form "will greatly reduce the utilisation, impact and value of the data held"⁵⁴;
• a data triage process – to "provide practical guidance to energy companies on making their data more readily available, while ensuring cyber security and data privacy"⁵⁵. Ofgem will consult on this guidance and related licensing by Summer 2021;
• a Digital System Map – this is intended to create a better picture of the state of the energy system, by making "infrastructure data available in a coherent way. This will lower the barrier to entry and enable innovators to develop new solutions, test new business models and manage investment risk more effectively".⁵⁶ The development of this map is being led by the Energy Networks Association Data Working Group;
• a new energy modelling strategy – to increase transparency and collaboration, including protocols for publishing Government models, whole energy system modelling, and an updated IT strategy providing a development environment for third parties to create models;⁵⁷ 
• the National Digital Twin – already under development by the Centre for Digital Built Britain, this will be an ecosystem of connected digital twins, connected via an information management framework, which can enable system optimisation and planning across sectors and organisations⁵⁸. As pointed out in the National Infrastructure Strategy, "although many infrastructure owners across energy, waste, transport and water have “digital twins” of their assets, the exchange of data between these systems is often ineffective, making it harder to tackle cross-cutting infrastructure issues such as climate change";⁵⁹ 
• the outputs of the Modernising Energy Data Access competition – this particular competition was designed to create open-sourced energy data, and create tools and processes that allow providers of new services "to link energy data with information from other sectors such as transport, heat and buildings, integrating the UK’s different infrastructure".⁶⁰  A solution should be finalised by Summer 2021. The three competing solutions are (1) an open standard for data sharing in the energy sector, (2) a data coordination platform, and (3) an open data platform;⁶¹ and
• multiple other policy announcements due in 2021 in which we expect to see data focused elements – including the overarching Net Zero Strategy, the Transport Decarbonisation Plan, the Heat and Buildings Strategy, Industrial Decarbonisation Strategy and the Smart Systems Plan.

While we await the detail, the end goal of these strategies and initiatives is to ensure that energy system data becomes much more readily available, and significantly more useful, open and trusted.

Ofgem

Over the course of 2021, Ofgem also plans to:

• develop data and digitalisation standards – for both relevant regulated entities and for Ofgem itself, including greater openness of data, addressing data quality and transparency of digitalisation strategies;
• publish a joint Digitalisation Strategy and Action Plan with BEIS – to modernise the use of, and sharing of, data across the energy sector;
• ratify and embed modern data and digitalisation standards into licences, starting with RIIO network price controls - what other data-focused changes will be incorporated in future price controls beyond those recently implemented could depend on how successful the cultural shift toward data sharing actually becomes;
• support technical and governance services and innovations - embedding standards that ensure data is interoperable across the energy sector, other markets and across government; and
• conduct a holistic review – to identify new and existing data and digital monopolies to understand the implications for energy consumers, and to inform Ofgem's future response.⁶²

We envisage that these will all reflect elements of the four intended outcomes of Ofgem's strategy change programme: improved planning and management of energy data, including regulation of data monopolies; increased data sharing, to enable new and more efficient markets; better information is to be received by consumers, who can take advantage of this data; and improved regulatory decisions, through Ofgem making greater use of, and sharing, data⁶³.

What to look out for

Overall strategy – in the short term we will look to see if the incoming policy, the Energy Data Strategy in particular, truly builds on the EDTF's recommendations. To do so, it would need to set out an immediate roadmap for implementing a defined change in approach toward data sharing across the energy sector.

The persuasive arguments for achieving this have already been made. The Government now needs to set out how, practically, such change should be implemented, and by whom, by when, and against which metrics that would indicate success, and under what incentives. This may involve a programme of industry consultations in order to establish exactly what is possible.

Cross-sector approach? – naturally the EDTF focused on energy system data, and we expect the bulk of the incoming policy to focus on the same. However the transition is not dependant solely on the energy sector itself, but heavily influenced by those transforming how energy is consumed, from car manufacturers to digital platform providers.

As a result there are vast repositories of data that reside outside of the energy sector that are relevant to the energy transition. We expect that there will be some consideration given to the need to encourage and standardise cross-sector data sharing, to make optimal use of all available data that is relevant to net zero, not just the data produced within the energy sector. Programmes like the Modernising Energy Data Access competition will help identify the roadblocks in achieving this, and their outputs could help drive increased cross-sector data flow.

Sharing framework – while there has been positive but piecemeal development in energy data sharing to date, the Government may consider introducing a standardised legal framework to accelerate data sharing, and alleviate anxieties about doing so.

In particular, this would need to:

• strike a balance between the restrictions inherent in the rights of data owners (such as copyright and database rights), confidentiality, and meaningful access for others;
• set out who owns and can extract the value from any intellectual property rights created using shared datasets, whether this would be jointly owned intellectual property, and what licensing structure would apply. The Royal Society has suggested that the UK's Open Government Licence offers an example of a viable approach, as it encourages free and flexible use and re-use of information;⁶⁵
• address how the costs of creating and maintaining open data platforms are spread between data owners, market participants, and other users;⁶⁶
• take account of all relevant privacy and data protection legislation;
• build in common architecture and standards in order for the widest possible uptake and access; and
• address the potential liability of dataset contributors, where their data is incomplete or poor quality. The EDTF suggested the development of a set of standard liability waivers to help give organisations comfort regarding the release of data where this is a concern.

Triage – it is not yet clear how the data triaging process introduced in the Energy White Paper will mirror or build upon existing triaging processes, such as that in the Data Best Practice guidance. The continued drive toward making more data open will require triage processes to facilitate the least restricted flow of data as is possible. To do so, the exemptions to the publication and sharing of data may have to narrow. Alternatively, the Government may also look at the possibility of extending the 'presumed open' principle in the Data Best Practice guidance beyond common assets. It remains to be seen just how imposing this could become for data owners, and how much of a drain it is on internal resources to manage a more onerous triaging process and extricate the data that is presumed open.

Code and policy changes – the EDTF recommended that energy code modifications be considered, to increase the range of actors required to participate in the data catalogue, as well as further policy changes to ensure that data is treated as a key component of infrastructure.⁶⁷As happened with the RIIO-2 price controls, it may be that we see the Data Best Practice guidance, or equivalent, more formally adopted elsewhere, or the guidance itself codified in some form. We expect that there will be further consultations launched on data focused code amendments in the foreseeable future.

Conclusion

The 2020 amplification of the UK Government's focus on the importance of data and digitalisation in the country's strategy for transition means that 2021 will be a pivotal year for the energy sector. We wait to see if policymakers and industry will make a success of embracing data sharing, and digitalising not just the energy system, but our entire response to the net zero challenge. For owners of valuable energy data, other market participants and potential new entrants looking to gain access to that data for the first time, the growing assumption that this data is presumed open should prove to be transformative.

Author: Adam Eskdale, Associate, Digital Economy Transactions