Posted on: 29/03/2018
The Triad results published last week have again highlighted the changing energy landscape and the impact of more energy users managing their consumption at peak times. Gavin Baker, Head of Pricing, discusses the winter 2017/18 results and the future direction of travel for Triads.
Triads have been used to cover transmission costs since 1950’s – but with the energy system changing rapidly and many large consumers now able to reduce their costs through Triad avoidance, industry experts think the days of Triads are numbered.
This speculation has been fuelled by the winter 2017/18 Triad results, which included the latest Triad to date and only the second time we have seen a 6.00-6:30pm peak.
Source: National Grid
As more energy consumers try to avoid Triads by turning down their consumption in peak periods, demand patterns - and therefore the eventual Triad periods – are becoming increasingly unpredictable.
We provide a warning service to notify our customers of potential Triads, so they can take action at their sites, and we correctly called all three of the Triad periods in winter 2017/18.
Ofgem review signals change
Ofgem believe the current Triad charging system is an unfair way of spreading the network costs, as businesses that don’t have the ability to load manage are absorbing the cost that others have avoided.
Last year, Ofgem published its Targeted Charging Review, which is a Significant Code Review looking at transmission and distribution network charging.
A decision hasn’t been made yet on what direction this will go, although Ofgem have indicated a preference for a fixed capacity charge element alongside a peak demand charge. This means energy users will be charged a fixed price based on their capacity, reducing the perceived distortions from TRIAD avoidance and creating a more level playing field for industrial electricity costs.
We would expect plans to become clearer in the next few years and a new regime in place by 2021.
Ofgem has already indicated its intentions in this area by reforming the Triad benefit for generators, who are facing benefit cuts from this April. The phased approach sees payments decreased over the next three years to 2010 to zero for many.
Preparing for change
It’s likely the Triad mechanism will continue to exist in its current form for a few more years so customers should continue their established Triad avoidance activities.
However, it’s reasonable to think that this benefit will drop away in the future, so businesses should start preparing now to find new ways to optimise their existing demand reduction capability.
Our Asset Optimisation team is already working with customers to review their Triad management strategies and explore Demand Side Response (DSR) opportunities to secure more future-proof benefits from their flexibility.