National Grid has launched a major push to embed demand side response within the heart of the UK’s energy system. The system operator has suggested that demand response could play a larger balancing role than generation within the next 15 years.
National Grid yesterday held an event to launch its Power Responsive platform, which it bills as a “framework for turning debate into action”.
The aim is to bring businesses, suppliers, policy makers and other stakeholders together in order to scale the demand side response market by 2020. “The definition of scale by 2020 from balancing services (DSR) was 30-50% – this is our target,” a National Grid spokesperson told The Energyst.
Thereafter, National Grid sees demand side response as potentially playing a larger role than generation in system balancing. The firm’s head of commercial operations Duncan Burt told utility industry magazine Utility Week that “well over 50%” of balancing could be delivered by demand-side measures by 2030.
The market for demand side response is currently small. Of the 48.6GW of capacity procured in the December T-4 auction, DSR firms represented 174MW, or around 0.35% of the total.
However, it is beginning to grow rapidly.
National Grid announced earlier this month that it had procured 2.56GW of back-up power for the coming winter. Of that derated capacity, demand response represented 177MW, or around 7% of the total balancing reserve. Overall, the amount of demand side balancing reserve procured was up 56% year on year.
Price is right
Also, the price of demand side response is coming down. Strategic balancing reserve (generation) and demand-side balancing reserve cannot be truly compared. That’s largely because the generators contracted by grid have to take their plant out of the market all day. Demand-side firms are usually just contracted for the evening peak. Then the rates paid vary if either service is actually used.
But on a procurement basis, National Grid’s figures for the second round of SBR/DSBR suggest that per megawatt, the current premium on demand side response is around 17%. However, that includes testing and validating, which National Grid suggested made up around a quarter of demand side procurement costs.
Once scale can be achieved and the technologies proven, demand side response is likely to be a far cheaper option. It would also create a market where the value is pocketed by a far broader range of businesses than a few centralised, vertically integrated firms.
However, that requires the energy system and policymakers to reverse their centralised mindset. It will also require programmes like the capacity market to be more flexible in terms of how businesses can participate rather than stipulate response must be available 24/7 or not at all.
Decc has acknowledged that demand-response participation will be part of its summer review of EMR mechanisms, and issued a tender earlier this year to scope out just how big a role DSR might play. But National Grid’s move this week to drive it up the agenda suggests that the market is already mobilising.
Not before time. The Energyst this week surveyed readers and found that 80% were interested in participating in demand response. However, the same percentage had not been contacted about it by aggregators or by their energy suppliers.
More than half of respondents, from SMEs to large corporates, said that up to 10% of their electricity demand could be flexible without interrupting their business operations. Around a third (35%) said that between 10% and 25% of demand was flexible.