Dr Tim Rotheray, Director of the Association for Decentralised Energy (ADE), talks to energy writer Susannah Lawson about what’s driving growth in the market for Demand Side Response and why it’s a win/win solution for all concerned.
There has always been a need for flexibility to ensure power supply and demand are matched. But as Dr Tim Rotheray of the Association for Decentralised Energy (ADE) highlights, this need is increasing, as more renewable power generation capacity is installed in the UK.
“Traditional thermal generation plants (i.e. gas, coal, oil and nuclear), which have historically provided this flexibility, are closing due to a combination of carbon taxes and the retirement of ageing power stations,” he says.
According to a research by UK think tank Policy Exchange – and cited in the ADE’s recent report Industrial Flexibility and Competitiveness in a Low Carbon World – around 23 gigawatts (GWs) of thermal capacity has been closed or mothballed since 2010, and a further 24GWs of coal and nuclear capacity are expected to close between now and 2025.
Need for smarter flexible power system
“The closure of these thermal generation plants is driving the System Operator [National Grid] to find alternative flexibility sources,” says Dr Rotheray. This, along with the need to accommodate more renewable and less centralised power sources, is creating the need for investment in a ‘smarter’ and more flexible power system.
“A smart system enables both power supply and demand to be flexed in the most efficient way possible, rather than simply changing generation to meet demand as in the past,” explains Dr Rotheray. “The ability to tap into flexibility sources ensures power supply and demand are matched, that the grid is not overloaded and that supplies are at the correct voltage and frequency across the network.”
According to ‘An analysis of electricity system flexibility for Great Britain’ by Imperial College London and the Carbon Trust, a UK smart system could save up to £40 billion by 2050 in avoided network upgrade, peak generation build and curtailment costs.
Potential to save £8bn a year by 2030
“Research also suggests that there are significant consumer benefits from increasing the amount of flexibility in the power system, including through the use of demand side response (DSR),” says Dr Rotheray. For example, the National Infrastructure Commission suggests that flexibility could lead to consumer savings worth £2.9-8.1 billion per year by 2030.
Certainly, there is scope for greater DSR participation. “On the Continent, for example, where it’s more prevalent, large consumers can reduce their annual energy bill by up to 10% through participating in demand response programmes,” says Dr Rotheray.
Finding savings is a key goal for many British businesses, especially as higher electricity costs are one of the main drivers to rising UK industrial production costs.
UK businesses paying 20% more for energy
According to analysis by Eurostat cited in ADE’s Industrial Flexibility and Competitiveness in a Low Carbon World report, large consumers in Great Britain paid approximately 20% more for energy than large consumers in 27 other European countries in the first semester of 2017.
“Flexibility is a win-win for energy users, energy system players and the System Operator,” says Dr Rotheray. “Industrial users receive payment for their dynamic interactions with the grid and ultimately benefit from reduced network and policy costs. For the System Operator, the participation of energy users in the electricity system can reduce the whole system cost, which in turn reduces costs for all energy users.”
Indeed, National Grid 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.
Smaller consumers able to participate
Yet despite this, many businesses still believe contributing to balancing services is only for the largest consumers. However, as Dr Rotheray points out, aggregation provides a means for many more smaller consumers to participate.
“Even though a customer might only be able to flex a small share of its demand, by joining with other users providing flexibility services, the total reduction in demand can reach sufficient scale to make a significant contribution to flexibility markets,” he explains.
“To manage the mix of users providing services, demand response services are often brought together by an aggregator who develops the technology to optimise different assets.”
Aggregating demand from 0.1MW
For example, at npower Business Solutions, their Energy HQ team aggregate demand for a range of DSR services from 0.1MW. They also use a Smart Controller to automate DSR participation – e.g. by automatically switching to onsite generation or battery storage or turning down energy-intensive processes during periods of network demand or peak pricing. This in turn delivers both cost savings and revenue generation.
The ADE believes there is a lot of scope for more businesses to get involved in DSR. “The industrial, commercial and public sectors account for more than half the UK power demand,” says Dr Rotheray. “Of this, the industrial sector represents 26% of the UK’s power demand and the commercial and public sectors account for a further 27%.
“As demand flexibility services are proportional to the scale of electricity consumption, there is significant demand flexibility potential for industry. This potential is still to be fully realised and changes in electricity demand, due to electric vehicles, will create new opportunities for demand response.”
For more help and support in identifying suitable DSR opportunities for your business and devising a bespoke DSR strategy, talk to the experts at Energy HQ, npower Business Solutions via EnergyHQ@npower.com or by calling 0800 994 9382.