Government is consulting on how to better incentivise energy efficiency and seeks input to inform market-based approaches.
It wants views on how current markets can be leveraged and how new markets might be created.
The consultation highlights key challenges around rewarding energy efficiency via current market approaches. The Capacity Market, for example, pays for generation or load reduction over winter to be ready to respond to a system stress event. It is not designed to reward permanent demand reduction.
National Grid’s ancillary services also tend to require specific short-term actions to help balance the system.
Similarly, distribution network operators are starting to procure alternatives to network reinforcement, but they are largely paying for services that can help manage constraints at specific locations at certain times of day.
Government asks how those flexibility-based markets might be used to facilitate energy efficiency, but also seeks views on new market models, and on potential benefits of combining energy efficiency with flexibility.
The consultation requests evidence on whether behaviour change should be rewarded in the same way as measures that require installation of equipment/investment.
See the consultation here.