Energy Saving

Maintaining DSR revenue: a new option to replace Triad loss

Posted on 27 November 2019
By Ben Spry
Ben Spry
Head of Risk Management

Ben manages the operational delivery of our risk management services, including the award-winning Optimisation Desk and its new suite of Demand Side Response products.

With the recent confirmation from Ofgem that the Triad methodology for calculating Transmission Network Use of System (TNUoS) charges will cease from April 2021 (see last week’s blog), many large consumers are reviewing revenue opportunities for demand side response (DSR) participation.

Of course, significant savings from Triad avoidance – that is turning down grid demand during periods of peak demand – can still be made throughout this winter season and next.

Two more winters to save £££££s

Indeed, a Triad management strategy can save up to £60,210* for every MW you don’t import during the three half hours of peak demand between 1 November and the end of February.

If you want to know more – or would like to find out how we can support you via our Triad Warning Service (free to customers) and automated Triad Management options – contact our Energy HQ team on 0800 193 6866.

Then as they say, when one door closes, another opens.

According to National Grid, Triad avoidance reduces the UK’s peak national demand by around 2GW over the winter season.

Now we are working to a target of net zero emissions by 2050, reverting to firing up more fossil fuel plant to be on standby to provide this capacity clearly isn’t the best approach.

Demand management set to grow

A far more carbon and energy-efficient option is to ask large consumers to reduce demand during peak times.

So alternative mechanisms to deliver this capacity are likely to increase.

Now the Capacity Market has been reinstated (following its suspension during an investigation by the EU Commission), the government is preparing to procure future capacity in three [please confirm] auctions in Quarter 1 2020. Two of these will be for DSR. 

The T-3 auction will be held in January next year to procure DSR capacity for 2023 delivery and the T-4 will follow in March for 2024 delivery.

Prequalified volume for next CM auctions

Our Energy HQ team at npower Business Solutions has bid and prequalified for a significant volume in both auctions on behalf of our customers.

So if you currently load manage or turn down during Triad periods, participating in the Capacity Market is an ideal way to replace some of your lost Triad revenue.

With coal generation, older gas plants and nuclear facilities set to come off line over the next 5 to 10 years – and much of the growing volume of renewable generation de-rated to the lack of predictability –the CM will need to send a price signal that incentivises gas engines, battery storage and DSR to participate and therefore we see the Q1 deliver higher revenues than previous auctions.

Forecast revenues of up to £22.5k per MW

Based on current forecasts and analysis of previous auction out-turns, you may be able to earn between £8,400/MW and £22,500/MW of additional value for your business.

But until the auction happens, it’s impossible to say for sure.

The CM works a bit like a game of chicken. As a reverse auction, participants set a bottom limit they’re prepared to go down to. They then drop out one by one as their limit is reached, until the final participants secure contracts for the volume required.

Our Energy HQ experts can help you prepare and assess practical limits – and then participate in the auctions on your behalf.

Balancing Services likely to increase

We are also likely to see increasing capacity volumes required by National Grid for its range of Balancing Services.

For example, National Grid used 49% more Short-term Operating Reserve (STOR) in 2018 than the previous year. The volume of dynamic capacity for its Firm Frequency Response (FFR) scheme also increased – jumping from 392MW in 2017 to 2720MW in 2018.

And as we’ve recently discussed, there is the emergence of more localised DSR schemes via Distribution Network Operators (see our blog on this topic here).

So the opportunities are there – as long as you’re willing to take a more holistic approach and adapt your strategy.

As I’ve mentioned, if you need any help or advice with this, our Energy HQ team of DSR experts are here to support you. You can reach them by calling 0800 193 6866 or sending an email to nBS@npower.com.

* Gross Half-Hourly demand tariff for the London area, Forecast TNUoS Tariffs for 2019/20, National Grid

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