Gas users to get upfront payments if they offer ‘demand side response’ in winter supply crunch

National Grid Gas Transmission (NGGT) has been granted permission by Ofgem to expand a payment offer to gas users who are able to reduce their use in the event of a gas supply emergency.
NGGT has been able to use the ‘demand side response’ option in the past, but the circumstances were limited and crucially no upfront payments were available for users who would incur costs in preparing to respond. During the so-called ‘beast from the east’, which triggered an initial warning over supplies (a Gas Balancing Notification) there was no response to a DSR call from NGGT. The gas network operator was told that “DSR arrangements have not been put in place between shippers, suppliers and consumers because the incentives to do so have not been considered sufficiently strong when judged against the probability of a gas shortage arising.”
Now Ofgem has agreed that the use of the DSR option can be expanded, can be triggered several weeks or months in advance and NGGT can make ‘option’ payments to users who offer response. Ofgem said, “We recognise that potential DSR participants may incur costs in order to be available to offer DSR should it be needed”.
It has also increased the potential payments, capping them at £5 million for the winter period but giving NGGT the option to request an increase if necessary.
Ofgem added, “We consider it important to have a functional DSR tool to prevent or lessen the impact of a GDE, especially considering the increased uncertainty in European gas markets created by the Russian invasion of Ukraine and of the current high and volatile gas prices. Therefore, we deem it appropriate for extra measures to strengthen the tool, such as the options payment, to be introduced.”