Demand Side Response: Our Energy In Our Hands
Did you know that, as consumers, we are at the heart of a UK wide initiative to help secure our energy future? Not simply passive bill payers, our energy will, increasingly, be in our hands and our actions will play a crucial role in ensuring its security.
Demand side response or DSR is the unwieldy name of a programme that aims to rebalance our energy needs around the country. It will not only change how we produce energy, but also how we supply and use it. From manufacturing, public sector and big business to the householder, we all have a role to play.
Today, we have a seemingly complex and fragmented picture of energy strategy and low carbon initiatives around the UK. From the cancellation of the Green Deal, that sought to encourage energy efficiency and investment, to the cutting of the Feed in Tariff for solar PV, wind and micro hydro schemes, the emergence of highly controversial hydraulic fracturing, or fracking, for gas reserves and new nuclear power station at Hinkley Point C. All this, combined with fears around the impact of BREXIT on our energy sector, means our energy supply, it’s mix and management is undergoing unprecedented change. As signatories to the Paris Agreement on climate change, it has also never been more crucial to cut our carbon emissions. So, how can we deliver a low-carbon future, keep energy costs down and ensure the lights stay on?
Despite the lack of a clear direction for UK energy, consumers: all of us, from individuals and families to communities, schools and businesses will need to play a greater role in energy creation and its management as renewable energy and storage technologies are set to revolutionize our energy industry.
"In 2016 on our brightest sunny day solar PV produced more energy than nuclear power." 1
Where we start: smart meters, smart grid
The Government wants everyone in England, Wales and Scotland to have a smart meter in our homes by 2020 and at OVO we have already installed over 100,000. These new smart meters will be able to accurately measure our real time use of energy and send that data back to the supplying utility companies. The initiative has been supported on TV by the recent campaign encouraging us to ‘get Gaz and Leccy under control’.
The new meters mean we can see more easily and accurately how we use our energy. Suppliers will be able to better identify and track patterns of low and peak usage and this should support more flexible tariffs, including cheaper pricing for quieter periods when demand for electricity drops. In other words, and if you already have a dual meter system you’ll be using cheaper nighttime energy, we will be able to manage our energy usage more efficiently and reduce our bills. The rise of electric cars also makes the case for adopting better energy efficiency and should see us habitually switching this rising demand to quieter overnight periods to help enable the National Grid to cope.
As consumers, using smart meters will mean we can make more informed choices about ‘use’ versus ‘cost’. This upgrading of the metering will feed into the ‘smart grid’, a 2.0 style upgrade for the National Grid, which means greater efficiency, flexibility, management of supply and demand and better integration of fluctuating renewables like solar PV, wind and hydro power.
Already, before smart meter installation, within our homes many of us are making energy management part of our daily lives. Those homes or businesses with solar panels, a wood burning stove and biomass boilers; those of us with ground source heating, a wind turbine or participation in a community hydroelectric energy scheme. Growing numbers of us are already becoming more aware of where our energy comes from and are actively managing it. Even though the solar PV Feed in Tariff has been scaled back, a drop in the cost of installation means that, as electricity charges rise, solar PV is still a viable investment. If you have a lot of roof space, then, as you can imagine, those benefits increase.
Our domestic and business renewable investment is delivering consumer-generated energy back to the grid to help respond to demand and it’s a vast untapped resource. Those of us with more space and the capacity to generate more energy, such as larger businesses and organisations, are going to have an increasing part to play in balancing out the nation’s electricity needs.
Participation and partnership – a consumer empowered future
Launched in June 2015, with a 2025 vision for a ‘consumer-empowered future’, the National Grid’s Powerside Responsive programme aims to turn all the talk about consumer generated energy into action and support the uptake of demand side response (DSR).
Demand side response will enable us, consumers and businesses, to save on energy costs and reduce our carbon footprints by increasing, decreasing or shifting our electricity consumption. For example, by changing the way we use lights, appliances, heating, ventilation and air-conditioning, fridges and freezers. For big industry it also means utilizing backup or distributed generation, pumps, motors, compressors and other manufacturing processes.
“Demand-side response has the potential to save businesses and consumers hundreds of millions of pounds. If just 5% of peak demand is met by demand side response solutions, collectively we could save up to approximately £200 million a year and benefit consumers by £790 million. It can also make a significant contribution to reducing carbon footprints through more efficient energy usage.” 2
A recent report by the Association of Decentralized Energy sees us, the user, at the centre of a new energy system for the UK with a wealth of untapped potential:
“Manufacturing sites, hospitals and retail stores could provide the equivalent electricity supply of 6 new power stations and address the UK's electricity capacity concerns… Up to 16% of the UK's peak electricity requirement, or 9.8 GW, could be provided by businesses through flexing their electricity demand and making better use of onsite generation.
“This potential for demand side response would represent a nearly 10-fold increase and shows the scale of support that business energy customers could provide to help fill the gap in keeping the nation’s electricity supply and demand in balance.” 3
Intelligent energy usage - how does demand side response work?
Supply must match demand: the National Grid, our electricity system, must keep, as near as possible, this balance, even though demand fluctuates throughout the day, night and throughout the different seasons of the year. Demand side response works to help maintain this balance of supply and demand during unforeseen fluctuations in the electricity system by going into partnership with us, the energy consumers.
Larger and far more energy hungry than households, commercial and public sector energy users make up nearly 70% of the UK’s electricity demand. They can also be more flexible, have more data and, increasingly, on-site generation capacity, such as wind and solar PV. DSR means that instead of simply paying their big energy bills and working to be more energy efficient through initiatives such as the Energy Savings Opportunity Scheme (ESOS), our big energy users can play a more active role, be financially rewarded and reduce their carbon footprint. To do this they can:
- Alter the times they use electricity – increasing it when demand may be low but renewable output high.
- Reduce their use of electricity.
- Increase their on-site generation and energy storage.
- Use stored energy when demand is high or feed it back to the grid to help balance additional demand.
This more flexible use of energy means that industry can help reduce peak demands on the grid and help ‘balance’ the electricity system. By 2020 the National Grid wants DSR to provide 30-50% of capacity in the electricity-balancing market, as opposed to just 4% today.
"DSR is a really exciting area, it allows us to balance the system much more economically, which benefits customers." National Grid Chief Executive John Pettigrew
“Bernard Matthews found that by shifting the lighting for their livestock by one hour to avoid peak times, they saved £40,000 whilst maintaining comfort levels.” 4
As with Bernard’s light bulbs, some big businesses are already benefitting from flexible energy use and self-generation. Despite drops in the Feed in Tariff, one of the largest rooftop solar PV operators, with more than more than 200 sites and a cumulative capacity of 41 MW, UK supermarket Sainsbury’s maintains that solar PV is a “crucial element” of its sustainability planning. Alongside other renewable energy use, including heat pumps, in September 2016 the supermarket giant also revealed plans to experiment with emerging battery storage technologies.
In 2015 global manufacturer Nestlé switched on a 1,970-panel 500 KW solar PV system at its Fawdon factory in the North East of England. More recently Nestlé’s newly commissioned wind farm in Dumfries and Galloway, due for completion in 2017, is set to help further power Nestlé’s UK and Ireland operations. Currently, all of Nestlé’s grid-supplied electricity is generated from renewable sources and the new wind farm will provide 50% of the energy supplied to its zero-carbon manufacturing sites in both countries. The nine-turbine wind farm is also a 15-year partnership deal with Community Wind Power. It will produce approximately 125 GWh of power a year, enough to supply the annual demands of 30,000 homes.
The likes of Sainsbury’s and Nestlé’s ability to invest on this scale is beyond the majority of smaller businesses, but whatever your size, as a business, you can reduce your carbon footprint, help provide energy and benefit your bottom line. Supporters are clear that there are financial gains to be made, together with an ability to avoid peak charges with little interference in day-to-day business activity and a reduction in reliance on grid supplied electricity.
In a recent Energyst report, 86% of businesses currently using demand side response surveyed said they were satisfied with their experience. Around half of them would offset their energy costs through demand side response, or are already doing so. Around a third would reinvest the proceeds in energy efficiency and, as most providers switch to on-site generation to earn DSR revenues, investing in energy efficiency would be a win-win for them.
Andrew Wright, Senior Partner Energy Systems at Ofgem feels that firms who invest in DSR can be confident of a return on investment and that flexibility is key to an affordable decarbonisation of our electricity system alongside creating greater value for their businesses. And, investors are opening their wallets. Over the past couple of years city investors have increasingly turned their attention to energy as a market with growing returns, which means there are funding routes opening up for self-generating renewable energy, battery storage and DSR capability.
How businesses can get involved in Demand Side Response
For businesses to take part and benefit from DSR there are five things to get in place:
- Appoint an internal project manager
- Get in contact with your electricity supplier
- Find out whether you need to deal directly with the National Grid or via a demand side provider.
- Undertake or arrange your site(s) survey.
- Assess the financial impact/returns and wider benefits.
Very large businesses, such as utilities, work directly with the National Grid to establish their DSR. The majority of businesses, however, are collaborating through their regional distribution network operators (DNOs) emerging ‘demand aggregators’ including Flexitricity, Kiwi Power or Open Energi who broker deals on energy reduction between businesses and the National Grid, and specialists like Boston Renewables in East Yorkshire. They help businesses of all sizes make the most of DSR with a ‘turnkey’ service from design and planning to installation and maintenance.
“There are opportunities for businesses of all shapes and sizes to benefit from demand side response. The majority of small to medium sized enterprises, or SMEs, are inclined to focus on their core activities and at the same time largely ignore their energy overhead. Many SMEs put resource into negotiating electricity supply contracts but are mostly unaware of their ability to participate in storage and demand side response. For any SME that is half hourly metered and that operates outside of a 9-5 timeframe the benefits are there for the taking.” John Hudson, MD Boston Renewables
From the commercial and industrial sector taking the lead, household DSR also has a big role to play and offers further untapped potential for our future energy security. No small part of this will be the need for households to think about, not simply when and how much energy they use, but how it is generated.
At OVO, this energy mix is crucial to how we make a positive impact. Today, our energy only comes from natural gas or renewable resources. Over the past three years we have reduced our coal and nuclear reliance to nil and more than doubled our offering of renewables from 26% to 53%, while halving our carbon emissions. This means that OVO customers are all making a responsible choice and a very real difference through a range of truly green energy tariffs.
Along with France, here in the UK we are ahead of the game in establishing demand side response, as other nations like Germany are still working out how to reduce their energy demand, cut fossil fuel power stations and their carbon dioxide emissions. However, we have a yawning knowledge gap. The message around our energy cooperation and collaboration and the benefits it brings needs far greater positive and consistent reinforcement.
In the coming months and years, the generation, supply, use and cost of energy will focus minds, both here in the UK and around the world. It will serve us well to be better informed and prepared; to understand more about where our energy comes from, think how we choose to use it and how our actions impact upon others.
It’s fair to say that the future of our energy security is, more and more, in our hands. For us, our families, businesses, communities and the planet, it’s time to get very much more involved.
1 ICL Reporter ‘Potential Energy’ - Issue 296 September, 2016
3 Association of Decentralized Energy ‘Bringing Energy Together’ - July 2016