FEATURE ENERGY MANAGEMENT ENERGY (R)EVOLUTION
Richard Palmer, associate partner of Energy at Carter Jonas, investigates how businesses can benefit from demand side balancing services (DSR) technology
I
n April this year, Britain saw its first ever working day without Coal Power since the
Industrial Revolution, and in June the National Grid tweeted “Renewables breaking another record at 1pm today providing 50.7% of demand”. This illustrates how the energy market is
changing; and with change comes new opportunities. Moving forward the market will likely evolve from a mix dominated by large power stations providing predictable and mostly flexible electricity to one with a significantly greater proportion of variable, though less flexible solutions, such as wind and solar power.
DEMAND SIDE BALANCING These changes increase the potential for demand side balancing services (DSR); services which enable National Grid, the System Operator, to balance demand and supply more efficiently at times of system stress, basically when everyone is using the kettle. In June 2016, National Grid committed to procuring 30%-50% of balancing services from demand side sources (businesses which actually use the power) rather than from power stations. They recently published a consultation: “System Needs and Product Strategy” setting out clarity and simplification on the types of balancing services required to maintain secure and affordable electricity supplies to aid investment. This will open up new opportunities for commercial and public sector businesses. DSR technologies are increasingly feasible
due to the integration of information and communications technology and the power system, resulting in a new term: Smart Grids. This currently forms part of a call for evidence consultation by BEIS and Ofgem which published the responses on 24th July 2017, known as the Smart Systems and Flexibility Plan and emphasises the ability for customers to play an active role in managing their energy needs. To benefit financially, commercial and public
sector businesses need to understand where, when and how they draw electricity from the public supply system. They also need to understand the capacity and capability of any onsite generation and to identify excess demand which does not materially impact on operations. It is important to understand whether sites are half hourly (HH) metered or on smart
8 WINTER 2017 | ENERGY MANAGEMENT Some suppliers are able to bid DSR
customers in to the day ahead wholesale market, which can be very lucrative when an offered strike price is accepted due to an unforeseen event. NG also provides additional routes to market
by providing frequency response (reducing demand within 30 seconds), by providing reserve (reducing demand within up to 20 minutes response time) and by providing contingency capacity in the Capacity Market which can be called on to supplement grid supplies. It is quite complex to understand the
meters. Some commercial premises will be required to change to HH metering from 1st April 2017; this has potentially significant implications for additional delivery and metering costs especially at peak times. Sub- metering may also be required to provide additional information on specific systems and processes. Once the energy profile is understood,
pricing data can be overlaid to understand when it is beneficial to turn down load and delay consumption to lower cost times (there can also be occasions when businesses are paid to “Turn Up” demand). This involves both the wholesale price and delivery prices through the transmission and distribution network. Most value is generally achieved through the
winter peaks from 4pm to 7pm Monday to Friday when non- commodity costs such as Triad (and an Ofgem review has just been finalised affecting embedded generators) and “red band” DUoS rates are at their peak. Savings are also achieved on supplier recharges of government taxes & levys and electricity system costs.
“DSR technologies are
increasingly feasible due to the integration of information and
communications technology and the power system, creating the “Smart Grid...”
“revenue stacking” from the wholesale market, cost avoidance of delivery charges and National Grid Services. This is where the role of the “Aggregator” in the energy market plays an important role to maximise value; differentiation between competitors will be partially derived by their trading and optimisation desk capability. Furthermore, it is important to take a staged
approach to reduce operational risk; for example entering the Capacity Market before considering frequency response markets. The value to this opportunity will depend on location and the amount of flexibility a commercial business can offer but, as a starting point, £50,000 to £100,000 per MW can be achievable. Carter Jonas are actively advising clients on
how DSR can provide new revenue streams. To give an example, the company are currently working with a hotel group which could potentially save £25,000 by running three of its existing back-up generators 20 to 25 times over half or one hour periods between November to February. Other commercial operations, which could potentially take advantage of this energy (r)evolution are hospitals, shopping centres, catering suppliers, local authority offices and manufacturers who can either earn or deliver savings and gain greater control of their energy management. This “flexibility market” presents an
exciting opportunity, especially for those with relatively high electricity demands. Additionally, DSR can deliver greater resilience and competitiveness in an uncertain economic climate but…time is of the essence.
Carter Jonas
www.carterjonas.co.uk T: 0207404 0640
/ ENERGYMANAGEMENT
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