Monthly Archives: September 2014

Demand side essential to deal with the energy trilemma

We return after the summer break to a world where there is still no single definition of sustainability that appeals to everyone but where the need to deal with the trilemma of energy security, affordability and climate change remains as important as ever.  On energy security, with two nuclear stations currently offline, fires at Ferrybridge and Ironbridge coal-fired stations and Barking gas-fired station to close, National Grid will have its work cut out this winter. On affordability, Ofgem’s August projection of an average dual fuel bill for the twelve months from August 2014 is £1330.  And Edward Davey’s statement on the Government’s position for the Paris climate change conference shows as strong a commitment as ever to the need to decarbonise the world economy.

In each of these areas the demand side has an important, if not essential, part to play.  It’s not surprising, therefore, that the Commons Energy and Climate Change Select Committee launched an inquiry at the beginning of July into demand-side measures with a call for evidence, and it is equally unsurprising that, given the amount of work on the demand side that Sustainability First has undertaken over the last three or so years in its GB Electricity Demand Project that we submitted written evidence to the Inquiry.

The Committee took oral evidence in early September and Tim Yeo, the Committee’s chair, has written to Matthew Hancock, the Minister of State at DECC, about steps needed to make DSR a reality in the capacity market.  Our own written evidence to the inquiry provides a useful introduction to the topics dealt with in the most recent twelfth paper from the Electricity Demand Project, on household demand-side participation in the GB electricity markets, that we shall be covering in more detail in our next few blog entries.

We told the Committee that, while near-term market interventions for the demand-side in the capacity market and the EDR pilot were clearly important, the findings from the GB Electricity Demand Project suggest that if the electricity system as a whole is to benefit from electricity demand-side measures, then wider and longer-term issues also need to be considered, including in relation to household electricity demand-side measures.

Given how much emphasis the Government is placing on energy efficiency measures to reduce the impact of price increases on customers, reducing electricity demand is absolutely central to minimising the increase in electricity system costs and therefore to reducing the impact on customer bills. There are major risks for customers’ bills if we fail to drive forward successfully on product standards and on appliance stock turnover.

Modelling for the GB Electricity Demand Project by Brattle has indicated that the technical potential for load shifting across all sectors today may be up to around 18GW out of a total of 54GW on a January weekday winter evening and around 10 GW of 35 GW on an August weekend evening. In the business sector, commercial conditions and market arrangements are developing and there is growing interest in load turn-down and turn-up solutions in addition to the previous emphasis on embedded generation. But, for the household sector, which represents around one-half of winter-evening peak load, there is still some way to go before there is sufficient commercial interest from market actors plus more demand-side ‘pull’ from customers and consumers themselves.

Demand-side response is increasingly useful to all parts of the electricity value chain:  by electricity suppliers to avoid the need for expensive power generation at peak times and / or low-wind periods and to avoid the risk of costly ‘imbalance’ penalties; by distribution network operators to avoid the need to reinforce the network where it is constrained or close to its physical capacity and to keep down the cost for customers who require new connections to the network; as well as the more traditional uses by National Grid for balancing national supply and demand.

It will be difficult for domestic customers to engage with DSR unless the actions they take can be measured and they can be properly incentivised to take these actions. Smart meters should provide the means to achieve this. However, this will need to be done with care. Customer incentives for DSR are bound to increase complexity for the end-consumer. And we need to take care to protect those customers, such as the fuel poor and the vulnerable, who may be less able to change their behaviour and may therefore face price increases without the ability to react to such increases.

Network operators and third parties will need fair access to end-customers via the smart meter set-up.  Electricity suppliers will be responsible for installing household and small-business smart meters and for communicating with the meter – and with the related switches for appliance control. If companies other than suppliers wish to control customer appliances by making use of the smart meter arrangements and the auxiliary load control switches, then, initially at least, they will need supplier cooperation.

Community projects are of great interest in themselves and widely popular. They also provide a useful and enthusiastic test-bed for the introduction of low carbon technologies and experimenting with demand-side response. A number of these projects were reviewed in Paper 10 of the GB Electricity Demand Project.  However, we identified a range of detailed commercial, regulatory and administrative matters that will need to be resolved to enable local matching of supply and demand to become a reality at scale.