A fair future for distributed flex?

Delivering an efficient net-zero energy system needs a high degree of customer participation. This is evident from Regen's "A day in the life" work. So I was very pleased to see Ofgem's recent call for input on the future of distributed flexibility.

Ofgem outlines how consumer energy resources (CERs) will be invaluable for balancing the energy system. These CERs include EV chargers, heat pumps, white goods, small-scale batteries and rooftop solar. And while it's great to see recognition for the value these resources bring, I'm worried that what transpires wont be fair or equitable.

I'm also disappointed at the lack of focus on the people behind these "invaluable" CERs. We need to be paying much more attention to:

1. how to motivate sustained engagement;
2. how to ensure equitable access and fair distribution of benefits and burdens; and
3. how to navigate the complexity of multiple markets and data sharing.

Motivation

Ofgem hints to an approach whereby CER owners would be remunerated for the services their assets provide. This seems to align with the approach taken in National Grid ESOs flexibility services this winter. Now, I'm not saying that people shouldn't share in the financial gain from their collective action (of course they should!).

However, decades of research shows us that motivating people by paying them to reward "good" behaviour is less effective in the long run. We'd be much better off tapping into more intrinsic forms of motivation that align with people's wider values and norms.

This is backed by more recent work looking at how people make decisions. Decision making happens in one of three ways. Calculation-based decision-making means weighing up costs and benefits. Affect-based decision making happens when you follow your gut feeling. And role or rule-based decision making happens when you rely on learned habits or rules of professional, ethical, and social conduct.

Most flexibility programmes (most energy programmes for that matter) assume that people follow calculation-based decision making. But early research in related fields shows that this isn't the case. Instead, we need to restructure programmes to support role-based or affective decision making. This leads to better engagement and stronger outcomes.

This is especially important if we want to see more active consumer engagement in our energy systems of the future. If we want to see sustained engagement over time, then we need more than a blip in behaviour. We need to see a culture shift. Which simply wont happen if we're just paying people for performance.

Fairness

This worries me. Massively. There's a big risk that our transition to a more flexible energy system is going to widen socio-economic inequalities across the UK.

Paying people for delivering flexibility means that those people who have CERs benefit. Meanwhile, Ofgem suggests that the costs to pay for the common digital energy infrastructure could be socialised. This effectively asks people who may not own CER assets to pay for those who do have them to benefit. The risks and costs of not implementing distributed flex are also socialised. This unevenness - with burdens held by the many but benefits realised by the few - seems incredibly unfair.

While Ofgem rightly recognises that CERs are generally only accessible for affluent customers, their proposed approach to addressing this relies solely on financial mechanisms that lower costs and incentivise purchase. This strikes me as being similar to the feed-in-tariff scheme that ran from 2010-2020. Under this scheme, financial support helped drive uptake of small-scale generation.

However, research has shown that financial incentives, applied at the household level, widen socio-economic inequalities. There is still a financial barrier to entry, and those who can afford to, benefit.

On top of this, many people do not have the time, resources, or capacity to implement change. This makes the uneven uptake self perpetuating. Those areas with higher levels of uptake, which tend to be more affluent, create supportive social conditions that enhances further uptake. Or, on the flip side, people who live in communities with lower levels of uptake become trapped.

Local and community based business models, governance structures, and delivery approaches, could offer innovative ways to support more equitable participation in distributed flex. Ofgem - with their role to protect all consumers - would benefit from exploring this further.

Complexity

Our energy system is being increasingly complex. There are multiple markets and multiple CERs with multiple user interfaces. This can make it hard for people to engage. It also raises ethical questions.

With more and more data gathered from people and their CERs, we need to understand: Who has access to the data being used? Whose data is used in the first place? How transparent are the processes? How aware are people about this data and their rights and privacy? What outcomes does the use of these data lead to, and are they fair?

We are already seeing social disparities between people in terms of levels of understanding. Higher educated, younger and middle-aged, and middle-class groups tend to be more clued-up and confident about their energy data. This means they can more easily engage, reap benefits and make more informed decisions.

Meanwhile, those typically vulnerable groups – the elderly, people with disabilities, those in fuel and wider poverty and various intersections in between – tend to be less engaged and less well-versed. This puts them at greater risk of data misappropriation, being left behind in the energy transition, or digital exclusion.

We need better solutions that support more effective engagement and participation.

They traditional approach is to try and educate or up-skill people. This assumes education will lead to more informed and better choices. It asks people to participate in the operational elements of the market. But the complexity of distributed flexibility means that this is likely to lead to a digital divide. Ofgem should consider alternative ways to support households on their digital journey.

Citizens juries and other democratic processes illustrate the power of engaging people earlier. Rather than educate people to "operate" something highly technical, people are involved in a co-design process. This helps ensure that solutions are designed with, by, and for the people they are intended.

This changes the entire paradigm around how people - and their CERs - might participate in flexibility markets. It means that the key question is not "how consumers know where and when it is a “good” or “bad” location or time to use electricity" as noted in the call document.

Instead, it's about how we can collectively - with consumers - co-create appropriate structures, tariffs, business models, and policies, that work for everyone. That make it easy for people to participate. And that don't require them to become energy gurus. Instead, they embed trust through being fair, transparent and accountable. And they ensure that benefits and burdens are equitably shared in a digital, flexible, net-zero future.