Uncertainty often breeds stagnation. Businesses, in particular, are reluctant to invest or try new things if the future looks changeable.
Certainly, when it comes to embracing demand side response (DSR), we talk to many organisations who are interested in the opportunities that increasing flexibility around energy use can provide – but are cautious about making any commitment.
However, once we carry out a bespoke analysis to pin down how current and future opportunities could translate into savings to the bottom line, they can make a firm decision about project viability – and be confident about commencing or holding off.
Flexibility an essential part of energy future
Because one thing’s for certain – while the different DSR-related vehicles providing revenues and savings may be changing, DSR is an essential part of the UK’s more flexible energy future. So there will always be opportunities to benefit participants.
As National Grid summarises in its recent Power Responsive report: “The electricity system of the future will need to be flexible and dynamic, and so demand side flexibility should play a central role.
“Demand side flexibility improves system efficiency, helping to integrate low-carbon technologies, reduce peak demand, lower operating costs, and avoid or defer network investments.”
Demand for DSR increasing
As a result, the volume of DSR being utilised in the market is increasing – and is set to increase further over the coming years.
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 392 MW in 2017 to 2720 MW in 2018.
At the same time, local Distribution Network Operators are trialing their own DSR services to help balance local grids. (See our recent blog on this.)
Interest there – but lack of knowledge a barrier
But complexity and a perception that DSR is only suitable for the largest consumers often put participants off. In a recent Energyst survey, lack of knowledge was cited as a key reason for not participating.
That said, 83% of those non-participants said they are interested in doing so, as long it doesn’t affect their operations. This is up from 77% the year before.
There have also been concerns that changes to the way key transmission and distribution charges are calculated will devalue DSR participation.
And while Ofgem is reviewing key charges – for example Transmission Network Use of System (TNUoS) that’s currently based around consumption during periods of peak winter demand (Triads), thereby giving DSR participants the opportunity to reduce these costs by turning down demand – any changes are now unlikely to be introduced before April 2023. (See our blog.)
New developments in the pipeline
National Grid is also investing in a variety of future developments to make the DSR market more accessible to a wider number of participants. These include:
- The trial of a weekly cleared price auction for frequency response requirement to increase transparency and provide easier entry for new providers
- Increasing transparency of current grid services markets to improve providers’ ability to provide viable grid services tenders
- A commitment to widen access to the different balancing mechanisms
- Participation in a ‘Future Worlds’ consultation to map out how Distribution Network Operators (DNOs) can transition to Distribution System Operators (DSOs), thereby providing more localised DSR opportunities
- Collaborating with a number of DNOs to trial local schemes and technologies to open the market up to local participants
If you want to find out more about current and future DSR opportunities for your business, and a realistic idea of how these could translate into savings and/or revenues, contact our DSR experts via Energy HQ. You can call them on 0800 193 6866 or send an email to EnergyHQ@npower.com.