Demand side response (DSR) is moving into the limelight, after sitting in the shadows over recent years. Here at Delta-ee, we are getting more and more involved in DSR as a key research topic that our clients are asking us for help with. DSR is also rising up the agenda within National Grid, as we found out when we were invited to attend and facilitate roundtable discussions at National Grid's conference and launch of ‘Power Responsive’ in London on 18th June – a welcome and concerted effort at energising DSR in the UK. The National Grid has ambitious targets for DSR, wanting to see it meeting a much bigger chunk of the capacity that National Grid requires to avoid around £9 billion worth of investments. Today, DSR accounts for around 2GW of flexibility for the UK eletricity grid; the technical potential is estimated to be in excess of 10GW.
The drivers for National Grid’s campaign are clear. With increasing deployment of large scale renewables (wind, solar and hydro), and fossil fuel generation plants coming offline, the common solution is DSR. DSR provides a cost effective way to manage these ever pressing issues and other future challenges such as projected future growth in the electrification of heating (e.g. gas boilers to heat pumps) and transport.
At the Power Responsive launch event, key stakeholders came together to discuss key issues in the current DSR market, as well as brainstorm an action list for National Grid to help them to realise their ambitions. Stakeholders included DNOs, aggregators, control providers, suppliers, commercial and industrial customers and policy makers.
Our highlights and takeaway messages from the event are:
DSR is a key priority for National Grid
The Power Responsive campaign is merely a kick start to a longer term strategy to make DSR a core element for providing capacity and flexibility for an ageing and under-stress grid and transmission system. National Grid confirmed intentions to roll out a serious movement to DSR on a much bigger scale, targeting industrial and commercial customers first, before moving on to residential customers. Delta-ee’s Pathways Tool forecasts electrical demand out to 2025. Under a scenario where the UK meets its carbon budgets, our UK forecast shows much greater electrification of residential heat, which will increase peak electrical demand in the UK.
Should DSR be a carrot or a stick?
The “carrot or stick” comment coined by British Gas became one of the themes of the day. From British Gas’s perspective, helping National Grid to meet its DSR targets has historically been a stick, mainly through Triad. However, it is clear that this 35 year-old stick is not strong enough to motivate all customers to curtail loads at peak times. British Gas explained that out of a small sample of 10 of their customers, 3/10 reduced demand by 10%, 4/10 did nothing and 3/10 actually increased demand during a triad this year. Making DSR into a very large carrot instead would help to incentivise customers to get on board – and we suspect that with the right proposition a new type of flexible customer may emerge.
Some DNOs have growing confidence in DSR
UK Power Networks shared with the audience the results of their trials with DSR and their confidence in their ambition to construct 64MW of DSR capacity in their region. Through trials with industrial, commercial and residential customers, they found that 90% of DSR events happened when planned. The value of DSR for DNOs is in avoiding costly upgrades to substations and grid reinforcements. We see some DNOs moving quickly towards incorporating DSR into their business activities.
To regulate or not to regulate … that is the question
A few suggested that some form of aggregator certification scheme would help to build customer confidence. This suggestion received a schizophrenic reaction: partly welcomed, as it could help to build trust; but also groaned at, due to the aggregator market being unregulated today. A spokesperson from OFGEM commented that they didn’t want to ‘come down on aggregators like a tonne of bricks’. Delta-ee have undertaken primary research with potential and current DSR commercial customers, and in this we've seen that trust in, and lack of awareness of, DSR is certainly an issue with some customers.
OFGEM indicated that they welcome with open arms more entrepreneurs to come to DSR and help to 'shake things up'. The message from OFGEM was clear: the rules are set, the regulations are in place, and now it’s over to the market to make it happen; it’s the entrepreneurial aggregators that really are the ‘silver bullet’ in today’s market and that are key to carrying National Grid’s ambitions forward. Delta-ee research reveals there is no shortage of entrepreneurs, given that there are currently ~20 players in the UK market. However, many of them face challenges getting traction in the market.
Residential DSR … how close is it?
Throughout the event, it was clear that industrial and commercial customers were centre stage for all stakeholders. Residential DSR is on National Grid’s radar, but it is likely to be “5-10 years away”. The stated justification for this is due to a current lack of a cost structure, the scale of the benefits being lower, and a perception that technical solutions are not available (compared to commercial and industrial customers, which have suites of technology available). However here at Delta-ee we’ve analysed the markets in other European countries and the US, and have found that the technology options for residential DSR do indeed exist, and in fact are on the market today.
Part 2/2 DSR blog …
As well as a number of market issues, the customers are key to DSR being able to stay in the limelight. My next blog on the Power Responsive event will explore our roundtable discussions on the barriers faced by commercial and industrial customers for DSR. Delta-ee were asked to help open the roundtable discussions, given our understanding of what customers want, and in particular our recent research with DSR customers.
Want to find out more? Feel free to get in touch with me: [email protected]