Energy Saving

Uncertainty impeding much needed energy flexibility

Posted on 08 October 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.

After the recent large-scale national power cut, National Grid has highlighted its intention to review supply security and look at the potential for higher levels of resilience in the electricity system.

But as we shift generation away from centralised fossil fuel power plant, to a more diverse and decentralised mix, increasing security and resilience requires a new approach.

With the UK now committing to net zero carbon emissions by 2050, finding ways to meet growing power demand and balance new renewable generation, while reducing overall emissions, is going to be challenging.

Flexibility will be key. And this is where consumers and embedded generators come in.

DSR set to grow

In its most recent Future Energy Scenarios report, National Grid suggested that Demand Side Response (DSR) could reach 6.7GW by 2050 – and as much as 13GW in the ‘stretch’ scenario it put forward, far exceeding levels of participation seen today.

However, according to a survey recently published by The Energyst, 61% of organisations that currently provide DSR say they could offer ‘significantly more’.

Many others who don’t currently participate say they would be willing to do so if the conditions were right.

Decreasing revenues and uncertainty creating barriers

The biggest barriers identified by businesses are insufficient rewards and revenue uncertainty.

Nine in ten providers surveyed by The Energyst say generating income from assets is their primary reason for providing flexibility, followed by peak charge avoidance.

But the value in balancing services such as Short-Term Operating Reserve (STOR) and Fast Frequency Response (FFR) have reduced dramatically in recent years.

The Capacity Market – which includes DSR – is currently suspended.

And the recently introduced Medium Combustion Plant Directive (MCPD) has meant a lot of generation assets that previously participated in DSR no longer qualify to do so.

What’s more, Ofgem is looking to change the way in which Transmission Network Use of System (TNUoS) charges are recovered, essentially removing the Triad system.

This means large consumers who currently employ flexibility to reduce consumption at times of national stress on the grid will no longer be incentivised to do so.

New opportunities emerging

But there are also new opportunities to generate revenue.

For example, the wholesale market provides scope to sell back or increase the generation of onsite power during periods of peak demand (e.g. via our Market Access product).

Then as more Distribution Network Operators (DNOs) transition to Distribution System Operators (DSOs), a growing number of localised schemes for DSR providers will start to emerge (see our blog on this topic here).

The key is to identify the most suitable rewards for your individual business situation – and then to stack these to maximise revenue returns.

Getting the right support

To do this requires an informed approach, as well as knowledge of the policy and regulation climate and how future changes are likely to impact any return on investment in DSR assets or behaviour.

That’s where we can help.

We don’t ‘sell’ DSR for its own sake – but seek to work as your partner to identify the best way to reduce your energy costs, harness opportunities for revenue and support a more resilient and robust route to energy security.

Do get in touch if you’d like to find out more.

You can contact us via your Client Lead (for existing customers). Or contact the team direct at nBS@npower.com or by calling 0800 193 6866. 

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