Industrial users should be able to sell DSR directly to wholesale market, report says

Nearly 10GW of business-led demand-side response (DSR) could be released in the UK if regulation changed to make it easier for flexible business energy users to sell their demand reduction, a report from the Association for Decentralised Energy (ADE) has found. These changes need to be made before December’s Capacity Market auction to procure sufficient capacity for 2020.

The three regulation and policy changes recommended by the report are:

  • Allowing demand-side response direct, independent access to the wholesale market and balancing mechanism
  • Mandating fair treatment in the capacity market for demand-side response, including equal contract lengths. Currently new power plants are able to bid more competitively as they get 15 times the value in capacity market auctions. 
  • Simplified, user-friendly balancing services, as a complex and unbalanced service limits businesses’ demand-side response participation

The report estimated the total potential demand-side response across the industrial, commercial and public sectors in the UK at 9.8GW by 2020. This includes:

  • 2.8 GW from industrial demand flexibility
  • 1.7 GW from commercial and public sector demand flexibility
  • 2.3 GW in flexibility available from the 5.2 GW of current on-site CHP capacity
  • 3 GW of on-site back-up generation capacity (non-CHP)

Launching the report, ADE director Tim Rotheray said: “Keeping the lights on and our factories running is becoming increasingly challenging as the electricity market changes. We are building more wind and solar, which cannot always be depended on, and we are seeing our traditional large nuclear and coal power plants close down.

“If we are to meet this challenge successfully, we need to access the enormous resource that energy users can provide, whether they are NHS hospitals, pharmaceutical manufacturers or your local retail store. Today’s report shows that by putting these users at the heart of the energy system, we will make it more cost-effective, reduce carbon emissions, and give customers a chance to participate in the system and take control of their energy use.

“Unfortunately, we too often miss the true size of this potential, and design our systems to meet the needs of an older, less flexible, and more centralised energy system. By making these changes to the balancing market, the capacity market and balancing services, we will allow businesses to compete fairly and help deliver the UK’s demand-side response potential.”

Cathy McClay, head of commercial electricity for National Grid said: “National Grid is actively working on how we as an electricity industry can enable increased participation of a range of flexibility sources in our markets. We believe that there are great opportunities for consumers of energy to play an active role in flexibility and realise benefits of doing so.”

Read the full report:

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