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The needs of the day are pronounced: not just supply but demand is changing, as electricity is used more for transport and heating. If consumption patterns are not modified to use or store energy when it is available, e.g. at times of high renewable generation (sunny or windy days), some low-carbon generators may have to be ‘constrained off’. This is costly and inefficient.
The government, and others (including the National Infrastructure Commission) believe that, instead, new sources of flexibility both on the supply and the demand side could help to deliver a more resilient, sustainable and affordable electricity system, displacing or deferring the need for network reinforcement. The market will need to evolve to facilitate this flexibility, with the correct incentives in place for all participants (both the providers of flexibility and network operators)
The National Infrastructure Commission found that a Smart Market could save consumers up to £8 billion a year by 2030, as new technologies – ranging from smart meters to energy storage – give consumers the opportunity to manage their energy consumption more flexibly.
These schemes include Short Term Operating Reserve (STOR), Triad Avoidance and an ever expanding range of Frequency Response products now available to UK organisations.
National Grid has highlighted an increasing need for these ancillary services to support the growth of intermittent renewable generation. By participating in one of these schemes, businesses agree to reduce their demand at a given period of notice. The duration of this event and the amount of notice they are given vary by product, as does the remuneration resulting from participating.
These products do not just include demand reduction: National Grid launched its “demand turn up” (DTU) service in summer 2016 to address the challenge of operating the UK system throughout periods of high renewable output, i.e. on sunny and windy days.
DTU is designed to procure negative reserve from demand-side providers who can either turn up their demand, or reduce output from embedded generation (e.g. baseload CHP) when wind and solar output is high. DTU can be delivered by sites active in other DSR services.
The DTU service commercials are yet to become truly compelling – for the 2016 launch, providers were paid availability for the contracted periods at £1.50/MW/hr plus a £60/MWh utilisation fee each time the service was called upon. The value may grow in future years, however, if NGC needs to increase balancing services as a result of growth in the nuclear and renewable generation fleet.
Ofgem and BEIS are working to ensure that system users can make the most of these opportunities.
On distributed generation the emphasis is on consumers using low carbon electricity generated locally – such as from rooftop PV or CHP plants – to reduce bills, or to store energy in on-site batteries for later use.
On energy storage Ofgem is exploring how consumers or aggregators can use batteries and other forms of storage to provide flexibility on both the demand and supply side, including storing energy when it is plentiful, or when local networks are becoming congested. Storage is also likely to play an important role in providing additional system services in future, and it is important to ensure the correct regulations are in place to deliver this flexibility.