Ben Spry, Head of Risk Management at Energy HQ, explains the many different ways to benefit from Demand Side Response – and also why getting clarity is so important.
The business benefits of DSR
The good news about Demand Side Response is that it brings myriad benefits – and that these can be tailored to suit different business types with different circumstances and requirements.
The not so good news is that it’s not easy to explain these benefits simply – and not all apply to every business in the same way. In other words, it’s a complex proposition.
The problem with this is it’s hard for many would-be participants to get clarity. And lack of clarity means that some DSR aggregators are able to claim far higher than realistic benefits are available to get businesses to sign up.
So rule number one when looking at how DSR could benefit your business is pin down any potential partners to give a realistic appraisal. If one suggests returns far higher than another, ask them to explain exactly how and why.
Warning aside, there are undoubtedly many advantages to participating in DSR. The best way to maximise these is by cost stacking – that is, gathering all the available benefits that can apply into your business case.
Saving on non-commodity costs
Every business has different priorities. But in this day and age, saving money is usually a key focus. The beauty of participating in Demand Side Response is that you’ll be taking action to avoid peak non-commodity charges – which make up a considerable part of any consumer’s bill.
For example, Transmission Network Use of System (TNUoS) charges are billed according to consumption at peak demand. By participating in DSR, you’ll hopefully be avoiding these peak periods, so these costs will reduce.
With TNUoS charges for 2018/19 as much as £54,800 per megawatt, that’s no small saving.
Distribution Use of System (DUoS) charges are also most expensive during peak periods (4-7pm Monday to Friday) all year round, so there’s also potential to save on these too.
We estimate that DSR participation can typically save around £45-70k/MW per year – and often more. But each business is different, so it’s best to get a bespoke quote based on your individual operation and flexibility.
The most commonly cited benefit for DSR is income from participating in National Grid balancing schemes.
These provide payment in exchange for reducing grid consumption when asked to do so, either by turning down demand or switching instead to on-site generation or energy storage. You can also earn for exporting to the grid if you have generation capacity to spare.
The minimum volume for direct participation is 1MW, but aggregators like Energy HQ reduce this to 0.1MW.
Once the exact parameters have been agreed, participation can be fully automated with minimum disruption.
The revenue on offer varies, depending on how quickly you can respond and how long you can sustain a response for. National Grid’s Short Term Operating Reserve (STOR) scheme, for example, requires flexibility delivered within 20 minutes of being notified and then sustained for up to two hours. Participants then earn both an availability fee plus a utilisation payment.
Firm Frequency Response requires a faster reaction, and offers both dynamic (continuous) and static (ad hoc) options, with response for the latter ranging from 2-30 seconds and sustained for 20 seconds to indefinitely. Again, participants can earn both an availability fee plus a utilisation payment.
During the summer, when there may be excess capacity, it’s also possible to earn revenue for increasing consumption via National Grid’s Demand Turn Up scheme.
Releasing market value
Unlike National Grid balancing services, there’s also an obligation-free way to earn revenue from DSR – meaning that you can participate as and when it suits without having to fulfill any load commitment.
Wholesale Market Access is an exclusive service offered by Energy HQ, and developed by npower Business Solutions’ award-winning Optimistion Desk.
It provides a managed route to the Day Ahead and Within Day wholesale market for both generators (or businesses with on-site generation) and consumers. This enables your business to earn revenue at times of high market prices, either by increasing generation or by reducing consumption for specified periods – and then selling back the volume already purchased but not consumed.
Wholesale Market Access has the potential to net you between £30-60k per megawatt of capacity per annum (with the majority of income generated during winter peaks), so can be a valuable source of revenue.
Increasing site resilience
Resilience has become a buzz word is so many areas of business – but often would-be DSR participants don’t associate it as one of the benefits they’ll be able to access.
Yet by participating in DSR and running any on-site generation assets more frequently, you can be confident they’ll be well maintained and therefore better able to respond when you need them most (i.e. in a power cut).
This means you’ll enhance your security of supply and therefore increase site resilience, which is an important benefit for any business.
Supporting our low-carbon future
Another often-overlooked benefit of DSR is the wider role your business plays in supporting the UK’s transition to a low-carbon future.
As more consumers participate in DSR, National Grid has more flexibility to balance the energy system. This is good news for the environment, as we therefore have to rely less on keeping fossil fuel power stations on standby to fill any gap in demand, which helps reduce the UK’s emissions.
Without Demand Side Response, it’s unlikely we’d have been able to clock up so many extended periods of coal-free energy supply since the first recorded coal-free day in modern times on 27 April 2017.
Access competitive advantage
DSR is also becoming a key feature of energy management best practice, helping to support key goals of maximising efficiency, reducing costs and generating capital to fund more efficient technologies and equipment.
All this ultimately provides competitive advantage – because if your business is embracing the latest opportunities to reduce overheads, then your products or services can be delivered for less. That’s why embracing DSR makes make sound business sense.
For more information on how your business could benefit and a bespoke appraisal of the benefits available, contact the DSR experts at Energy HQ via [email protected] or call 0800 994 9382.
This is a promoted article.
To check out the DSR Clinic from Energy HQ on our site, click here.