Wednesday 24 October 2018

Why demand response is crucial to supporting the UK’s low-carbon future

When asked about the merits of Demand Side Response (DSR), energy managers are likely to reference cost savings and the potential for revenue generation. They may well talk about increased site resilience too. But rarely are the environmental benefits highlighted.

And yet, the growth of DSR and the flexibility it provides is crucial in supporting the UK’s transition to lower-carbon generation.

“There has always been a need for flexibility to ensure power supply and demand are matched – but this need is increasing as more renewable power generation capacity is installed in Great Britain,” explains Dr Tim Rotheray at the Association of Decentralised Energy (ADE).

“Traditional thermal generation plants (i.e. coal, oil gas and nuclear), which have historically provided this flexibility, are closing due to a combination of carbon taxes and the retirement of ageing power stations,” he continues. “In total, circa 23 gigawatts (GWs) of thermal capacity has been closed or mothballed since 2010, and a further 24GWs of coal and nuclear capacity are expected to close between now and 2025.”

Supporting coal-free power

Of course, utilising DSR for the flexibility needed to balance variations in supply and demand, rather than standby fossil-fuel generation, has huge environmental benefits. “Without DSR in the mix, it’s very unlikely we’d have seen the UK’s first coal-free day last year, or so many since,” says Fred Howard, DSR Specialist at npower Business Solutions’ Energy HQ.

Generation from renewable power is now a major contributor to the UK’s power supply. According to a joint 2018 report (Industrial Flexibility and Competitiveness) by the ADE and Renewable UK, “In the first quarter of 2018, for the first time, generation from renewables accounted for 29% of the UK’s total generation – greater than that of coal and nuclear power plants combined.”

As a result, we are seeing a rapid decarbonisation of electricity generation. According the ADE/Renewable UK: “Emissions in the power sector reduced by more than 50% between 1997 and 2017 to approximately 250-300gCO2/kWh”.

DSR trend increasing

While DSR is playing an essential part, it’s not easy to pinpoint exactly how much flexibility it’s actually providing, although the trend is certainly increasing.

For example, there was a 22% increase in DSR contracts bidding in the latest T-4 Capacity Market Auction – 2,246MW compared to 1,834 in 2016/17 – and a huge increase on the 637MW which bid in the 2015/16 T-4 auction.

But this still represents less than 4% of UK peak demand, which was 57GW in 2017. Although, of course, the Capacity Market isn’t the only measure of UK DSR activity.

According to the Association for Decentralised Energy, around 9.8GW of potential DSR capacity could be delivered by the industrial and commercial sector by 2020. At today’s levels, that’s more than 17% of peak demand, which is the equivalent of having three new Hinkley Point nuclear power stations (and a lot cheaper than the £19.6bn and rising cost of building just one).

Other countries ahead in DSR provision

Certainly in other countries, DSR plays a key role in reducing peak demand. In the US and Australia, for example, 15% of peak demand can currently be met by DSR, according to the Energy & Climate Intelligence Unit.

“Ultimately, more DSR participation will support the transition to a smarter, more efficient energy system,” says Energy HQ’s Fred Howard. “This will enable both power supply and demand to be flexed in the most efficient way possible, rather than relying on carbon-emitting fossil-fuel generation to fill the gaps.”

Indeed, according to Dr Tim Rotheray of the ADE, “The ability to tap into flexibility sources ensures power supply and demand are matched, that the grid is not overloaded and that supplies are at the correct voltage and frequency across the network.”

This is why DSR activity also involves participating in National Grid’s frequency response services – providing the System Operator with flexibility to manage periods of peak demand in a smarter and more environmentally-friendly way.

Concerns about role of diesel in DSR

However, some businesses are still concerned about the environmental contribution DSR is able to make when diesel is commonly used to power on-site generation. "In the grand scheme of things, using this diesel is far more efficient than keeping a stand-by coal power station warm in case demand is required,” says Fred.

“This means that per kilowatt generated, the carbon benefit outweighs the emissions. There are also more low-carbon diesel alternatives – for example, rapeseed oil. Worth noting too is that diesel activity represents only a small proportion of total DSR.”

Upgrading to a more flexible smart energy system could also save the UK up to £40 billion by 2050 in avoided network upgrade, peak generation build and curtailment costs, so estimates Imperial College London and the Carbon Trust in their report ‘An analysis of electricity system flexibility for Great Britain’.

Flexibility core to effective energy management

“It won’t be long before it’s common place to see large consumers using storage, generation and load reduction to help balance demand,” predicts Fred Howard. “Retailers and distribution facilities will routinely utilise commercial refrigeration units as energy storage. Manufacturers will be prepared to ramp down production lines in response to high market price signals or time of use charges, and some industrial consumers may even look to shift energy intensives processes to different times of the day.

“Flexibility will become core to effective energy management – and this will deliver not only cost savings to consumers, but environmental benefits to us all as a result of more efficient and lower-carbon power generation.”

To find out more about how to participate in DSR, read our DSR 101 article.

You can check out the DSR Clinic from Energy HQ here.

This is a promoted article.