Companies could benefit from contracts to cut their electricity use at peak times

31st January 2017

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  • Manufacturing


Terry Wilcock

Some 10,000 UK businesses could save 2% of their electricity bills by providing demand side response (DSR) services to the grid, according to energy firm SmartestEnergy.

Demand side response (DSR) involves a firm cutting its electricity use at times of high demand to help avoid power cuts. It is common practice among heavy industry, but SmartestEnergy said there is room to expand, particularly among supermarkets, hospitals and manufacturers.

If a firm cut its electricity use by 250 kilowatts, it could save around £20,000 a year, it estimated. This would be about 2% of its typical annual bill.

SmartestEnergy’s call comes the week the government holds its latest capacity market auction. Under this, energy firms will bid to provide almost 54 gigawatts of capacity in winter 2017–18. The lowest bids win contracts. DSR can compete in these auctions, although previous sales have been dominated by coal and gas plants able to generate power cheaply rather than cut use.

In an effort to boost the market, the government plans to hold a separate auction specifically for 300 megawatts of DSR In March.

Robert Owens, SmartestEnergy’s vice president of DSR, admitted the government and energy firms have been making the case for DSR for years, but he insists interest is growing. In 2015, some 470 megawatts of DSR won contracts in capacity market auctions. That figure leapt to 1.4GW in 2016.

Firms need to be continually reminded of potential savings, Owens said, ‘so the full range of companies are aware of what’s possible, and to encourage companies to relook at it if they’ve done so before and thought it was too complicated.’ When providing DSR, companies make money by being paid for guaranteeing capacity, but also from avoiding peak electricity and grid charges.

William Caldwell of the Association for Decentralised Energy said there was still a ‘huge awareness and education issue’ around DSR. Some businesses believe they would have to shut down their business entirely, and for long periods, if called upon to cut electricity use. Most businesses would be able to simply switch their operations around for a few hours. A rock crushing firm, for instance, may have to stop crushing rocks, but it could continue to transport them.

Caldwell said several policy changes would encourage take up. Allowing firms to win three or five-year contracts instead of the current one-year arrangements would encourage more businesses to come forward as they would see it as a guaranteed revenue stream, he said.

The government is not due to undertake a major review of its capacity market until 2019, however.


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