Guidance

Energy Security Bill factsheet: Regulation of load control and energy smart appliances

Updated 1 September 2023

A smart and flexible energy system has the potential to reduce costs by up to £10 billion a year by 2050^{[footnote 1]}, by reducing the amount of new generation and network infrastructure needed to meet increased electricity demand.

Why are we legislating?

Transitioning to a smart and flexible energy system is essential to improving energy security, reducing consumer bills, enabling new and innovative industries to flourish, and meeting our targets for net zero. It presents a win-win-win for consumers, industry and the electricity system.

By 2030, we estimate that up to 10 million vehicles (up to a quarter of all cars and vans) will need to be zero emission at the tailpipe, and by 2028 at least 600,000 heat pumps will be installed each year across the UK. These measures in the Bill will help ensure the transition to a decarbonised power sector and the electrification of heat and transport can be delivered securely and at the lowest cost. In addition, they will allow consumers to benefit from taking part in the efficient management of electricity supply and demand.

Energy smart appliances are an essential part of this smart energy system. They enable consumers to shift their electricity usage to times when it is less costly for the energy system. For example, running a heat pump when renewable generation is most abundant, or charging an electric vehicle (EV) overnight when there is lower demand on the electricity system. Individual consumers are rewarded for this flexible energy use by saving money on their energy bills, while all electricity consumers benefit from the overall reduction in system costs. This smart and flexible consumer activity is often termed “Demand Side Response” (DSR) and the organisations who provide these smart services by remotely controlling devices are referred to as “load controllers”.

Ensuring smart energy systems are safe and secure for both consumers and the grid will be key to realising the potential benefits of DSR markets and services, including consumer bill savings and cost-efficient decarbonisation. For example, where devices are connected without appropriate cyber security they could be hacked and controlled remotely to cause harm to consumers and the grid, potentially disrupting the supply of power to large numbers of homes and businesses. Although the number of organisations undertaking load control activity is currently relatively small, we expect it will grow significantly over the next decade as more consumers shift to smart technologies, meaning both the potential benefits and challenges they could pose to the energy system will also increase

To give consumers confidence to participate in DSR, common standards will need to be put in place across devices and systems, for instance, for cyber security or to ensure that consumers can use their device with any energy tariff or DSR service provider.

The Government is taking powers through the Energy Security Bill to ensure appropriate protections are in place for consumers and the grid by placing requirements on energy smart appliances and the organisations who control them (load controllers).

How the Bill will achieve this

Powers to set requirements for energy smart appliances: The Bill will provide Government with powers to introduce regulations for energy smart appliances (such as smart EV chargepoints and smart heat pumps) so that devices meet minimum technical requirements for cyber security, interoperability, data privacy and grid stability. These powers will also allow Government to mandate that electric heating appliances and EV chargepoints must have smart functionality, prohibiting the sale of non-smart devices in Great Britain. Although there are existing powers^{[footnote 2]} for EV chargepoints which allow Government to make regulations for smart EV chargepoints, additional powers are needed to ensure that a cohesive approach is taken to regulating all energy smart appliances, given the degree of similarity across this cohort of devices.

Powers to make activities related to load control licensable: The Bill provides powers to enable Government to regulate organisations who are involved in remotely controlling these smart devices, through making activities related to the provision of load control into licensable activities. This will ensure they operate in a way which is beneficial for consumers and the grid, for example meeting requirements for consumer protection and cyber security.

FAQ

Will these regulations increase costs to consumers?

A smart and flexible energy system can reduce costs by up to £10 billion a year by 2050^{[footnote 3]}, by reducing the amount of new generation and network infrastructure needed to meet increased electricity demand. These costs are currently shared among all energy consumers, so a move to a smarter system can benefit everyone.

Consumers using smart appliances will also be rewarded for providing value to the energy system, for example using a smart heat pump could help households reduce their heating bills.

How do these powers address cyber security risks?

These measures are an important step towards ensuring that the smart and flexible energy system is secure, safe and attractive for consumers to participate in. Regulations made under these enabling powers will ensure that devices are secure by design, and that businesses capable of controlling smart devices are meeting minimum standards of cyber security and data privacy.

Smart appliances and services offer significant potential benefits but, without intervention, could also introduce new cyber security risks to the energy system, which is of course an essential service that must be safeguarded. We are working closely with the Government’s National Cyber Security Centre, as well as industry experts, to implement measures we need to take to improve cyber security.

If consumers want smart appliances and services, won’t the market deliver without government?

While some companies are already starting to offer smart services and tariffs to consumers, right now these tend to only work if consumers have particular appliances or devices – locking them in to certain tariffs and services, and out of the rest of the market.

Everyone will benefit from a more vibrant and a fair competitive market for smart appliances and services: consumers will be able to access more offers, and companies will be able to sell their products and services more widely. It will also build consumer trust and confidence, expanding uptake. But this can only be delivered if an agreed set of common technical requirements and business practices are established. We want to work with industry to develop those standards, but believe that regulation is necessary to ensure they are consistently applied.

Background

The Government has already taken steps towards supporting the transition to a smart and flexible energy system. The Smart Systems and Flexibility Plan 2021 sets out the Government’s vision, analysis and suite of policies to drive a smart, net zero energy system. It includes a commitment to improving regulation of the smart energy system and the powers in this Energy Security Bill deliver on this commitment.

The Government has consulted on how to approach regulating energy smart appliances and smart chargepoints, and made the Electric Vehicles (Smart Charge Points) Regulations 2021, which provide that private EV chargepoints must have smart functionality and meet minimum device-level requirements. Further powers for energy smart appliances are now being sought to ensure a consistent approach is taken to regulating all energy smart devices.

Government has published its consultation on Delivering a Smart and Secure Electricity System which sets out a proposed framework for regulating the smart system, including both devices and the organisations who control them (called “load controllers”). This consultation will help inform the secondary legislation laid under the powers sought in the Energy Bill.

Further information

The following documents are relevant to the measures and can be read at the stated locations:

• Smart Systems and Flexibility Plan (2021)
• Energy Smart Appliances Consultation (2018)
• Electric Vehicle Smart Charging (2021)
• Heat and Buildings Strategy (2021)
• Delivering a smart and secure electricity system. Consultation on interoperability and cyber security of energy smart appliances and remote load control (2022)

1. https://www.gov.uk/government/publications/transitioning-to-a-net-zero-energy-system-smart-systems-and-flexibility-plan-2021 ↩

2. The Automated and Electric Vehicles Act 2018 ↩

3. https://www.gov.uk/government/publications/transitioning-to-a-net-zero-energy-system-smart-systems-and-flexibility-plan-2021 ↩