PIONEER (Proportional Investment of Networks in Energy Efficiency Retrofit)

The proposed project is linked to Innovation Challenge 4. The Climate Change Committee (CCC) estimate that EE has the potential to save up to £6bn a year across the system, yet rollout of thermal EE to date has been poor due to the lack of a business case.

The energy network innovation involved

1. Is in demonstrating the real-life network impact of installation of additional thermal EE measures in domestic dwellings to mitigate load growth from electrification of heat
2. Developing and trialling commercial models by which the DNOs can fund the beneficial deployment of additional EE measures on their networks.
3.  Integration of these novel commercial models with the DNO’s current procedures for managing constrained areas of the network.

The project will be delivered by a consortium of: 

1. National Grid Electricity Distribution
2. Carbon Trust - an independent company with a mission to accelerate the move to a sustainable, low-carbon economy. They bring extensive experience in designing and managing relevant innovation programmes, including DEFENDER, BEIS’ Heat Pump Ready programme and the Green Homes Finance Accelerator, and in implementation including expertise in building audits and retrofit and local area energy planning.
3. Frontier Economics - one of the largest Economic Consultancies in Europe, with Energy its largest sector specialism. Frontier worked with the CCC to develop pathways for heat pump take up, and modelled the roll-out of low-carbon heating and building retrofits for the National Infrastructure Commission. Frontier is currently working with NGED and Carbon Trust on DEFENDER.
4.  West of England Combined Authority
5.  Devon County Council
6.  South West Energy Hub

It will be supported by an advisory panel of Energies prong and Wadebridge Renewable Energy Network. We expect additional project partners for Alpha and Beta phases, once further details of the demonstration location and commercial models to be tested have been defined.

The users of the innovation will be:

• Homeowners and landlords
•  local authorities
• EE retrofit providers.

• Problem(s)

  The overall aim of PIONEER was to develop commercial models which DNOs could use to bring forward thermal efficiency measures as a cost-effective alternative to reinforcement, to enable the network to handle greater volumes of LCTs. Doing so would help networks meet SIF challenge 3 (accelerating decarbonisation of major energy demands) at lowest cost. The Discovery phase focused on designing the types of intervention which could be trialled, and where such trials should be held for maximum impact

• Innovation Justifcation

  The CCC estimate that EE has the potential to save up to £6bn a year across the system. A proportion of the estimated system cost savings is likely to benefit DNOs through avoided reinforcement and flexibility procurement. To address this, Ofgem have implemented a new license condition, expecting DNOs to consider flexibility measures, including EE, as an alternative to reinforcement and work with local partners to upgrade the efficiency of buildings.

  Currently no market mechanisms exist that translate the potential network cost savings into EE funding. This project’s objectives are to develop novel commercial models for DNOs to unlock or bring forward additional EE deployment, proportional to their cost savings. EE investment has a very different cost profile to flexibility procurement, with different financial and stakeholder risks involved. This includes higher sunk capital costs and greater uncertainty of efficacy.

  Through the DEFENDER NIA project, NGED have developed tools that allow them to assess the impact that EE has on reinforcement and flexibility procurement in locations across their network and has identified the network characteristics where EE is likely to be most cost effective. This project will tackle the remaining gaps in the role of the DNO in funding EE measures, including:

  • Validation of the modelled outcomes of EE measures through pre and post metering of installed EE measures in different house types
  • Understanding of the homeowner/landlord customer journeys of heat pump procurement and key touch points in influencing decision making on EE
  •  Understanding of the funding landscape for EE measures and commercial models for EE retrofit providers
  •  The extent to which EE will be deployed in the absence of DNO intervention.

  The counterfactuals to funding EE measures are either network reinforcement or flexibility procurement. In some areas of the network, DNO funding could result in increased deployment of EE measures and consequently significant deferral of network reinforcement or reduced flexibility procurement. This results in more cost-effective network operation and lower carbon emissions.

  Ultimately, our goal is BaU funding of EE measures alongside the counterfactuals to achieve cost effective network operation. However, innovation is still required to identify the best way to do this to maximise impact, especially given findings of previous innovation projects, which identify that the value of EE measures to the DNO is likely to be only up to low £100s per dwelling. This project will work with stakeholders across the value chain to make funding targeted and easily accessible

• Key Outputs and Learning(s)

  The overall aim of PIONEER was to develop commercial models which DNOs could use to bring forward thermal efficiency measures as a cost-effective alternative to reinforcement, to enable the network to handle greater volumes of low carbon technologies. Doing so would help networks meet SIF challenge 3 (accelerating decarbonisation of major energy demands) at lowest cost. The Discovery phase focused on designing the types of intervention which could be trialled, and where such trials should be held for maximum impact.

  The long listing tools that were developed for WP1 can be built upon in future to identify areas or properties where a scheme will provide the greatest value for money. It can also be used to identify suitable ‘control’ and ‘test’ areas to see the impact of different area or housing features on energy efficiency (EE) scheme effectiveness. Other work in WP1 provided useful further learnings around modelling energy efficiency measures to reduce peak loads. While results provide an opportunity for DNOs to better understand the benefit of retrofit programmes, further modelling and data are needed to improve confidence in findings.

  WP2 showed that there were several suitable areas for trial. It was identified that network areas frequently overlap several local authorities, making coordination with local partners more difficult (but opening a role for the DNO to provide co-ordination). It was also identified that many of the areas where EE interventions have the highest value have high proportions of properties using bottled gas or oil, which may move to heat pumps sooner and have unique needs which DNOs could address.

  WPs 3 and 4 showed that the cost of thermal efficiency measures is high, but the value to the DNO is low, therefore, funding should be focused on removing barriers to accessing available grant funding and private finance, rather than providing a separate source of funding. We found that DNOs can’t do these programmes on their own and international learnings show that they need to be part of a wider consortium, playing the role of both a funder and facilitator with retrofit programmes (at key decision points). Gaps still exist in uptake rates in DNO investment areas and there is a need to better understand the practicalities of working and bringing together existing schemes, and supply chain issues (particularly in rural areas of interest for retrofit).