Large gas customers will in future be able to contract directly with gas system operator National Gas Transmission (NGT) to provide demand side response (DSR), after a gas industry change of rules.
Large electricity customers can already be paid to reduce their demand for specific periods to help manage the system. But a similar arrangement to reduce gas demand in the event of a shortage previously only allowed NGT to contract with gas shippers. Feedback from a review in 2022 on how to increase the DSR available to the gas operator suggested that enabling direct contracting between NGT and consumers could increase the level of consumer participation and DSR volumes.
The rule change means large gas users (consumers that are daily metered with an annual quantity of greater than 2 million therms) can enter into direct contractual arrangements with NGT in its voluntary demand reduction scheme. There are emergency arrangements under which large consumers have their supply curtailed. This is intended to reduce the likelihood, severity and duration of a gas supply emergency, in the event that one occurs. But the DSR option allows consumers to receive greater financial compensation if they voluntarily curtail their demand when required, avoiding emergency action that would affect more users.
The DSR is procured each year. NGT issues an invitation to offer DSR quantities for the next three winter periods. Participants receive ‘option’ and ‘exercise’ payments, which would be exercised in the event that a Margins Notice or a Gas Balancing Notification was called in any of the winter periods.
The rule change comes as NGT has seen less predictable use of the gas network with more rapid changes in use and a consequent need to manage system pressure, largely because gas-fired power generation plant operates for shorter periods.