Posted on: 18/11/2016
Following his presentation at the EMEX event in London this week, Robert Owens explains how Demand Side Response (DSR) and storage will drive the transition to a smarter energy system while helping companies meet their energy ambitions.
Ofgem and the Government recently launched a consultation seeking industry views on the shift they want to see towards a much more flexible energy system.
The prize on offer from greater flexibility is huge, with research by Imperial College and the Carbon Trust predicting it could reduce costs for consumers by up to £40 billion by 2050.
Harnessing the full potential of a truly flexible energy system will require consumers to change the way they think about using energy. Energy efficiency has been a key focus for businesses for many years, but now they are also starting to look much more at the way they consume electricity, shifting energy use away from peak times and turning their consumption into a revenue creating asset.
DSR and storage are the key technologies which enable businesses to respond to price signals and consume power more flexibly.
Growing appetite for DSR
As awareness of DSR continues to grow, the market is becoming much easier to navigate, with aggregators and suppliers offering simple products and services providing a clear route to market. Businesses are also gaining more confidence in the financial returns and becoming less nervous about the risks.
A recent report from The Energyst suggested that up to 10% of business electricity demand could be flexible and in many cases much more. In return, they can benefit from payments for helping balance the system and achieve significant savings by avoiding costly peak-time charges.
Once businesses identify the assets and operations where flexibility can be introduced without impacting core business operations, the opportunities to turn their excess demand into a valuable revenue stream become much more visible. Businesses could see returns in the region of £80,000/MW in a year.
Storage unlocks even more flexibility
While DSR is exciting in its own right, combining it with battery storage – the energy sector’s hottest topic right now – offers even greater potential. Using battery storage alongside DSR means much greater flexibility can be achieved.
Battery costs are also continuing to fall and we are starting to see significant progress in work to demonstrate how storage technology could be used in practice on the grid.
The results of the National Grid’s Enhanced Frequency Response (EFR) tender in August highlighted how battery storage is quickly gaining traction. However, auction prices were lower than expected so we are still waiting to see how the next wave of battery projects will get built.
As the commercial partner on the Smarter Network Storage (SNS) project developed by UK Power Networks, we pioneered the UK’s first supply and offtake agreement for their 6MW project supporting them in scheduling their storage to optimise revenues.
Compelling opportunity for businesses
Although both DSR and battery storage are currently only making a relatively small contribution to energy flexibility, forecasts suggest they are both set for dramatic growth in the years ahead. National Grid’s latest Future Energy Scenarios report forecasts that 5.7GW of DSR capacity could be achieved as soon as 2026.
As a more flexible energy market develops, the value of flexibility is expected to continue to grow.
Combined with the rapid development of products and services to help unlock flexibility, there is a compelling opportunity for businesses to now start looking at how they can make the most of the potential it offers.