by Tim Webb
Regulator cites plans to provide infrastructure for renewable micro-generation
Britain will create up to four "smart grid cities" after the energy regulator set aside £500m from customers' utility bills to start rewiring the nation's electricity system.
Ofgem wants companies to choose several towns or cities where it will pay for households to have smart energy technologies installed to monitor how it works on a large scale.
The idea is to start an overhaul of the ageing electricity grid, which is centralised and depends on large fossil fuel powered plants, and make it more localised using more renewable forms of generation.
Mini "smart grids" will be built that will be able to handle more unpredictable large volumes of power from intermittent wind farms. The grids will also make it easier for households that have their own micro-generation – such as solar panels on their roofs – to supply electricity back to the grid. Smart meters will be fitted in homes, which are better able to manage demand unpredictable supply peaks from renewable forms of generation, such as wind and solar power.
Steve Smith, Ofgem's managing director of markets, told the Guardian that the model would be the US town of Boulder, Colorado, dubbed the world's first "smart grid city".
Companies could combine with other government schemes, such as those trialling electric cars, he said. Electric cars are helping to drive the roll-out of smart grids as they are generally charged at night. This means electric car batteries act as storage for otherwise unused renewable generation because wind farms continue to generate at night, when most other forms of demand is low.
Philip Wolfe, director general of the Renewable Energy Association, welcomed the £500m scheme. "This is encouraging news. The electricity network has been designed for a centralised energy approach for a few large scale power stations dotted around the country feeding out towards users somewhere down the line in a dumb grid.
"It will be a substantial task to rewire it. With the new feed-in tariffs coming in next year, it will dynamite the market for microgeneration. But it's important to have the infrastructure for it."
The £500m funding for the UK scheme will be spread over five years. Power companies also welcomed the cash.
Ofgem announced the plan as part of its five year review of distribution charges that electricity suppliers must pay to use the network. Ofgem said annual bills would go up by £4 each to pay for the £6.5bn in total it says companies need to invest.
Ofgem now has a remit to protect consumers, no longer just by keeping bills down, but also by cutting carbon emissions.