Business-led demand response could generate £8bn for UK

Businesses could provide electricity equivalent to output of six new power stations by flexing demand and utilising better-enhance onsite generation projects, a new report from the Association for Decentralised Energy (ADE) has claimed.

The Flexibility on Demand report, released on Tuesday (19 July), has revealed that businesses venturing in to demand response initiatives could establish a 10-fold increase in revenue streams – having already gained £100m from the Government’s Capacity Market.

The report notes that UK energy consumers would save £2.3bn by 2035 and that more business-led demand response initiatives would reduce demand on the electricity grid and lower national costs by £8.1bn by 2030 – more than £300 per household.

ADE’s director Tim Rotheray said: “Keeping the lights on and our factories running is becoming increasingly challenging as the electricity market changes. We are building more wind and solar, which cannot always be depended on, and we are seeing our traditional large nuclear and coal power plants close down.

“If we are to meet this challenge successfully, we need to access the enormous resource that energy users can provide, whether they are NHS hospitals, pharmaceutical manufacturers or your local retail store. Today’s report shows that by putting these users at the heart of the energy system, we will make it more cost-effective, reduce carbon emissions, and give customers a chance to participate in the system and take control of their energy use.”

Market auctions 

By turning down demand instead of increasing supply, the report claims that up to 16% of the UK’s peak electricity requirements could be provided by businesses. This 9.8GW of business-provided generation could be reached if companies coupled onsite generation with smart energy consumption methods.

The report notes that 2.8GW of electricity could be drawn from demand response flexibility in the industrial sector, if quarry companies delay the use of rock crushing machinery to rely on previously stored supplies on energy.

A total of 1.7GW of electricity could be drawn from commercial and public sector companies that turn off refrigeration units, instead using the fridge’s insulation to maintain low temperatures. Around 2.3GW could also be created by utilising “highly efficient” on-site combined heat and power (CHP) units with a further 2GW drawn from on-site back-up generators.

The National Grid’s head of commercial and electricity Cathy McClay said: “National Grid is actively working on how we as an electricity industry can enable increased participation of a range of flexibility sources in our markets. We believe that there are great opportunities for consumers of energy to play an active role in flexibility and realise benefits of doing so.”

With new Capacity Market auctions being held in December this year, the report also outlines three ways that the National Grid could enable user-led energy to compete in energy markets “on an equal footing”.

The report notes that demand response should be given access to the Wholesale Market and Balancing Mechanism – which has seen prices reach £2,500 per MWh. Demand response should also be given “fair treatment” in regards to contract lengths, which currently sees new power plants given contracts 15 times bigger. Finally, a simplified Balancing Services mechanism, which serves to create balanced treatment between the supply and demand potential of businesses, should be implemented.

Commenting on the report, Open Energi’s Chris Kimmett said: “Real-time DSR is already providing invisible flexibility to the grid within seconds, 24 hours a day, seven days a week, 365 days a year – and we estimate there to be 750MW available today from I&C sectors alone. We must shift our thinking away from gas as the baseload foundation for renewables and DSR, and instead focus on the evolving but potentially foundational role of flexibility from existing business processes in our energy mix.”

Summer of excess

The report arrives just days after the National Grid’s tender for a 200MW of “Enhance Frequency Response” closed. Submitted capacity reached six times the amount advertised, with bidders placing a huge emphasis on energy storage

The National Grid has turned to energy storage in order to prepare for a “summer of excess” which could see generation reach 67.4GW compared to the record-low 35.7GW in demand. In line with this, the ADE report anticipates that by 2020 the UK will need between 4.5GW to 8.5GW in demand response initiatives. 

Alastair Martin, chief strategy officer of ‘demand response’ company Flextricity, recently highlighted the role of business in developing a robust, reliable demand side response (DSR) mechanism to fill in for failing power stations.

Matt Mace

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