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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.
The World Cup is one of the most popular sporting events on the planet, but why does an intense penalty shoot out being played in Brazil mean that UK businesses may need to support the national power grid?
The solar eclipse of 1999 saw the strongest grid surge in British history. As the sun began to reappear, the cumulative effect of people going back to their daily tasks, all at the same time, saw an electricity demand surge of 3,000MW in the space of just a few minutes; the equivalent of an extra 4 million people demanding electricity from the system.
15 years later, the intricate forecasting of system stress events continue to play an unseen but integral role in keeping the lights on.
To understand what electricity demand on the system may be like during this summer's World Cup, National Grid have surveyed the population to see who will be watching, looked at data from other events like the Olympic Games and the Royal Wedding to see how the demand for electricity changed, and watched countless hours of football games; all to make sure Britain's lights – and televisions – will stay on.
Even small decisions and details, like how much extra time is awarded and the emotions that players express during the match, can change the way electricity is used in the home.
So what happens during a surge?
Electricity on the grid comes from various different sources, which all have varying flexibility, cost and carbon impact.
For power generation, hydro-electric power stations are by far the quickest to respond, taking about 10 seconds to ramp up, in comparison to nuclear, which can take 48 hours; that's a long time to wait for a cup of tea!
National Grid have the job of mixing and matching these different sources to ensure that there is enough supply to meet demand while you're watching the match.
But with about 20% of the UK's traditional power stations due to close by 2020, National Grid have sought out flexible, innovative ways to match supply and demand.
Businesses helping to keep the lights on
Demand side response (DSR) helps to do just that. Across the country, thousands of industrial and commercial electricity customers will soon be able to help keep the lights, and the television, on.
Businesses that have the flexibility to reduce the amount of electricity they need, by turning off equipment or by using back-up generators (like gas engines or combined heat and power) can now sign up to a scheme to help National Grid manage demand and keep the lights on.
At times when the power generation struggles to meet demand (so called system stress) for example during popular events, or on a very cold and dark, winter night, businesses signed up to the scheme will receive an alert from National Grid to reduce the electricity demand of their site; and in return, they will be paid for this reduction in demand. This demand shift can be immediate, providing very fast responses at times of a few seconds.
This kind of activity is often called smart grid energy because by reducing demand and using existing electricity generating equipment we can avoid building new power stations. All this means that the UK's lights stay on at a lower cost to the consumer.
So next time you and 1.1 million other people reach for the kettle after the match, just think what lengths National Grid and their team of analysts, power stations and now businesses are going to, for you to be able to flick that switch.