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National Grid’s new energy balancing service is far from ‘last resort'

Published: 12 June 2014 - Marianne Evans
Following the announcement by National Grid to introduce plans to help balance the UK’s energy system, KiWi Power, a London-based aggregator of demand management services, welcomed this extension of the UK’s Demand Response market, but described the six-week ‘window of opportunity’ for businesses expected to enter a new energy market as extremely challenging, and is calling for details of the proposed Capacity Market to be finalised to avoid a negative perception of Demand Management as a ‘last resort’ measure.
 
The new scheme, announced by National Grid, is referred to as ‘Demand Side Balancing Reserve’ or DSBR. It has been set up to reward participating businesses with financial payments for voluntarily turning down non-essential services, such as lighting, pumping equipment and air handling units, during times of peak demand throughout winter months. This measure is aimed at ensuring the electricity grid remains carefully balanced and blackouts are avoided.
 
Having monitored the development of the DSBR programme through the consultation period, KiWi Power has welcomed the decision by the Department of Energy and Climate Change (DECC) to implement demand response services at a time when the UK’s energy reserve margins could fall to just 2% by the winter of 2015-16. However, the short timescale involved may prevent many businesses from taking advantage of the scheme.
 
Ziko Abram, director and co-founder of KiWi Power said: “Yesterday’s announcement by the National Grid is a welcome step in the right direction. We are seeing strong demand from businesses wishing to take part but with just six-weeks in which to apply, many businesses, particularly those lacking the necessary technical expertise and resources to manage such a programme, will miss out. Implementing energy balancing measures, such as DSBR, requires the right technology to control and measure energy reduction so that accurate financial payments can be calculated and passed on, while ensuring business operations continue as normal without disruption.”
 
While DSBR is undoubtedly a positive step forward, reports describing demand reduction measures as a ‘last resort’ are misleading.
 
“Demand reduction strategies should only be described as a last resort if they prove to be more expensive than other, supply-side balancing measures. In fact, figures show that if demand response is deployed intelligently, it would prove more economically viable than many competing supply-side balancing measures” continued Abram.
 
Security of electricity supply is a priority for the UK Government. Due to changes in the energy market, the Government is intending to legislate to introduce a Capacity Market. This will act as an insurance policy against the possibility of the lights going out and future blackouts by providing financial incentives to ensure electricity capacity can meet demand.
 
Ziko Abram continued: “The Capacity Market (CM) has yet to be finalised. This is causing uncertainty within the energy industry, particularly with regards to the relative merits of demand and supply side measures. The CM should be designed to enable demand reduction measures to become a core part of the UK’s energy strategy, as it is in the US, and should not be regarded as a ‘last resort’. This will allow demand response to compete on a level playing field with supply-side mechanisms.”
 
“The 330 MW available for DSBR is very welcome news. However, we estimate there’s much larger potential to increase this figure in the UK in what is the largest demand response market in Europe. If we were to aim at taking 5% to 15% of demand away at peak times, as they can do in the US, then the market could be worth between 3,000 MW to 9,000 MW.”
 
Ofgem has already estimated that demand response services could save the UK £800m annually on transmission costs and £226m on peak generation capacity.
 
Widespread adoption of demand response could save 1.2m tonnes of CO2 emissions annually by 2030 according to recent studies.
 
KiWi Power’s proprietary smart grid technology is already helping hundreds of businesses throughout the UK, including NHS hospitals, water utilities and hotels, reduce their carbon footprint, use less energy and generate risk-free revenue streams simply by turning down power consumption for short periods of time, or by switching over to standby power equipment, during times of peak demand or grid stress.


 
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