National Grid ‘risks undermining business confidence’ with demand-side service withdrawal

National Grid's decision to cancel a tender financially incentivising companies to reduce electricity demand during peak times in winter months has been criticised as a "short-sighted" approach which will "undermine" business confidence in the UK energy strategy.

The Demand Side Balancing Reserve (DSBR) tender was reportedly withdrawn by the Grid due to a lack of willing participants, following the application closure earlier this summer. The network operator confirmed yesterday (22 August) that it would not be procuring any capacity for this winter, stating “minimal volume would be available across this period”.

In a letter addressed to tender applicants, National Grid said: “DSBR was designed for those consumers that don’t already reduce/shift demand or run embedded generation during peak times in response to pricing signals and despite National Grid amending the DSBR service via a consultation in September 2015 to encourage participation over the peak, it is clear this has not been successful.”

‘Short-sighted move’

The DSBR service targeted commercial and industrial energy consumers who volunteered to reduce demand between 4-8pm on winter weekday evening in return for a payment. 

The decision to scrap the initiative has been described as a “short-sighted move” from industry procurement experts, who claim that its withdrawal could have been prevented had businesses understood the benefits of managing demand during peak demand periods.

Energy consultancy Inenco Group, which worked closely with National Grid to help communicate the financial rewards of demand side response to business, believes that the decision could indicate the Government is prioritising short-term cost over carbon reduction.

Inenco chief commercial officer David Cockshott said: “The decision to completely cancel DSBR for the coming winter is a short-sighted move. It is already widely acknowledged that businesses will have a crucial role to play in keeping the system balanced in the future, providing cost effective flexibility.

“Withdrawing a scheme three months before it comes into effect risks undermining business confidence in future schemes, from the capacity market to frequency response. Today’s decision to withdraw DSBR at short notice is yet another example of how businesses are impacted by changing priorities and policies.”

Cockshott’s comments were echoed by demand response aggreegator Open Energi, which stated that cancellation due to lack of take-up from the UK’s energy intensive businesses contradicts the significant growth the company has experienced in adoption of smart, technology-led, demand response.

“The perception of demand-side response as a ‘blunt tool’ for stimulating demand reduction in a crisis is out of date,” Open Energi’s commercial manager Chris Kimmett said. “As our electricity grid becomes more dynamic we need solutions which can react in real-time to second-by-second spikes in supply and demand.

“The reality now is that fast reacting, invisible demand response innovation fits precisely around the needs of companies, earning them revenue, proactively and invisibly – whilst safeguarding core business functions.”

Smart-grid stagnation

Yesterday’s announcement form National Grid reflects a growing sense of unease within the business community that ‘smart-grid’ technologies are not progressing quickly enough to create a “truly smart energy network”.

New research from renewable energy purchaser and supplier SmartestEnergy recently revealed that the business case for energy storage is being further undermined by many uncertainties within the burgeoning sector, such as limited revenue streams and grid services contract availability.

Concerns have also been raised that the £11bn Government plan to install smart meters in every UK home and small business by 2020 is in danger of becoming a ‘costly failure’.

MPs recently called for a complete overhaul of the UK’s energy network operation, recommending that operating systems should be transferred from National Grid to independent operators in order to mitigate the potential for “conflicts of interest”.

George Ogleby

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie