Demand Side Balancing Reserve 2016/17 cancelled but still opportunities to monetise flexibility

In breaking news today, National Grid has unexpectedly announced they will not procure Demand Side Balancing Reserve (DSBR) capacity for winter 2016/17. Robert Owens, Vice President of Demand Side Management, comments on what this means for businesses planning to participate.

National Grid has unexpectedly announced this morning that they will not be procuring capacity under the Demand Side Balancing Reserve (DSBR) mechanism for winter 2016/17.

Read the announcement

In the open letter, National Grid commented:

“DSBR was always intended as a transitional product to provide additional reserves ahead of the Capacity Mechanism. National Grid continues to be committed to facilitating the growth of demand side solutions that work for us and the DSR market and encourage this innovation through our Power Responsive campaign.”

It was already known that DSBR would be phased out now the Capacity Market is underway, most in the industry expected DSBR to still take place for winter 2016/17. The shock announcement will leave many businesses with stranded capacity for this winter - the 2016/17 Capacity Market has already closed so there are no options available for them.

This is clearly a setback for these businesses but now they, like National Grid, should start looking forward to the Capacity Market and the revenue opportunities it provides.

Last month the Government published the amount of capacity it intends to buy in the upcoming auctions:

  • 53.8GW in the early Capacity Market auction for delivery in 2017/18 (scheduled for January 2017)
  • 300MW of turn-down Demand Side Response (DSR) capacity for delivery 2017/18 in the Transitional Arrangements auction (schedule for March 2017)
  • 52GW in the T-4 auction for delivery 2020/21 (scheduled for December 2016)

For businesses with capacity for winter 2017 onwards, the next auction of interest is scheduled for January 2017. SmartestEnergy will be bidding into this auction as an aggregator, so we are keen to speak to any businesses that would like to explore the value of their flexibility and potentially join our portfolio.