Friday 11 May 2018

The future of Triads and network charges

In a previous post, we wrote about how KiWi Power had saved customers over £8 million in Triad charges and in light of the recent results published by National Grid, we  thought we’d look at the future of Triad and Network charges.

A “Triad charge refers to the levy paid during the highest three half-hour periods of demand on the networks over the winter months. The charges are calculated based on your average demand across the three periods – usually, they occur between 4-7pm on Monday to Friday (although they must be spaced 10 days apart). This method has been used for nearly 70 years but with people becoming more and more savvy around fees and energy policies changing, the days of Triad, (aka Transmission Use of System - TNUoS) and Distribution Network Use of System (DNUoS) charges appear to be numbered.

Creating a Level Playing Field

As highlighted in the SNAPS review, the way our energy system works is undergoing rapid change. In the review, National Grid signalled a move towards a more transparent system that allows for more, smaller, innovative businesses to participate in these new programmes, so they can benefit from revenues and savings – especially with regards to energy storage technology. In the current system, embedded generators are considered to be ‘over-rewarded’ by TNUoS, thus distorting investment decisions for other energy markets.

The emergence of smarter technology means that the system needs to be more flexible, to allow them to connect and provide energy to the grid. Ofgem, the government regulator for electricity and gas in the UK, has advised on changes to current charging arrangements that would create a “level playing field” to foster an outcome that is equally efficient and fair for all parties.

Smarter technology also means that people are being clever when it comes to energy consumption. For example, KiWi Power helped its customers save over £8 million in Triad charges over the recent winter period (2017/2018). This is because we are able to accurately predict the Triad peaks, and people are able to adjust their consumption to avoid charges accordingly. Therefore, current residual charges are falling on those network users who are not doing this.

The proposed changes (via Ofgem) include:

• “The charging base for Half-Hourly demand would revert from “gross” to “net” demand.”
• “The Embedded Export tariff payable to embedded exports will no longer apply and would be removed.”
• “The Non-Half-Hourly methodology does not change; however the value of the tariffs will change based on the revised calculations of Half-Hourly tariffs.”

A positive sign for new technologies

Last year, TNUoS charges recovered approximately £2.6bn in network costs (the large majority of the charges) – this is because the charges for consumption during peak times are much, much, higher than non-peak times. The proposed changes would see a flattening of the rates (peak charges coming down, and non-peak charges coming up), so that the pricing bands aren’t so disproportionate. This is great news for newer technologies, such as energy storage tech, because it signals a change in the way in which the grid interacts with them.

Changing the pricing system means that the way charges are calculated, and this will give a fairer reflection of the costs incurred by operators. This will hopefully reward areas that use more efficient and smarter power sources, by reducing the amount of network losses and drive more investment into these emerging technologies. Essentially, the network charging signals should target areas that demonstrate a good balance in supply (i.e. those regions that have energy storage assets), and should benefit from a discount given their diminished usage of the local grid.

What impact will this have on you?

The actual decision on what system will replace the current one has yet to be made, so it’s hard to predict how exactly it will affect us. The impact that these changes will have will likely depend on a variety of factors such as your area and your Distribution Network Operator (DNO). Generally speaking, businesses can expect to see a rise in energy costs (unless you are operating at peak times, in which case you should see a slight decrease).

According the current timetable, we won’t know exactly what decision will be made until later this year, with the aim to implement changes for the 2020/21 charging year. This means that the current mechanism will exist in its current state for the next couple of years, so we recommend that you continue to adopt and implement a Triad avoidance strategy.

We also urge our clients to start preparing and find new techniques for optimising their energy demand, so that they are ready when the changes come into effect. A good place to start is by monitoring your current energy consumption and identifying when you use the most energy.

KiWi Power specialise in being able to predict and inform on peak times, so that clients can avoid high power consumption charges. We are also the UK’s leading demand response aggregator, meaning that we can help you reduce electricity consumption during these peak windows.

If you are interested in how KiWi Power can help your business avoid Triad Charges over the coming winter (2018/2019); or are interested in adopting a Demand Response strategy to reduce electricity consumption (and lower your demand profile), please don’t hesitate to get in touch with us."

This is a promoted article.