Until recently, it was unthinkable that consumers would become active participants in helping to manage the UK’s energy supply.
But as we shift to less centralised large-scale supply and instead embrace more diversified, small-scale and often renewable generation, we now need to find new ways to balance supply and demand.
Historically, these opportunities have been centralised, with National Grid the only provider of balancing services, procuring demand management from mostly large consumers.
But like our supply model, these opportunities are also set to become more diversified and localised.
The DNO to DSO transition
The UK’s 14 Distribution Network Operators (DNOs) – responsible for managing power distribution from National Grid’s main ‘arteries’ through local ‘capillaries’ to our homes and businesses – are actively preparing to transition into Distribution System Operators (DSOs).
This means more balancing of our network will take place locally, with DSOs procuring demand management services from consumers directly to balance their local grids.
Indeed, by 2030, the transition for DNOs to DSOs is expected to be complete, with a fully-optimised flexible grid in operation. (For more on this, see our DNO to DSO blog.) [please link to: https://www.npower.com/business-solutions/blog/2018/03/07/why-going-local-is-key-to-meeting-our-future-power-needs/]
New revenue streams opening up
This is opening up potential new revenue streams to many businesses, and is also likely to create a market for smaller consumers too.
But location will be key – these services will only be required where there is stress on the system.
So less so where the infrastructure to service larger industrial consumers already exists. But more so where electricity requirements are increasing or changing.
Heavily populated areas will also see increased demand for flexibility, where growing numbers of electric vehicles (EVs) will add to energy demand.
Spending on flexibility to save on network reinforcement
Only last month, UK Power Networks – the DNO for London, the southeast and east of England – announced it has allocated £12-million to buy demand-side response (DSR) capacity to help manage its grids from winter 2019.
Historically, 1MW is the smallest volume considered for a direct DSR contract. But UK Power Networks has reduced its minimum capacity threshold to just 50kW.
The DNO has indicated that it will require 200MW of DSR to offset the need to reinforce local networks over the next four years.
And while £12-million may sound like a lot of money, UK Power Networks head of smart grid development says: “The sums we’re investing will ultimately save customers money by extending the life of our existing infrastructure.”
Northern Powergrid is also currently investing in local DSR flexibility, as is Western Power Networks.
All UK DNOs looking at flexibility solutions
Indeed, according to the Energy Networks Association, all of the UK’s DNOs have committed to considering DSR or flexibility solutions over network reinforcement in all major projects.
So there are many new and emerging opportunities for businesses willing to be flexible around energy use.
The key is building a business case that explores all angles, with a trusted partner to explore those angles with you.
DSR revenue model changing
With the expected loss of a large chunk of traditional DSR savings come 2021/22 – when the peak-time charging models for transmission and distribution (TNUoS and DUoS) costs are expected to change following Ofgem’s current Targeted Charging Review – the picture is evolving. That’s why expert advice is important.
Our DSR team at Energy HQ is fully up to speed with all the changes to existing revenue/savings streams as well as new opportunities on the horizon, so can provide a fully-integrated view on how much DSR could be worth to your business, both now and in the future.