Three energy policy tweaks ‘could unlock 10GW’ of demand-side response


cradlepicUK firms could deliver almost 10GW of demand-side response within the next four years if policymakers level the playing field for providers, according to the Association for Decentralised Energy.

Its latest report suggests unlocking industrial, commercial and public sector demand-reduction as well as back-up generation and combined heat and power (CHP) could save UK bill payers around £10bn by 2035.

Of that figure, around £2bn is from avoiding the need to build new power stations, with £8bn in savings from avoided network infrastructure.

The ADE suggests some 2.8GW could be delivered by industrial companies, 1.7GW from the public and commercial sector and around 2.3GW from CHP.

The association also believes around 3GW of demand-response could come from existing back-up generation. That figure could potentially be much higher. No accurate tally of the UK’s back-up generators exists. Experts told the Lords Science & Technology Committee in 2014 that it could be as high as 20GW, although that estimate was then based on a 2010 ‘guesstimate’ by EA Technology, which likely lifted that figure from a 2001 report for the DTI.

Meanwhile, Frontier Economics, commissioned by Decc last year to look into the potential for DSR in the UK, could not find accurate data on which to base assumptions. It modelled scenarios with between 5GW and 20GW of back-up generation.

Either way, ADE director Tim Rotheray said there were “swathes” of generators that could be used to provide balancing services with the right framework in place.

He called for policy and market makers to implement three changes to unlock demand-side response: fair treatment in the capacity market; independent access to the wholesale market and balancing mechanism; and simplification of the balancing services market.

The capacity market currently awards generators contracts of up to 15 years but DSR providers are only given one-year contracts. Some have questioned the legality of that arrangement. Rotheray said the issue was that policymakers recognised the low cost of equipment – but not cost of the time and resource to develop DSR business cases.

Rotheray said DSR providers would probably be satisfied with “contract lengths between three and five years”. However, he questioned “whether it is right to give one actor a three year contract and another a 15 year contract … the time and effort [of implementing DSR within a business] needs to be reflected in the capacity market [contract structure].”

Paul Lowbridge, who manages National Grid’s Power Responsive campaign, which aims to procure up to 50% of balancing services from DSR by 2020, acknowledged the issue of complexity.

He said the system operator had made headway in terms of market education in the first year of the campaign, but would focus on making balancing markets more accessible for demand-side providers and “levelling the playing field” over the next 12 months.

Download the report here.

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