Demand response key to securing sustainable back-up reserve.
In the third annual auction for electricity capacity to keep Britain’s lights on, flexible industrial, commercial and public-sector energy users have handed a saving worth £40m to bill-payers. This proves that businesses responding voluntarily to electricity price spikes, demand peaks and power station failures, can make electricity cheaper and more secure for everyone, according to Britain’s largest demand response aggregator, Flexitricity.
In order to secure back-up energy supplies for 2020, this week’s four-year-ahead capacity auction has bought 13% more capacity at a price 25% higher than the equivalent auction last year, costing a total of £1.2bn. While part of the rise can be put down to changes in government tactics for these auctions, much of this higher bill will go towards keeping old fossil-fuelled power stations running and building new peaking generators.
However, Flexitricity says that the cost would have been even higher if the company hadn’t brought industrial and public-sector energy users, like manufacturers, hospitals, data centres, cold stores and supermarkets, into the Capacity Market through its ‘demand response’ programme. Flexitricity estimates the saving this year to be at least £40m across industry, after taking account of the payment which those companies will receive for taking part.
Dr Alastair Martin, Flexitricity’s founder and chief strategy officer, explained: “Capacity to keep the lights on can come from anywhere - it doesn’t all need to be provided by centralised, energy-wasting power plant. By paying businesses to turn down consumption briefly when there’s a peak or a failure somewhere else in the country, we make it unnecessary to keep large power stations warm or running inefficiently at part load.
“All over Britain there are thousands of megawatts of flexibility in industry, commerce and the public sector. This capacity can be made available without getting in the way of these organisations’ day jobs. Cold stores can turn off the fridges for short periods, and hospitals can align the test runs of their vital standby generators to periods when electricity is expensive. Similarly, efficient, localised resources like combined heat and power (CHP) generators can make small changes to their schedules to deliver when they’re most needed.
“By doing this as part of a demand response network, businesses can generate revenue as well as keep electricity costs down. On top of the £40m saving to all customers, these companies and public-sector organisations will share £45m in payments for taking part.”
He added: “We’ve managed to pull together four years of contracts from these capacity auctions, with delivery starting this October. No power station of any size has achieved that – it really is business energy users who are keeping the lights on this winter.
“Business really values a consistent energy policy. However, we believe there will be still more changes to the Capacity Market, because it is still failing to deliver Government policy. Demand response successfully displaced the equivalent of around 100 diesel farms or car-park generators from this year’s auction, which is great. But such merchant peaking power stations – which don’t do anything that other resources can’t do better – are still big winners here, while the new-build CCGT stations the government really wants are going nowhere.
“After Combined Heat and Power (CHP), the next best way to burn gas is in a large Combined Cycle Gas Turbine (CCGT) power station. But after three years, the Capacity Market has still failed to deliver a single new-build CCGT. Trafford CCGT, which famously took a contract in the last round, looks certain to pull out of the deal. Carrington, the only new-build CCGT to be commissioned recently, was already committed. Centrica has managed to fund a partial rebuild of its King’s Lynn A power station. But that’s all.
“So unless the Government changes its policy, and tells us that car-park generators are what it really wants, then the Capacity Market is going to change – again.
“Nevertheless, Flexitricity is in this for the long haul. We’ve patiently built up a portfolio of real, genuinely flexible customers, which is why we’re the only company to have proven demand response capacity in the main auctions. Whatever the Government does, it’s important for everyone to deliver on the commitments they make to customers if Britain’s electricity supply is to remain secure.”
Established as part of the UK’s Electricity Market Reform Package, the main four-year-ahead (T-4) auction is held annually in a bid to identify reliable back-up electricity resources and incentivise new generation in anticipation of future need. Tuesday’s 2020/2021 auction closed after three days of bidding, securing 52.4GW capacity.
Flexitricity successfully bid 370MW into the auction, obtaining contracts for 2020/2021 for all of this capacity. Flexitricity now has capacity market contracts stretching from October 2016 to September 2021; the only company of any size to do so.
Ends
Issued by Weber Shandwick on behalf of Flexitricity.
For more information please contact:
Dyan Owen: 0141 333 0557 / 07738 086 818/ dowen@webershandwick.com
Notes to Editors
About Flexitricity
Flexitricity partners with businesses throughout the UK to provide reserve electricity to National Grid.
The word “Flexitricity” means “Flexible Electricity”. The company looks for flexibility in electricity consumption and generation, creating revenue for energy users and generators using the flexibility they find.
Flexitricity was founded in 2004 by Dr Alastair Martin, a professional energy engineer with experience ranging from gigawatt-scale coal and nuclear power stations.
Based in Edinburgh, the company introduced the concept of aggregated load management and flexible generation.
National Grid’s estimate of savings to consumers can be found at: http://www.nationalgridconnecting.com/how-dsr-could-transform-our-energy-system/