Caroline Bragg, ADE Senior Policy Manager
Large public sector energy users, such as hospitals, universities and local councils, are working with the electricity system operator to keep the grid balanced in a cost-effective way by ramping up or decreasing their demand on the grid when it is most needed.
Users can provide flexibility in many ways, including by changing their usage behaviours, using on site, efficient generation and/or through battery storage technology.
This flexibility in demand, known as demand response, offers a win-win for everyone involved.
Caroline Bragg, Senior Policy Manager from the Association for Decentralised Energy, gives you four key reasons why you should consider demand side response if you can be flexible with electricity demand on the grid
- You can reduce your operating costs by lowering your demand, open up new revenue streams and potentially be rewarded with lower network charges
In Europe, where demand response is more prevalent, large consumers can reduce their annual energy bills by up to 10% by participating in demand response programmes.
There are several revenue streams you can access:
- Short Term Operating Reserve (STOR) – where the System Operator buys reserve or additional sources of power in order to deal with unforeseen increases in demand or a lack of generation, which aggregators and other demand response providers can access;
- Frequency response – this includes a number of services that the System Operator tenders to ensure the networks’ frequency is maintained at 50Hz;
- Capacity Market (CM) - The CM awards contracts and pays those able to provide reliable sources of capacity. A total 1,206MW carbon-free demand response received Capacity Market contracts in the 2017 T-4 auction, up from 174MW in the first 2014 T-4 auction.
Those able to offer flexibility or switch off completely can also reduce their transmission and distribution network costs by reducing their demand at peak times.
- You don’t have to be a large industry to take part and benefit
Even though you might only be able to flex a small share of your demand, you can join with other users providing flexibility services to reach sufficient scale and make a significant contribution to flexibility markets.
To manage the mix of users providing services, demand response services are often brought together by an aggregator who develops and manages the technology to give you the biggest return on your assets.
Aggregators source flexibility from business energy users in batch production processes, electric intensive processes, refrigeration processes, onsite generation in hospitals and universities, battery storage and hot water systems.
- There is huge untapped market potential
The Electricity System Operator estimates that up to 2.7 gigawatts (GW) of demand response participated in balancing and ancillary services between 1 April 2016 and 31 March 2017 but there is potential for much more!
There has always been a need for flexibility to ensure power supply and demand are matched but this challenge is growing as more renewable power generation capacity is installed and traditional thermal generation plants close. Large energy users are perfectly placed to offer the flexibility needed.
In addition, demand response is also evolving as electricity generation becomes more decentralised. In manufacturing sites and offices, energy management systems can optimise site electricity demand depending on wholesale power prices, network charges, local storage and the fuel cost of back-up generators. There is scope from all this change to tap into more flexibility services, and for businesses to manage their energy costs.
This potential is still to be fully realised and changes in electricity demand, such as electric vehicles, will create new opportunities for demand response. Indeed, demand response technologies have the potential to become a game changer for electricity markets.
- There’s consensus that flexibility essential in delivering Government’s policy objectives
The Government, Regulator and System Operator all agree on the need to invest in a smarter and more flexible power system to ensure the low carbon transition is efficient and benefits consumers.
The System Operator has set an aspiration to meet 30–50% of balancing capability from demand response by 2020 to help keep generation, demand and network capacity in balance at the least cost for consumers.
The 2017 Helm Review, Clean Growth Strategy and Industrial Strategy all emphasise the centrality of continued deployment of low carbon generation and growth of industrial flexibility in delivering the Government’s energy policy objectives.