Demand response: paving the way for a lower carbon economy

As the gap between supply and demand of energy in the UK becomes ever narrower, Alastair Martin, chief strategy officer of 'demand response' company Flextricity, highlights the role of business in developing a robust, reliable demand side response (DSR) mechanism to fill in for failing power stations.

November 2015 brought this issue into sharp focus when National Grid issued its first NISM – Notification of Inadequate System Margin – in almost four years, as a result of multiple coal power station failures across the UK. Without DSR to provide additional capacity at times like this, there is little doubt we would be seeing regular NISM warnings, and at times ‘brownouts’ or even ‘blackouts’ in some parts of the country.

Demand response delivers efficiency by turning up small generators or turning down electricity consuming processes when required to help stabilise national electricity systems. This makes demand response a source of margin. Each megawatt of margin provided by demand response is a megawatt that does not need to be provided by conventional power stations – maximising efficiency and delivering more environmentally friendly power.

Sources of demand response: –

Flexible electricity loads such as cooling, heating or pumping
Combined heat and power (CHP) generators at hospitals, community energy schemes or industrial sites
Small hydro generators with reservoirs
Standby generators installed at industrial sites

DSR is a major growth area within the energy market. When delivered responsibly, it is an efficient and intelligent use of existing resources to secure supplies and reduce the country’s CO2 output.

Business benefits

At Flexitricity, this has been our goal for 12 years. We make use of existing flexible energy resources from our network of connected companies – including data-centres, refrigerated warehouses, offices, hospitals and factories – as a means of providing excess capacity without requiring to build new assets. These resources include electricity-consuming processes which can be turned down for short periods, emergency standby generators at critical sites, combined heat and power (CHP) providers, and small hydro sites.

In return, these businesses and organisations can tap into new revenue streams, reduce CO2 emissions and improve security of supply. In other words, by unlocking the flexibility in their energy assets (without affecting their day-to-day operation) businesses are financially incentivised for providing reserve when margins are tight. What’s more, by participating in demand response, regular testing improves the reliability of their assets, and national carbon emissions are reduced by reducing the need to keep dormant power stations active. 

Standby generators are a minority of Flexitricity’s portfolio, and they produce only a small fraction of the reserve energy we deliver to National Grid. But when they’re needed, they’re really needed, whether that’s by National Grid, or by the hospital or datacentre they support.

To be reliable, a standby generator must be fired up on load periodically – it needs to be given some proper hard work to do every now and then. Our DSR network makes sure this happens when the energy is really needed. And while they are switched off, they quietly provide the margin that National Grid needs to secure the system, which means that large gas power stations don’t have to run inefficiently at part load.

Diesel farms

This is in sharp contrast to the rise of ‘diesel farms’ developed by investors seeking returns from the UK’s tight capacity margins. Diesel farms consist of new generators in shipping containers, clumped together on brownfield sites. They don’t supply emergency power to any particular site, so they depend on reserve and capacity markets to pay their mortgages.

All diesel is dirty when it runs – that’s a fact. To be environmentally beneficial, diesels need to keep strictly to a reserve role, spending most of their time as silent capacity, enabling other power stations to operate more efficiently. If a diesel runs for more than 100 hours in a year, it’s gone beyond what it needs to ensure reliability.

But diesel farms only need test runs if they needed to be built in the first place – and that’s the problem. There are an awful lot of them. Last month, according to analysis by Sandbag, the Government promised 15-year subsidies to another 650MW tranche of new-build diesel farms.

The virtue of diesel is speed – it’s best for fast delivery when a large nuclear or gas power station fails unexpectedly.  We already have far more than we will ever need in that specialist role.  We’re in danger of relying on them to balance the slow, natural variations in wind output.  And that’s unthinkable.

Energy reset?

In her “energy reset speech” last November, Secretary of State Amber Rudd promised to take stock of the capacity which the Government has been buying and ensure gas comes through next time. It may be too late for that, and gas is absolutely not the answer to everything. But it’s certainly true that the Government’s capacity policy needs a rethink.

There are a lot of ways to secure electricity supplies, and compared to diesel farms, virtually all of them are less polluting and a better long-term bet. Where DSR uses diesels, it aligns essential test runs on critical sites to the needs of the national electricity system. And DSR delivers far more: from flexing CHP generators to turning cold stores to max when it’s particularly windy, DSR can provide reserve in both directions – up and down.

DSR is already a vital part of the UK’s energy mix. It is also boosting other low-carbon technologies like community heating schemes. All of this is happening now. But decisions taken now by the Department for Energy and Climate Change will influence emissions and security for decades to come. It certainly is time to move on from diesel farms. It’s also a great time to set out a plan for electricity that is economic, secure and low carbon. DSR is a crucial part of that.

Case study: Norish (cold storage/logistics company)

Alastair Martin is chief strategy officer of the UK’s largest demand response company Flextricity

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