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National Grid service could mean cheaper energy bills. So why are some businesses against it?

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Some business and manufacturing organisations have come out swinging against a new National Grid service which pays businesses to reduce their power demand during peak periods. They shouldn’t. Businesses and consumers who are worried about energy bills will be big winners. 

National Grid announced last week they would develop a Demand Side Balancing Reserve, a new service which will pay large energy users to voluntarily reduce their demand during specific, high-demand winter weekday evenings between 4 and 8 pm.

The CHPA’s Claire Wych explained  demand side response, and the cost-effective value it can provide the energy system during high-demand periods.

But the service is not just good value for the electricity system, but also good value for large energy users. And yet, instead of welcoming this service, business organisations came out against it.

The CBI said it “underlines the need for us to get the investment we need into our energy infrastructure to keep the lights on”. EEF said “we should never have found ourselves in the dire situation of having to bring forward last minute solutions to avoid blackouts”.

The FT also came out swinging, calling the measures “an indictment of Britain’s politicians”. A column by Jonathan Guthrie described it as householders paying “workers to down tools when manufacturing should be staging a recovery”.

These responses fail to recognise the financial opportunity which demand side response can provide large energy users like manufacturers, data centres, and industrial sites.  

As it considers tightening capacity margins, National Grid has a choice in how it should spend its revenue to ensure electricity security. This is revenue collected from all business and household consumers through the network charges added to our electricity bills.

National Grid can take this money, collected from all electricity users, and pay energy companies for them to build and maintain power plants. Or National Grid can instead pay businesses, manufacturers, and other large energy users to provide a valuable, voluntary service.

And these are not small amounts of money. It will be about £10/KW just to participate, and between 25p-£15/KWh for power demand reduced during the peak demand periods. For an industrial site with 20 MW of on-site power demand, just by turning down their demand by 5%, such as adjusting their work schedules around peak demand periods, they could receive thousands of pounds.

Not only that, because turning things off through demand side response is usually cheaper than building and maintaining a power plant to run for just a few high-demand hours a year, network charges for all consumers, businesses and householders, would be lower.

The preference for manufacturing sites should be clear. But it is going to take time to change expectations that we are passive recipients of energy, produced somewhere else and in control of someone else.  

The energy system is changing. There are going to be increasing opportunities for energy users to participate in the energy system. Schemes like the Demand Side Balancing Reserve ensure energy users will receive value for this participation. We can all benefit, whether you are a manufacturer, a small businesses, or a bill payer. 

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Jonathan works closely with CHPA members and policymakers to promote the sustainable development of combined heat and power, district heating, and the wider decentralised energy sector in the UK. Jonathan joined the CHPA in 2012 after previously working as a senior researcher in Parliament, and he has also worked as a journalist for several North American newspapers and magazines.

Jonathan holds a BA from Tufts University and an MSc in Public Policy from Queen Mary, University of London. He grew up in Vancouver and Toronto, Canada, but has lived in the United Kingdom since 2008.


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Guest Monday, 17 December 2018