Scotlands innovation potential

to realise a new integrated

energy system

Scotlands innovation potential to realise a new integrated energy system

1. Executive summary

Scotland has a rich history of innovation and has been at the forefront of many global technology breakthroughs over
the last century. Looking to the future, climate change remains one of the most significant global challenges and the
Scottish Government has embraced this challenge with ambitious targets for reducing the countrys carbon emissions.
Whilst Scotland is well on its way to meeting its electricity demand target, progress on heat and transport needs to
accelerate significantly over the next five years. This paper highlights Scotlands distinctive characteristics including
its abundant renewable energy resources, limited power interconnection, high heat demand and urban population
density that present opportunities.
We believe now is the right time for Scotland to move towards an integrated smart energy system that would put
Scotland in a leadership position internationally. Such a vision would see Scotland generating significantly more
power from renewable resources and see power, heat and transport sectors more deeply connected. We draw on the
fact that Denmark has proven an integrated energy system can work and that smart energy technologies are
becoming more available. Clearly Scotland has made a good start, but to accelerate progress we see the need for the
following approach:
A fully integrated approach to Scotlands future energy strategy. The development of this strategy to
be grounded by the principle of integrating the energy vectors of power, heat and transportation.
A comprehensive economic evaluation of the costs and benefits of integrated solutions against todays
energy strategy that will drive new policy solutions and define areas where innovation is needed.
The strategy would include a more holistic approach to infrastructure planning considering the
opportunity for local power, heat and transport demand and generation solutions.
The strategy would also drive new policy and market mechanisms to properly reward the benefits
and efficiencies of decentralised and smart solutions compared to todays energy system.
The strategy would include investment in innovation to develop and test the new solutions before
their full-scale roll-out. An appraisal of the supply chain benefits nationally and export opportunities
internationally would further reinforce the economic value generated.
Key to unlocking Scotlands integrated energy future is targeted innovation and in particular we see the need for:
Further targeted innovation to drive down cost and develop the supply chain to realise Scotlands
renewable potential in offshore wind, wave, tidal and bio-energy.
Innovation in energy storage, which is critical to facilitating further investment in wind and will be a
key enabler in local decentralised energy systems.
Further innovation in technology, business models and installation techniques to facilitate the uptake
of district heating, with a focus on integrating renewable energy and thermal storage.
Innovation in energy management software solutions for buildings, home and the transport sector,
which will be critical to a dynamic, smart and efficient energy system.
More innovative solutions to engage end consumers to make their energy usage and costs more
tangible. The opportunity to innovate on the back of smart meter roll-out is critical.

Scotlands innovation potential to realise a new integrated energy system

2. Introduction

Scotland has a rich history of innovation and has been at the forefront of many global technology breakthroughs over
the last century. Scotland also has a rich heritage in energy, being the vanguard of developing North Sea oil and gas
resources, which have benefited the country and led the rest of the world with its skills, experience and capability.
Looking to the future, climate change remains one of the most significant global challenges for society and the planet.
The Scottish Government has embraced this challenge with ambitious and legally-binding targets for reducing the
countrys carbon emissions. These ambitious targets are for Scotland to meet 30 per cent of its overall energy demand
from renewables by 2020 and, within that target, 100 per cent of electricity demand, 11 per cent of non-electrical heat
demand and 10 per cent of transport energy to be supplied from renewable sources. Whilst we recognise the carbon
reduction potential from Carbon Capture and Storage (CCS) technology, this paper considers only the renewable
resources available to Scotland to meet its renewable energy targets.
To date progress against the carbon emission reduction targets has been mixed. Whilst Scotland is well on its way to
meeting its electricity demand target, progress on heat and transport needs to accelerate significantly over the next
five years in order to deliver on existing targets. This challenge is compounded when we consider that heat and
transport accounts for over 70 per cent of total energy consumption.

Progress towards 2020 renewable energy targets

Electricity

Heat

Transport
Achieved so far

Gap to target

Scotland, relative to other countries in Europe, has a number of unique characteristics that present both challenges
and opportunities. For example, Scotland has the highest heating demand per household in the UK and highest levels
of fuel poverty, yet the country has the highest offshore renewable energy resource in Europe. Scotlands electricity
system is one of the least interconnected in Europe, however despite the countrys low overall population density,
Scotlands urban population density is no different to other countries.

Scotlands innovation potential to realise a new integrated energy system

Crown copyright, the Met Office

We believe now is the right time for Scotland to move towards an integrated smart energy system and put Scotland in a
leadership position internationally. We know that Denmark has proven an integrated energy system can work. Smart
energy technologies are becoming more available. Our vision for Scotland is driven by the exploitation of abundant
natural renewable resource combined with strong innovation in enabling smart energy system technologies.
Such a vision would see Scotland generating significantly more power from renewable resources. Rather than
curtailing renewable generation, which is when renewable power generators are actively managed to reduce their
generation to help balance the grid, we believe targets should exceed electricity demand and transfer that excess
across the energy vectors of heat and transport. Such transfer of excess electricity can be either direct or through
using hydrogen as an energy carrier.
In a future Scotland, we see power, heat and transport sectors being deeply connected. Energy storage is
commonplace as a key enabling asset to optimise and maximise the contribution from renewable generation.
Residential and commercial buildings are active energy assets meaning their energy demand can be controlled and
optimised against prevailing weather and energy prices. The roll-out of district heating further increases the active
role of residential homes in the energy system. Fuel poverty is eradicated through the adoption of both physical
energy efficiency measures and energy management software that can reduce demand whilst maintaining an
acceptable level of comfort.

Scotlands innovation potential to realise a new integrated energy system

In a future Scotland, electric vehicles are widely adopted as homes and businesses have charging infrastructure
that is smart and offers optimal charging and storage services based on personal usage and energy system
balancing requirements.
To realise this new vision, we have an enormous opportunity to propel Scotland into a world leading position by
reimagining its approach to energy through the creation of a joined up integrated energy strategy. Rather than
considering each constituent as a separate entity: electricity, heat and transport energy strategies, we advocate a
new much more integrated approach.
Clearly Scotland has made a good start, but to accelerate progress we see the need for the following approach:
A fully integrated approach to Scotlands future energy strategy.
The development of this strategy to be grounded by the principle of integrating the energy vectors of
power, heat and transportation.
A comprehensive economic evaluation of the costs and benefits of integrated solutions against today
energy strategy that will drive new policy solutions and define areas where innovation is needed.
The strategy would include a more holistic approach to infrastructure planning considering the
opportunity for local power, heat and transport demand and generation solutions.
The strategy would also drive new policy and market mechanisms to properly reward the benefits
and efficiencies of decentralised and smart solutions compared to todays energy system.
The strategy would include investment in innovation to develop and test the new solutions before
their full-scale roll-out. An appraisal of the supply chain benefits nationally and export opportunities
internationally would further reinforce the economic value generated.
Key to unlocking Scotlands integrated energy future is targeted innovation and in particular we see the need for:
Further targeted innovation to drive down cost and develop the supply chain to realise Scotlands
renewable potential in offshore wind, wave, tidal and bio-energy.
Innovation in energy storage, which is critical to facilitating further investment in wind and will be a
key enabler in local decentralised energy systems.
Further innovation in technology, business models and installation techniques to facilitate the uptake
of district heating, with a focus on integrating renewable energy and thermal storage.
Innovation in energy management software solutions for buildings, home and the transport sector,
which will be critical to a dynamic, smart and efficient energy system.
More innovative solutions to engage end consumers to make their energy usage and costs more
tangible. The opportunity to innovate on the back of smart meter roll-out is critical.
We believe Scotland has a significant opportunity to maximise its renewable energy resources and unique
characteristics to meet its climate change targets in a way that delivers significant value to Scotland. A new
integrated energy strategy and a targeted innovation approach will be key to unlocking Scotlands low carbon
innovation potential.

Scotlands innovation potential to realise a new integrated energy system

3. Scotlands unique characteristics

Scotland has unique characteristics that lead to particular challenges and opportunities. These are explored in turn
in more detail in the following sections and can be summarised in the following way:
Significant natural resources for renewable energy It is clear that relative to the size of the
country, Scotland has significant natural resources which can be harnessed for renewable energy.
This is most pronounced in the electrical power generation sector, however significant bio-energy
resource is also present.
Limited interconnection Another major characteristic of Scotland is that, along with the rest of the
UK, it is an island, sitting at the geographic periphery of Europe. As such, interconnections of energy
systems with the rest of Europe are a notable challenge. This means that opportunities to export and
import power into continental Europe are limited, suggesting that alternative national solutions are
required and of greater importance than would be the case of a continental country.
High heat demand and fuel poverty Scottish households have the highest gas demand in the UK
and the highest levels of fuel poverty1. Despite progress in improving levels of insulation, particularly
in social housing, there remain significant challenges in providing homes with affordable heating.
High urban population density Scotland is a small country yet despite having a significantly lower
overall population density than the rest of the UK, a very high proportion of the population lives in
urban areas and within the Central Lowland area in particular. This area of high urban density
provides opportunities for lower carbon and more efficient heating and transport solutions.
Academic and industrial capability Scotland has a significant indigenous offshore energy industry
and associated technical capabilities; it also has leading academic capabilities in particular in the
areas of offshore energy, oil and gas and renewables.

3.1 Renewable energy resource

With the largest offshore renewable energy resources in the EU (25% of EU
offshore wind; 25% of EU tidal; and 10% of EU wave power), Scotland will be making
an even greater contribution to the EUs overall target than our population size. 2
With its climate, as well as large expanses of rural land, numerous islands and strong winds and tides, Scotland
has ample natural resources. The question is can the renewable energy sector fully harness the opportunities
presented by these natural resources. For example, renewable electricity generation set new records in 2014,
providing 50 per cent of Scotlands electricity demand.
Even more significantly, records from the first six months in 2014 demonstrated that in totality renewable energy
(namely wind and hydro) became Scotlands main source of power, generating 32 per cent more electricity than any
other source of power in Scotland. The renewables sector generated 10.3TWh (2.5TWh more than nuclear Scotlands
previous main source of electricity generation), while coal and gas produced 5.6TWh and 1.4TWh respectively.

1
2

Scotland energy facts 2015

2020 Routemap, Scottish Government, 2011:9

Scotlands innovation potential to realise a new integrated energy system

With this significant renewable electricity generation comes the challenge of integrating such a sizeable intermittent
generation asset into the electricity system. This point can be illustrated using two international comparisons: Last
year, Ireland generated 19 per cent of its electricity from wind but at the same time it experienced curtailment (i.e.
when supply exceeds demand and renewable generation has to be switched off in order to balance the system).
By contrast, Denmark generated 40 per cent of its electricity from wind alone in 2014 (a new world record) and has
regularly exceeded 100 per cent on certain days, with no curtailment. Later in this paper we explore the lessons from
Denmark on how it manages the challenge of intermittent wind generation.
In addition to wind, hydropower, waves and tides, Scotland also has 65 per cent of the UKs forestry resources 4.
Currently 40 per cent of renewable heat is met from biomass5 (heat pumps currently contribute 40 per cent and solar
thermal 20 per cent) and biomass is by far the most common fuel type used in RHI applications in Scotland.6

Case study Artemis Intelligent Power

While Artemis Intelligent Power has developed and patented a unique
Digital Displacement technology which represents a fundamental
advance in the field of hydraulic machines. Essentially, Artemis has
replaced the mechanical port-plates and swash-plates of conventional
machines with its own unique high-speed solenoid valves. These are
controlled by an embedded computer and combined with an ultraefficient radial piston design to create the most efficient and
controllable hydraulics in the world today.
Based near Edinburgh, Artemis Intelligent Power started out on
developing an innovative hydraulic transmission system for automotive
applications at University of Edinburgh. The Carbon Trust worked with
the team to identify a quicker, lower risk route to market in stationary
applications and went on to support the development of the technology
for the wind energy market. In 2010 Artemis IP was acquired by
Mitsubishi Heavy Industries and has assembled a team of world-class
engineers and technicians dedicated to bringing Digital Displacement
technology to market. Within the companys facility located in Scotland the team covers: mechanical and
electrical engineering, software, electronics hardware, system simulation, tribology, finite element analysis,
fabrication, manufacturing and test.
Digital Displacement technology allows a wind turbine to convert wind energy by a combination of pumps and motors
to produce a constant speed irrespective of the blade rotation speed, eliminating the need for a step-up gearbox,
complex generator technology and power inverter. The lower costs this leads to should help accelerate the
deployment of offshore turbines in the UK and beyond. The technology has now been incorporated in Mitsubishis
7MW SeaAngel turbine and tested off the coast of Japan on top of Mitsubishis V-shape semi-submersible platform.
In addition to wind turbines, the technology can also be used in on and off-road vehicles to enable significant fuel
savings whilst also increasing controllability.

3
4
5
6

Scottish Renewables 2014 (www.scottishrenewables.com)

Forestry facts and figures 2014, Forestry Commission
https://www.ofgem.gov.uk/sites/default/files/docs/2014/10/drhi_1st_10000.pdf
Energy in Scotland 2015, Scottish Government

Scotlands innovation potential to realise a new integrated energy system

3.2 Interconnectedness
As an island nation on the geographic periphery of Europe, Scotland, along with the rest of the UK, has significantly
less interconnectedness with Europe than other countries in continental Europe. By illustration, Demark, with a
population of 5.6 million people, has 5.9GW of interconnection capacity, compared with the UK with a population of
64.3 million people and an interconnection capacity of just 3.7GW. Scotland has no direct international
interconnection capacity, other than to other parts of the UK (2.2GW in total with England and Northern Ireland).
Denmark, because of its close location to neighbouring countries such as Norway and Sweden, has little need for its
own electricity storage capacity. Ireland, on the other hand, has exceptionally low interconnector capacity and
domestic grid capacity, making its current system insufficient to absorb a high level of wind energy. This has led to
regular wind energy curtailment, creating an exceptional challenge for Ireland to reach its target of a 40 per cent
share of renewable electricity by 2020. Scotland, like Ireland, is similarly limited in overseas connection capacity,
and so alternative solutions must be explored nationally to avoid renewable energy curtailment.
Energy storage is one solution that can alleviate curtailment and add additional value to wind generation assets and
the broader energy system. Reducing the intermittency of generation output, which effectively increases the control
over exported generation to the grid would bring significant benefits. These benefits are realised by wind generation
operators, grid operators and ultimately end consumers as the value and cost benefits of a more efficient energy
system are realised.

3.3 Heat demand and fuel poverty

Scotland has the highest household natural gas consumption by consumer in the UK7.
The latest statistics from the 2013 Scottish House Condition Survey shows that some 39 per cent of households are in
fuel poverty 8. This compares with 16 per cent in 2003. Despite an increase in insulation measures implemented, this
has not mitigated the effect of exposure to rising fuel prices. Indeed, if fuel prices had risen only in line with inflation
over this period, fuel poverty would be around 11 per cent9.
The link between wholesale and retail gas prices is well documented. With the cost of extraction increasing and fossil
fuel prices being driven by global supply and demand events, Scotland needs to find alternative ways to heat its homes.
The UK is already a net importer of fossil fuels and the cost of energy has become increasingly influenced by global
events. The seasonal nature of heat demand - and therefore gas demand and price - is also a major influence on
consumers fuel costs. The drive for renewable fuel sources has the potential to break the dependence on these price
volatilities. The Scottish Government has a clear target for 11 per cent of Scotlands heat demand to be generated
from renewable sources by 2020.
Further innovation in energy efficiency and demand reduction in households is another key mitigation action which
can contribute significantly towards the achievement both of this target and the reduction in prevalence of fuel
poverty. In particular, Scotlands rural areas, which are typically off the gas grid, have higher consumption of
electricity for heating, so opportunities for switching to heat pumps or biomass heating becomes more important.

7
8


9

Energy in Scotland 2015

A household is in fuel poverty if, in order to maintain a satisfactory heating regime, it would be required to spend more than 10% of its
income (including Housing Benefit or Income Support for Mortgage Interest) on all household fuel use. Definition from The Scottish fuel
Poverty Statement August 2002.
http://www.gov.scot/Publications/2014/12/6903

Scotlands innovation potential to realise a new integrated energy system

3.4 Population density

Scotlands extensive rural areas offer some of the most dramatic scenery in the world and are also home to many
small rural communities. Nonetheless, whilst Scotlands overall population density is significantly lower than that of
England, with 68 people per square km compared to 413 people per square km respectively, the percentage of people
living in urban areas is the same in Scotland and England, with the national figures showing 82 per cent living in
urban areas and 18 per cent of the population living in rural areas.
Some 70 per cent of the population live in the waist of Scotland, the Central Lowlands area which includes
Scotlands largest cities of Glasgow and Edinburgh and their surrounding conurbations. The majority of homes within
the Central Lowlands are connected to the natural gas network. This is also where the majority of Scotlands
motorway and other road transport infrastructure is located.
Considering further the implications of this for travel and transportation: In 2012, the Scottish average annual car
mileage made per person was 7,16110 compared to 7,900 in England.11 This suggests that alternatively fuelled (e.g.
electric and hydrogen) vehicles may make sense for the relatively lower mileage driven by many car users in
Scotland, most likely as a result of the high percentage of the population living in urban areas, concentrated in the
Central Lowlands. With this in mind, it is interesting to note that research12 has shown that out of five local authorities
in the UK with the highest number of electric vehicles in their fleet, four are in Scotland. Dundee Council had the
highest number of electric vehicles (38), following an active programme of replacing diesel pool cars. The Dundee
area also has over 30 electric vehicle charging points.
Given the high urban population the case for integrated public transport is strong. The further electrification of the
rail network and alternative fuels for HGV and buses are important steps towards decarbonisation of transport.
The population density of the urban areas of the Central Lowlands also offers opportunities with respect to the need
to heat our homes and other buildings far more efficiently. The Carbon Trust worked with the Scottish Government,
Ramboll Energy, Zero Waste Scotland and others on the development of the Scotland Heat Map, which is a powerful
planning tool that provides a range of geospatial information on where heat is supplied and used.
The vast majority of heat is generated from gas transmitted through the main gas network. Similar to the rest of the
UK, much of this infrastructure was developed in the 1970-80s to take advantage of local fossil fuel resource (North
Sea gas). A similar investment in infrastructure would now be required to move to more efficient district heating
networks, which could be highly effective in urban areas with high population and building density.

10
11
12

TransportScotland (www.transportscotland.gov.uk)
UK Government (www.gov.uk)
2020 Climate Group News (2015) Scottish councils leading way on electric vehicles adoption
http://www.2020climategroup.org.uk/news/scottish-councils-leading-way-electric-vehicle-adoption/

Scotlands innovation potential to realise a new integrated energy system

10

4. Scotlands opportunity to move to a new energy system

Energy systems are best considered through the three key vectors of electricity, heating and transport. This report
emphasises the role of integrative approaches to renewable energy across these three energy vectors. Smart energy
technologies are key to facilitating these integrative approaches.

A smart, sustainable energy system

Renewable
energy resources

Centralised fuel production,

power and storage
Co-generation

Distributed
energy resources
Smart energy
system control
H2 vehicle
Surplus
heat

Electric vehicle

Image adapted from IEA, 2012

Scotlands unique characteristics and significant renewable energy resource mean there are real opportunities to
transfer renewable energy across vectors. We believe through adopting a more integrative approach to the energy
system, Scotland can meet is carbon reduction targets and generate significant value.
We believe now is the right time to act because:
Denmark has proven that an integrated energy system can work,
New technology innovations in smart energy systems are becoming more available, and
This represents an opportunity for Scotland to become a leader in new energy systems.
In this section we consider the main technology and innovation trends across Europe and beyond. We consider and
compare Denmark as one country that is a similar size to Scotland and has high levels of generation of renewable energy.
We also explore more broadly the smart energy technologies that form part of the emerging new energy system.

Scotlands innovation potential to realise a new integrated energy system

11

4.1 Heat and power

Denmark has seized the opportunity for innovation through the trial and growth of smart energy systems13 which
incorporate a holistic approach towards heating, electricity and transport. From an oil-dependent society in the early
1970s, Denmark has transformed into a world leader for renewable energy. Although it continues to be dependent on
the consumption of coal and other fossil fuels, the proportion of renewables in Denmarks energy mix is rapidly
increasing, providing security and cost resilience. Denmark is comparable to Scotland in terms of population size,
carbon intensity and natural resources, making it a useful benchmark for Scotland in terms of meeting
decarbonisation targets. In 2012, Scotland and Denmark produced 39.8 and 37.1 Mt of CO2 respectively, and their CO2
emissions per capita in the same year were 6.7 and 6.6 Mt of CO2.14
In terms of electricity alone, Denmark produces 40.7 per cent of its domestic consumption from wind resources,
while Scotland stands at 30 per cent. The proportion of heat consumption met by renewables also places Denmark in
the lead with 20.8 per cent compared to Scotlands 2.8 per cent in 2011.

4.1.1 Transferring renewable power to heat the role of CHP

The systems which will be most relevant for the long-term are those in which new generation technologies are
combined with energy conservation and system efficiency improvements. The Danish energy system, with its high
share of CHP-based district heating, can be regarded as a front-runner and a system well suited for the analysis of
large-scale integration of renewable energy.
Denmark has one of the most extensive district heating networks in Europe. In order to meet its 2050 target of 100
per cent renewable energy for electricity, heat and transport, Denmark has invested in significant research and
technology development in order to incorporate wind power into its traditionally thermal-powered electricity system.
By optimising the complex interplay between wind energy, the electricity grid, CHP and
electricity
consumption,
Cape
Town, South
Africa
Denmark is exploring innovative mechanisms for demand management and energy efficiency, balancing supply and
demand through heat storage and essentially avoiding curtailment during times of excess wind power generation.
Through innovations in system management, as well as specific technological investment, Denmark is able to
account for fluctuations in the level of renewable energy supply through its flexible CHP plants and transmission
lines connecting Denmark with Norway and Sweden. All Danish CHP plants have heat storage facilities attached,
allowing the temporary decoupling of heat and power production according to supply and demand. During periods of
low wind, CHP plants increase their production of electricity and any surplus heat is stored. During high winds, heat
consumption is covered by the thermal storage. During periods of very high wind, renewable electricity is used to
warm the water in thermal storage units, and the thermal CHP plants output can be managed to balance system.
Rather than perceiving wind energy as an additional aspect to their energy supply, Denmark has integrated it as a
central mechanism for meeting heat and electricity demand. Approaching wind power in this way has important
implications for bringing renewables into the energy mix. Balancing fluctuations is now understood to be a more
general, system problem, rather than a problem associated solely with wind farms and the electricity grid.

13
14

Henrik Lund, energyindemand.com

International Energy Agency and the Scottish Government

Scotlands innovation potential to realise a new integrated energy system

12

4.1.2 Driving towards a low cost heating system

Denmark has an advanced district heating system using a low cost and highly efficient heat supply, with plans to
advance the system further. District heating provides a complementary storage system for wind power, using excess
wind energy in large-scale electric boilers or heat pumps. These boilers are able to provide heat for whole districts.
At the moment, Denmark has an extensive network of pipes that harness heat from conventional coal and gas-fired
CHP plants and combine it with heat from CHP powered by renewable resources including wind energy and biomass.
Heat is also used from solar thermal energy plants as well as waste heat from factories, transport systems and
incinerators. Denmark is therefore able to make use of its large amounts of fluctuating renewable energy.
Because of the diverse range of energy sources, district heating CHP plants are flexible and are independent of a
single fuel source; today, 63 per cent of Danish households are connected to energy efficient district heating systems.
Denmark is looking to convert district heating away from fossil fuels completely, expanding its wind and biomass
powered CHP and district heating sector further. This involves the incorporation of electric heat pumps connected to
the heating system, serving as energy storage for intermittent wind power production.

Case study Heliex Power

An estimated 40,000GWh of energy is lost in the
form of waste steam worldwide. Heliex Power is a
British engineering firm specialising in the design
and manufacture of energy recovery systems.
The companys patented steam expander systems
became commercially available in 2013 following
several years of research and development at its
dedicated manufacturing and test facility in East
Kilbride, Scotland.
The Heliex set replaces the steam pressure
reduction valve in processes and in applications
where steam is being discharged to atmosphere.
Electricity is generated using low-grade steam
from the customers own processes. The
electricity can be sold to the grid at feed-in tariff or used in-house.
The set has its own boiler and condenser, and extracts energy from a flow of hot gas, liquid or two-phase flow.
The energy is recovered through electricity generation.
Heliexs screw expander systems have applications in any process that produces waste heat, including wet steam,
from 150 up to 300 deg C and higher in certain circumstances. Important applications for it exist in electricity
generation, petrochemical industries, glass and refractories, pharmaceuticals, food, brewing and distilling, paper
production, biomass and land fill gas engines. Additional applications also include industrial diesel engines and
gas turbines, combined heat and power systems, geothermal power stations and processes utilising steam
pressure reduction valves which can all improve their energy economics through Heliexs screw expander sets
comprising expanders with outputs from 70 to 500kWe. The technology is already being deployed for example
Heliex Power has deployed its patented heat recovery systems in an award winning district heating project in
Milan, generating power from a local glass container factory.

Scotlands innovation potential to realise a new integrated energy system

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4.1.3 The emergence of energy storage

Not more than 5 miles from the German border with Denmark, the town of Braderup has invested in a local energy
storage project to store excess wind-generated energy. The community invested in a 20MW wind farm and
subsequently in a battery energy storage facility to overcome grid overloading during periods of high winds.
The storage system itself has a peak output of 2.3MW and a capacity of 30MWh and is used to trade electricity on
the market and provide services to the local distribution network. This effectively means that the energy system
can compensate for grid fluctuations, which in the past would have led to the wind farm being shut down when the
grid is overloaded.
This has the added benefit of greater self-reliance on the power generated by the wind farm such that more than
90 per cent of the self-generated electricity can be used by the people who own the infrastructure that has
produced it. Rather than local opposition to wind farm developments, this community has greater buy-in to the
energy storage system as it increases the sense of self-sufficiency and economic value from any power sales to
the grid.
This example is very relevant to Scotlands future energy system. As already introduced, the high renewable
generation potential of Scotland together with its limited interconnection capacity means that these energy
storage solutions are essential to maximise the benefits of that renewable energy resource.

4.2 Transport
Twenty one per cent of carbon emissions in Scotland currently come from transportation, a proportion which
is broadly in line with the UK as a whole. With the need to decarbonise the transport sector to help meet
climate change targets, there has been extensive discussion and exploration of the use of vehicles fuelled by
non-fossil sources.
The Scottish Government has set a target of almost complete decarbonisation of transport in Scotland by 2050.
The move towards greater renewable generation of electricity can accelerate this carbon reduction by a switch to
greater use of alternative fuelled vehicles.
Electric, hydrogen and bioenergy fuelled vehicles are all potential alternatives to todays combustion engine.
The active management of electric vehicles could be matched to intermittent renewables generation, therefore
further optimising and balancing the overall energy system. Intelligent charging can go further by utilising the
vehicle battery as an energy storage device. An energy system which embeds electric vehicles as a core form of
decentralised energy could benefit from balancing services and offer a form of localised demand management
for homes and businesses. The relatively small energy storage capacity of vehicle batteries and issues related
to battery degradation with added charging and discharging means that the benefits only become tangible
when a significant volume of electric vehicles are plugged in to the system and battery lifecycle issues are
further addressed.
Hydrogen has potential across the electricity, heating and transport sectors as an energy carrier that can provide
the means for coping with fluctuating renewable energy input. Hydrogen produced by the electrolysis of water
powered by renewable energy can be used to integrate electricity with heat and transport through: generating fuel
cell powered grid electricity; blending hydrogen into standard heating gas; producing synthetic hydrocarbon fuels
for transport; as well as the commercialisation of fuel cell electric vehicles.

Scotlands innovation potential to realise a new integrated energy system

14

Liquid transport fuel options may be well served by the increased development of the biofuel sector. The
utilisation of waste feedstock comprising of agricultural, commercial, industrial and residential bio-waste provides a
compelling low carbon fuel source and where significant advancement in technology development is underway.
There are associated economic and environmental benefits from additional products in the form of bio-chemicals
and materials. It is expected that the heavy duty road vehicle fleet in Europe (trucks and buses) and a significant
proportion of marine transportation, will be best powered by liquid transport fuels rather than alternative renewable
sources. This and the longer term potential for airline fuel provides a clear market opportunity to pursue.

4.3 Demand
Most of todays energy system remains relatively centralised, in that power and fuel for heat is generated centrally
and is distributed in a one-way flow to end consumers in businesses and households.
The emergence and success of the new energy system will require intelligent control and management, which will be
driven by the availability, collection and correct interpretation of large volumes of data. Here are a few examples:

4.3.1 Smart heating thermostats

With heating being the largest element of most household energy bills in Scotland, the ability to optimise and
ultimately reduce heating demand should be attractive to individual householders, as well as a key priority for the
future viability of Scotlands low carbon energy system. A number of smart thermostat products are being introduced
which aim to deliver savings on household energy bills. For example, the Nest thermostat claims to learn peoples
day to day movements and optimises their home heating, thereby eliminating waste and reducing bills. Equivalent
thermostats, e.g. Tado, will monitor the local weather forecast to optimise when to heat your home; both offerings
can also detect problems with the efficiency of operation of domestic heating boilers. These software driven
solutions claim up to 30 per cent savings can be delivered in heating bill costs.

Scotlands innovation potential to realise a new integrated energy system

Case study IE-CHP

The smart homes market is forecast to roughly triple in size
and reach US$50Bn globally by 2020. It has already seen
significant acquisitions, for example Googles purchase of
Nest Labs for US$3.2Bn in 2014 and is experiencing a wave of
innovation around energy management, HVAC, security,
lighting and entertainment.
In parallel, the rise of distributed generation is one of the
most important trends in the energy industry today and is of
key importance to Scotlands future energy system. It is
already having an impact on the current business models of
some of the worlds largest energy companies. For example,
E.On recently set a new strategic focus on renewables,
distribution networks and customer solutions.
Based in Scotland, IE-CHP sits at the intersection of these market trends. The company aims to radically
improve the energy management of distributed power devices. With its patent pending technology it is
innovative in its ability to cost effectively optimise the performance of multiple domestic technologies including
micro CHP units, micro Renewables, gas boilers, and thermal stores. IE-CHPs technology complements the
customer facing control products of leading smart homes companies (e.g. Nest, Hive) by providing a back end
that significantly improves system performance to reduce costs, save energy, reduce carbon and improve
customer comfort. It also has the ability to interface with intelligent grids to enable new commercial
propositions to be developed and realised.
IE-CHP utilises an innovative architecture that offers several key benefits over competing energy management
systems. These benefits include:
High Efficiency: the technology integrates boiler, distributed generation devices, and thermal store controls to
enable system efficiencies to be realised;
Low risk: the technology is designed to control a wide range of distributed generation devices (e.g. mCHP, heat
pumps, solar thermal) and thermal stores, and can also communicate with a variety of customer facing control
products (e.g. smart thermostats);
Cost and energy savings: the system efficiencies that the technology achieves, delivers significant cost and
energy savings with a fast payback period;
Low disruption: the add on technology is compact, easy and quick to fit, and leverages existing infrastructure
in homes (e.g. boilers and radiators);
High adaptability: the system architecture is flexible and can be adapted to device/storage changes in the home
IE-CHP has initially demonstrated its solution with fuel cell mCHP units and has now broadened the application to
include additional mCHP and micro renewable technologies. The company is now exploring opportunities to
collaborate with partners on commercialising the technology.

15

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4.3.2 Smart meters

The UK Government has obligated UK energy suppliers to roll out smart meters to all households by 2019.
This major investment follows the EU drive for greater energy efficiency. The business case for the smart
meter roll-out is predicated on more accurate billing and shifting behaviour to promote energy efficiency and
reduced consumption.
There are a number of features that the smart meter enables. For example, in Sweden customers can opt for
greater granularity in their tariff structure, thereby allowing choices to be made dependent on market prices each
day. Greater data capture on energy consumption patterns can also uncover insights into how to save energy
within the home.
The significant debate around smart meters has been concerning the extent to which consumers will interact and
take action on the information that will be available to them. We consider, though, that the national roll-out of
smart meters represents a major opportunity for further innovation. The ability to interpret the rich and granular
data gathered by smart meters and turn it into meaningful insights and information remains an underdeveloped
area for innovation which needs to be explored further not only for the benefit of individual households and
businesses, but for the whole energy system.

4.3.3 Building energy management

Relevant to SME and larger commercial/non-domestic properties and increasingly to households - building
energy management systems can control how a whole building or specific space is heated, cooled, ventilated and
lit. Each building will have a unique energy consumption footprint based on its age, building fabric, occupancy and
usage. The intelligent control of buildings brings opportunities to manage and reduce energy consumption in ever
more sophisticated ways.
Viewing buildings as active energy assets within the energy system will open up opportunities for demand side
management, intelligent heating and cooling and for scheduling any on-site generation, e.g. Solar PV, CHP, as well
as energy storage devices such as batteries (including those in electric vehicles).
Much innovation has grown from the US, where buildings in general have higher power consumption driven by
higher cooling requirements. There has been limited innovation to focus on the higher heating loads of NorthWestern Europe - including Scotland in particular - to better manage buildings to reduce energy consumption.

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5. A vision for Scotland to become a leader in new energy system

Scotland has a unique opportunity to maximise its significant renewable resources, making these the foundation for
a new integrated energy system. The following section paints a picture of how a future Scotland might look:
The combination of onshore and offshore renewables, including wave, tidal and wind mean that
Scotland will be generating more renewable energy that powers demand and therefore exceeds its
100 per cent target.
The economics of on shore wind are further improved through the addition of energy storage,
reinforcing it as a major part of the energy mix. Floating wind provides a cost effective solution to
unlocking Scotlands offshore generation.
The countrys island geography means that rather than exporting renewable power to neighbouring
countries, Scotland will be able to transfer power generated across the energy vectors of heat and
transport.
Energy storage plays a key role in the energy system, facilitating the integration of renewable power
into the grid with no curtailment of wind power generation. Many local communities are selfsufficient in energy and the transmission and distribution grid is operating efficiently.
Scotlands scale and high urban density means that low carbon transportation solutions and
community / district heating systems are commonplace in the Central Lowlands. Integrated public
transport is commonplace and alternative fuelled vehicles have been adopted ahead of the rest of the
UK as typical car journeys are shorter thereby not affected by current anxieties over range.
Many of Scotlands urban areas have district heating systems powered initially by gas-fired CHP systems
and optimised with local wind power generation. Over time, gas will be replaced by sustainablysourced biomass to further reduce carbon emissions and mitigate fossil fuel price volatility.
Many of Scotlands public and commercial buildings will be managed to optimise their energy
consumption against their occupancy, prevailing weather and energy market prices.
Fuel poverty has been eliminated as energy consumption in households and businesses is reduced
through intelligent energy management software solutions and the roll-out of energy efficiency
measures. New energy efficiency providers are offering targeted and bespoke solutions to
consumers based on the additional insights gained from smart meter data.
An active new supply chain is providing services in high technology integrated solutions. Both
academia and industry are exporting new services to other countries as Scotland is seen as the
leader in developing new integrated energy system solutions.

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6. How do we get there

To realise this new vision, we have an enormous opportunity to propel Scotland into a world leading position by
reimagining its approach to energy through the creation of a joined up integrated energy strategy. Rather than
considering separate electricity, heat and transport energy strategies, we see significant value coming for a
new approach.
A fully integrated approach to Scotlands future energy strategy.
The development of this strategy to be grounded by the principle of integrating the energy vectors of
power, heat and transportation.
A comprehensive economic evaluation of the costs and benefits of integrated solutions against today
energy strategy that will drive new policy solutions and define areas where innovation is needed.
The strategy would include a more holistic approach to infrastructure planning considering the
opportunity for local power, heat and transport demand and generation solutions.
The strategy would also drive new policy and market mechanisms to properly reward the benefits and
efficiencies of decentralised and smart solutions compared to todays relatively dumb energy system.
The strategy would include investment in innovation to develop and test the new solutions before
their full-scale roll-out. An appraisal of the supply chain benefits nationally and export opportunities
internationally would further reinforce the economic value generated.
Key to unlocking Scotlands integrated energy future Scotland is targeted innovation, which we believe should contain
the following building blocks:

6.1 Focus on smarter energy efficiency measures

In addition to more practical energy efficiency measures such as insulation, we believe the key technology innovation
in household energy efficiency should focus on software and data led solutions.
The roll-out of smart meters across Scottish households presents an opportunity for innovation in energy data
analysis, consumer engagement and intelligent energy (heat) control. The majority of smart thermostats sold in the
US last year were not through utilities but independent retailers. Current claims of up to 30 per cent reduction in
energy consumption would make a considerable impact in Scotlands fuel poverty challenge.
The creation of an innovation platform together with utility partners to develop innovative solutions is required.
The roll-out of smart meters can act as a catalyst over the next five years. Such an innovation programme should
consider energy efficiency through demand reduction and demand side management through intelligent interaction
of household demand with the grid.

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6.2 Turn buildings into active energy assets

Buildings should be viewed as an active energy asset in the future energy system. In a more intermittent renewable
generation world, the ability to manage demand will become essential.
Many innovations from the US have been developed on the back of high energy demand driven by cooling and heating
requirements. Given the predominantly heat-led energy demand from buildings in North Western Europe and
Scotland, specific solutions are required. Minimising heat loads through effective energy management will mean that
capital investment in heat generation infrastructure can be reduced.
Demonstrating innovative building energy management technologies in public and commercial buildings should be
pursued as an energy efficiency initiative. In addition demonstrations that also consider price signals from the
market should be explored to test the ability of buildings to react in an integrated energy system world.

6.3 Promote smart and integrated renewable powered district heating

Innovation in technology, business models and reducing installation costs are key to facilitating the uptake of district
heating in Scotland.
Investment in district heating network infrastructure provides long term security and cost resilience, allowing a
number of heat input technologies to be connected. Innovation is required to integrate renewable power with heat.
Perhaps best demonstrated first in island and rural community applications, the optimisation of renewable power
generation with community heat solutions should focus on smart integration technology development, software
solutions and business model innovation. In the Danish model, the heat side of the energy system is largely owned by
the municipality.
Technology innovation could include thermal storage integrated with community/district heating. Energy management
software solutions can optimise thermal storage, heat demand and wind generation to maximise efficiency and cost.
Many solutions are not compatible with todays traditional market mechanisms and regulation, therefore new business
models should be explored that properly reward low carbon and energy efficiency credentials.

6.4 Enable grid-integrated electric vehicles and hydrogen alternatives

Due to the high urban density and lower miles travelled Scotland has an opportunity to be a first mover in the
adoption electric vehicles in the UK. While responsibility for innovation to reduce vehicle cost and increase
performance lies with vehicle manufacturers, wider innovation is required to explore the opportunities of gridintegrated intelligent charging. Such innovation should focus on towns and cities where charging infrastructure can
be established efficiently and public sector can lead through access to fleet vehicles.
Hydrogen also has potential to become a significant alternative transportation fuel. In certain situations, e.g. in HGV
and buses, the conversion of excess wind generation into hydrogen could be the most effective solution to balance
and optimise the energy system. Further innovation and test cases are required to understand the relative benefits of
hydrogen as part of the integrated energy system.

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6.5 Develop energy storage as a key energy system asset

The Carbon Trust plan to publish a report into the potential for energy storage in the UK by the end of 2015. Given
Scotlands relatively large share of onshore wind capacity, energy storage has the opportunity to add further value to
existing renewable assets and reduce the cost of planned onshore wind, potentially accelerating the attainment of
subsidy free generation.
Currently, energy storage has no identified status in todays market mechanism and regulatory regime. A number of
energy storage applications are possible providing value in both small decentralised systems and large bulk
applications. We recommend a clear energy storage development roadmap is created that identifies the technology,
commercial and regulatory actions including demonstrations to facilitate energy storage within the energy system.

6.6 Maximising bioenergy

Scotland is already making good progress towards the use of renewable energy resources for heat and transport.
Namely the increase use of biomass from forestry and bioenergy from waste recovery processes, e.g. from whisky
distilling. More could be done to harness the potential of bio-waste material available in Scotland.
Further support for innovation in the production of bioenergy and biofuels from waste processes and products (i.e.,
forest and agriculture residues, bio-waste from municipal, industrial and commercial sources), is required as a key
element of reducing Scotlands carbon dependency in the heat and transport sectors. There are several later stage
chemical and combustion based technologies that could be supported, along with earlier stage thermal conversion
routes that have higher potential rewards, but also higher risk.

6.7 Maximise offshore renewable generation

With around 25 per cent of EU offshore wind potential Scotland has a significant opportunity to exploit this natural
resource. Further innovation to reduce the costs of offshore wind should remain a priority for Scottish Government.
The Carbon Trusts recent report for the Scottish Government highlighted that potentially attractive levelised cost of
energy (LCOE) levels for floating wind are achievable. Global interest in floating wind is increasing with the US and
Japan planning demonstrations. Scotlands high offshore wind resource and deeper waters mean floating wind has
huge potential. Given Scotlands broad experience in offshore energy and the significant national and international
market opportunity, Scotland should innovate in floating wind.
The Scottish Government has invested in wave and tidal technology and this should continue to retain its global
leadership and provide another sustainable renewable energy generation source. Innovation should continue to focus
on technology fundamentals to prove marine energy can be efficient, reliable and affordable.

In conclusion we believe Scotland has a significant opportunity to maximise its renewable

energy resources and unique characteristics to meet its climate change targets that
generates significant value for Scotland. A new integrated energy strategy and targeted
innovation approach is the key to unlocking Scotlands low carbon innovation potential.

The Carbon Trust is an independent company with a mission to accelerate the move to a sustainable,
low carbon economy.
The Carbon Trust:
Advises businesses, governments and the public sector on opportunities in a sustainable, low carbon world.
Measures and certifies the environmental footprint of organisations, products and services.
Helps develop and deploy low carbon technologies and solutions, from energy efficiency to renewable power.

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Published in the UK: September 2015
The Carbon Trust 2015. All rights reserved. CTC842