Dr Alastair Martin, Chief Strategy Officer of Flexitricity, takes a look at some common myths relating to Demand Side Response and gives his view on the opportunities that are available.
This June, I joined National Grid in London for its second Power Responsive conference to discuss next steps for the Demand Side Response (DSR) industry. Together with industrial and commercial energy users, CHP operators and public sector organisations, we discussed working with aggregators to develop DSR opportunities.
Awareness of DSR is growing, but there is still a great deal of misunderstanding around participation and practice. When first engaging in DSR, customers need both realism and persistence. To find the right aggregation partner, they should be ready to ask difficult questions, covering track record, experience of working with similar customers and how the aggregator will protect the core business operations of participating sites.
After 12 years in the business, we’ve grown used to answering these questions. When Flexitricity started out, DSR was unknown. Now, with the birth of the Capacity Market, and with the Power Responsive target of 30-50% of National Grid’s balancing needs coming from the demand side, DSR has quickly become the hot topic in energy.
But we can’t hit those targets unless everyone has a clear idea of what we’re talking about. So here are five common myths surrounding DSR, and our view of the right way to view demand side opportunities.
Myth one: DSR is easy
This one comes in several guises, such as “it’s free money” and “you don’t have to do anything”. It is true that some DSR can be commercialised with minimal expenditure; it’s also perfectly feasible for DSR companies to pay for controls upgrades. But most site managers aren’t interested in external funding, so capex is not the point.
The key is management time and the resulting opportunity cost. While the energy manager is busy appraising a DSR proposal, discussing flexibility with Operations, or considering payback with Finance, some other energy project isn’t getting done.
With experience, genuinely viable DSR opportunities begin to stand out. But the experience must come from both sides: DSR aggregator and energy user. There is no DSR without collaboration.
Myth two: It’s all about demand peaks
Since Flexitricity was born, there has never been an energy shortfall at peak. Crises have happened, however. Tilbury power station caught fire during a morning pick-up in February 2012. A couple of weeks later came the ‘duvet day’, a cold Saturday morning when seven gas power stations failed to get out of bed. The infamous Longannet/Sizewell B crash in 2008 happened just as biscuits were being dunked in mid-morning tea.
That’s not to say that DSR doesn’t get activated at peaks. Triad management – the classic peak reduction opportunity – is now so lucrative that other DSR activities like short-term operating reserve (STOR) become secondary during winter weekday evenings.
Myth three: DSR is all diesel
In fact, flexible load and CHP are making far better returns from DSR than diesel. That’s because market conditions are rewarding low delivery cost more than consistent availability.
Cold stores, for example, modulate their electricity consumption to take advantage of prices. During the most expensive periods of the day, flexible plant is already off – leaving nothing more for National Grid. But at other times, a cold store can shut down very cheaply if requested. CHP follows a similar pattern – the day job must be done, but during idle periods, CHP can deliver reserve energy cheaply and often. And that’s where the economic sweet spot is found.
However, standby generators have two particular virtues which other resources sometimes lack. First, they need occasional on-load running in order to provide reliable emergency power. That works well with DSR – the trick is to ensure that testing is done when the electricity is most needed. Second, as a standby generator’s day-job is to sit and wait, it can be regularly available for Grid duties.
CHP and flexible load are likely to retain the top spot in terms of economic returns from DSR. However, National Grid has recently signalled willingness to pay more for resources which can be consistently available, even if they will be used very rarely. If a large power station trips, standby generators can fill the brief gap quickly and reliably while cheaper resources are ramped up.
Myth four: You can only do one thing at a time
This one is partly true. No resource can provide frequency response and STOR at the same time. Different resources on the same site could do that, but each resource needs to commit to what it’s providing at any time. Sometimes the commitment is made months ahead; in other cases, an hour will do. But overlapping is usually prohibited.
There are two exceptions. The first is that sites consume electricity for a purpose, and they will keep doing that whatever they are doing in DSR. Core business must be protected, and it’s for the aggregator to resolve any conflicts. The way to do that is through a large, diverse portfolio, continuous monitoring and active management.
The second is the government’s Capacity Market, which was explicitly designed to overlap with everything else a resource might want to do. This makes economic sense – if one resource can do two things, then the consumer doesn’t have to pay for two resources.
Myth five: It’s about technology
Automation, security and speed are very important, as are aggregation methods, flexibility in communications and defensive engineering. However, none of those will help if the site itself simply isn’t right for DSR. Thorough appraisal and careful implementation are vital – DSR without engineering is like a car without steering. And if there’s a problem, a site operator wants to be able to pick up the phone – at any time of the day or night – and speak to a person. Flexitricity knows that technology alone isn’t enough. Expertise makes the difference.
Donna Hunt of Head of Sustainability at Aggregate Industries describes how her company is broadening its thinking to take full advantage of the possibilities of Demand Side Response.