Decc tenders work to scope demand side response in future electricity capacity auctions


The Department of Energy & Climate Change (Decc) has issued a research tender to try and work out how big a role demand-side response (DSR) can play in the UK energy market.

The department wants robust estimates of how much back-up power generation currently exists in the UK, DSR technology types, response times and costs.

The contract for the work is split into two phases: an initial qualitative and quantitative research piece; and a second project exploring the future potential of DSR over the longer term, how it can reliably participate in the capacity market, technology costs, the variables that may come into play and their likely impact on price curves.

Decc will pay up to £40K for phase I and up to £60K for phase II. Both pieces of work will feed into the development of the capacity market auctions and will shape how demand-side technologies can play a role in delivering security of supply.

While the first capacity market auction took place before Christmas, the department faced some criticism for the focusing on generation. Although around 1 GW of DSR was pre-qualified for the auction, only 174MW (less than 1% of the total capacity secured in the so-called T-4 auction) worth of contracts was allocated to DSR at the clearing price of £19.40/kW. Most of the remaining DSR players dropped out at between £25/kW and £35/kW.

The Energy & Climate Change Select Committee, in particular chair Tim Yeo, has repeatedly questioned the wisdom of overlooking the potential for demand-side response within the Electricity Market Reform (EMR) policy mix, given that the first capacity auction has largely rewarded existing plant.

Meanwhile, the Lords Science & Technology Committee has heard evidence that there is no reliable estimate of the UK’s total back-up power generation. Back-up generation could play a key role in demand side response, and while an estimate of 20GW has been cited in evidence submitted to the resilience inquiry, that figure was seen as out of date and unreliable.

Decc though, has insisted that DSR remains firmly in its plans and the tender for robust research upon which to make provision is evidence that it is looking beyond generation to help deliver security of supply.

The Analysis of current and future provision of Demand Side Response in Great Britain tender closes next week (11 February) and the work must be complete within four months. It will feed into the review of the EMR levers that Decc and its delivery bodies will undertake this summer.

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