Posted on: 27/01/2017
Flexible power consumption gives companies opportunity to avoid peak prices and make money from capacity market and energy trading.
Nearly 10,000 UK businesses have the potential to save £20,000 or more each year by helping the National Grid balance supply and demand, SmartestEnergy said today as it prepares to bid to provide 100MW of “demand side response” (DSR) capacity next winter.
Businesses which can identify flexibility in their energy consumption can make money from the Grid by providing DSR, turning down or turning off non-essential energy use at times of high demand. One of the main opportunities is the capacity market, which ensures there is enough supply in the network to meet demand.
For every £1,000 businesses earn in these capacity market payments they can save a further £5,000 by avoiding peak energy charges.
Businesses buy electricity in advance at £40-£50 per megawatt-hour, and once they have identified flexibility in their electricity consumption they can also make money by selling this back to the market at premium prices instead of consuming it themselves. Prices this winter have gone over £200/MWh more than 37 times and reached £792/MWh on October 31st.
Robert Groves, Chief Executive of SmartestEnergy, said: “Electricity isn’t just a utility you take for granted but a valuable commodity. Matching demand to supply is key to a cost-effective and reliable energy system, and businesses which can help do this stand to gain by tens of thousands of pounds a year. The average business can shift 10% of its energy usage with little impact on operations.”
DSR makes good sense for businesses which have the flexibility to be able to deliver at least 250kW of capacity – typically businesses which are spending at least £1 million on electricity and consuming 10GWh a year. There are 9,700 businesses with electricity contracts of 10GWh or more according to energy market analysts Cornwall Insight.
A business which has a 250kW DSR contract with SmartestEnergy could save nearly £20,000 a year. It would make £2,812 from Capacity Market payments but would save an additional £15,000 by shifting consumption off peak and £17,150 by stopping consumption altogether. (See case study below.)
SmartestEnergy is an electricity supplier, DSR aggregator and energy trader. It supplies 5% of the UK’s industrial and commercial power demand, buying in energy from independent generators. It has secured 90MW of DSR capacity for 2020 and has 100MW prequalified for the capacity market auctions on January 31st and in March.
Mr Groves said: “We understand our customers’ electricity consumption so we are best placed to understand how to maximise income from their flexible capacity without affecting their core business. We can navigate the complexities of DSR contracts, spot opportunities to sell the electricity they have bought at a good profit, and ensure that savings on non-commodity charges are passed on.”
Nine in ten businesses would be interested in providing DSR if it did not affect their core business, The Energyst found in a survey last year. Among businesses currently providing DSR it found that the median level was around 10% of their consumption.
Businesses are finding the flexibility to provide DSR in different ways:
- Supermarkets can reduce power to cold stores, fridges and freezers for short periods;
- Manufacturers can shift some non-full time production outside peak hours;
- Hospitals and data centres can switch to back-up generation.
The DSR market is growing rapidly. The National Grid spends £1 billion a year on balancing services, to ensure power supply and demand are matched, that the grid is not overloaded, and that the right voltage and frequency is maintained across the network. It has set a target of meeting 30% to 50% of balancing services from DSR by 2020, and spending could double to £2 billion a year within five years as renewables replace fossil fuel generation.