Winning bidders announced for Britain’s first ‘energy efficiency auction’

The Department for Energy and Climate Change (DECC) has today (4 February) awarded 18 organisations £1.28m to help them reduce peak electricity demand, as part of the UK's first ever Energy Demand Reduction (EDR) auction.

Participants in the EDR pilot made their applications for a cut of the money based on how much energy they could save and at what cost. The funds went to businesses running projects – such as LED lighting or efficient motors – that could save energy in the cheapest way possible.

The 18 successful bidders will receive payments once savings are delivered and evidence is received – all auction winners must offer a minimum reduction of 100kW between the peak hours of 4-8pm

According to Decc, this pilot auction will help reduce demand by at least 1,855,548kWh across the country during the winter peak – equivalent to making over 37 million cups of tea.

Energy and Climate Change Secretary Ed Davey said: “We want to see if reducing demand on the electricity grid can be a cost-effective solution that will work alongside building new power stations – guaranteeing our energy security, cutting emissions and lowering energy bills.

“This auction is the first of its kind in Britain. If this goes well, demand reduction could compete alongside new generation in future capacity auctions, to help keep costs to consumers as low as possible.”

The EDR scheme aims to reduce demand for electricity through efficiency projects – the type of which have saved the UK from building 14 power stations over the last 30 years.

Timber supply company Howarth Timber was one of the 18 winning bidders.

Industry concerns

Industry experts seemed to welcome the idea of the scheme, but criticised the ‘scattershot’ nature of the new policy as well as its limited scope, which saw just £1.28m allocated out of a possible £10m. 

Reacting to the EDR announcement, ADE energy director Dr Tim Rotheray said that even greater energy savings were possible if the scheme was to be opened up to all energy users.

“By creating the right policy, demand reduction has the potential to reduce power consumption by 45trn kWh by 2020, enough for thousands of cups of tea for everyone in the UK,” said Rotheray. “It is vital that in extending this pilot it brings forward demand reduction at best value to the consumer.

“By creating a pilot that is more accessible to different energy users, such as industrial sites and those with Climate Change Agreements, we have the opportunity to bring forward much more reduction capacity at lower cost.”

In a similar vein, Wayne Mitchell, head of npower Business Solutions, added: “Investing in select technologies or upgrades might deliver efficiencies, but a scattergun approach is unlikely to yield long-term savings.

“Regardless of the technologies highlighted in this first EDR auction, an integrated approach to energy solutions will get the best results. This needs to start with a full understanding of how, when and where your business uses energy, and suppliers should be doing everything they can to encourage this.”

Let us know your thoughts on the EDR scheme: Is it a good way to encourage efficiency, or too small and diffuse to make a real impact? Leave a comment below or tweet us @edie

The Carbon Trust’s Paul McKinney gave us his take in an exclusive blog post here.

Brad Allen

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