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As part of our series on energy security, we take a look at demand side response (DSR).
Traditionally, business and domestic energy customers were passive consumers of energy and demand peaks were dealt with at the point of supply: if there was a surge in demand, more power stations were brought online. If the capacity margin (the difference between energy supply and demand) was narrow, the only way consumers would notice the difference was in the cost of energy. DSR seeks to redress the balance by creating flexibility consumer side too. It does this by incentivising customers to use less energy during peak periods.
DSR involves getting paid or incentivised to use less power at peak times.
As we move to a lower carbon energy mix, overcoming intermittency of supply will be a vital. During times of high demand, companies will switch to backup generation or turn down non-essential appliances. This can be automated (by a DSR provider) or controlled by the end user. As well as helping the government meet their emissions targets, businesses will also save on energy costs and reduce their carbon footprint.
In 2015 The National Grid began a huge push on DSR, pledging that our energy system would rely on it for over fifty percent of the time by 2030 . This push was encouraged in part by new technology – the introduction of smart meters has made it possible to get almost up to the minute information about energy usage. This has allowed the government to expand DSR by introducing so-called time of day tariffs. If you are on one of these tariffs you will be incentivised to lower energy usage during peak times. There are also DSR programs where businesses receive payments through the Capacity Auction for reducing consumption when demand is high.
Whilst DSR is certainly a priority for the National Grid, surveys show that is probably isn’t for consumers, partly due to a lack of understanding about what it actually is.
Managing energy peaks at supply side has a number of drawbacks – oversupply is costly and wasteful and the investment doesn’t necessarily provide any benefits. Take for example the £180 million that was spent on a supplemental balancing reserve that has never been used. Additionally if the UK buys energy at peak prices, it pushes up costs, which is never good news for consumers.
If you are on a half hourly meter, you will be billed for triad charges. These charges cover energy usage in peak times, and have increased 80% over the past five years. They could make up 15% of your bill! By using less energy during triad periods you can slash your energy bills. One study found that the UK’s energy bills could be cut by over £8 billion if businesses embraced DSR.
Many businesses worry that DSR will be disruptive – surely it will be a pain to have to shut down appliances? However inroads are being made so that changes in your energy usage should be almost imperceptible, especially if you have a backup generator – although these aren’t essential to take part in DSR.
DSR isn’t just for large businesses – businesses of all sizes have energy flexibility, and can therefore benefit. In fact, according the the WP Group:
‘Industry specialists have estimated that a typical participating business can expect to see a return of around £20,000 a year from DSR. This amounts to about 2% of its total annual bill.’
Contact your regional Distribution Network Operator (DNO). You can find your DNO here. They will be able to tell you more about any DSR trials they are running, and how you can get involved.
Are you interested in DSR? Let us know about your experiences on Twitter @switchmybiz.
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