Bridging the 2020 Electricity Gap

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28 July 2016 | Updated 01 January 1970

Manufacturing sites, hospitals and retail stores could provide the equivalent electricity supply of six new power stations and address the UK's electricity capacity concerns, says a new report from the Association for Decentralised Energy.

The new report says that up to 16% of the UK's peak electricity requirement, or 9.8 GW, could be provided by businesses through flexing their electricity demand and making better use of onsite generation.

This potential for demand-side response would represent a nearly 10-fold increase and shows the scale of support that business energy customers could provide to help fill the gap in keeping the nation’s electricity supply and demand in balance.

This new analysis comes ahead of this year’s Capacity Market auction, which is being held in December to procure sufficient capacity for 2020.

As old power stations shut down and new renewable generation like wind and solar are not always available the Government is increasingly worried about the ability to keep the lights on by 2020. One part of the solution is to engage energy users to manage their energy use and onsite generation to help the electricity system in return for payments, known as demand side response.

By unlocking the demand-side response potential, the report’s analysis finds UK energy consumers would save £600m by 2020 and £2.3 billion by 2035, all by preventing the wasteful construction of more than 1,300 diesel engines which may only run a few hours a year. By turning down demand instead of increasing supply, and by employing more local, efficient generation, demand-side response reduces emissions and helps the UK meet its carbon targets.

The report also highlights that more businesses-led demand-side response would reduce demand on the electricity network and lower costs by £8.1 billion by 2030, the equivalent of more than £300 per household.

The ADE’s detailed, bottom-up analysis found the UK’s demand-side response potential includes:

The equivalent of two large power stations, or 2.8 GW, from industrial demand flexibility, such as a quarry delaying the use of a rock crushing unit by relying on a previously stored supply.

The equivalent of nearly on large power station, or 1.7 GW, from commercial and public sector demand flexibility, such as a retail store turning off their refrigeration units for a period of time, using the fridge’s insulation to maintain low temperatures

The equivalent of three large power stations from on-site generation, including 2.3 GW in flexible availability from highly efficient, on-site combined heat and power capacity and 3 GW from on-site back-up generation.

Businesses contributing demand-side response struggle to compete fairly in different energy markets, preventing demand-side response services from reaching their full potential.

The ADE report recommends three changes which would allow user-led energy to compete within the energy system on an equal footing:

Independent access in the Wholesale Market and Balancing Mechanism, which has seen peak prices as high as £2,500 per MWh in the past year but are unable to be accessed by demand-side response directly.

Fair treatment in the Capacity Market, including equal contract lengths. Currently new power plants get 15 times the value in Capacity Market auctions, allowing them to bid more competitively.

Simplified, user-friendly Balancing Services, as complexity and unbalanced treatment between supply and demand services limits businesses’ demand-side response participation.

Comments

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. Our 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, 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."

Pictures:

The full report 'Flexibility on demand | Giving customers control to secure our electricity supply' can be viewed by Clicking Here

The abridged graphic version can be viewed by Clicking Here

Article written by Brian Shillibeer | Published 28 July 2016

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