Turn it up! (And use it up)

By Dr Jonathan Marshall, ECIU Energy Analyst

Electricity systems are getting smarter. This is true both in the UK and in other developed nations around the world, and is a result of increasing contributions of renewable power, widespread desire to reduce waste and cut unnecessary expenditure, and rapid technological progress in tools needed to increase flexibility of the grid.

A vital part of this move towards a smarter system is the ability of demand (the amount of energy we use in homes and businesses) to respond to supply (the output from our power stations).

Since the construction of the first power station in the UK, this has not happened – supply has always had to react to the whims of customers, with virtually no elasticity in demand.

This is unheard of in almost every other market, that the amount of a product or service we use is thoroughly shielded from the cost. Imagine drivers not changing their behavior if the cost of petrol increased ten-fold? Or shoppers not taking advantage of an oversupply in cotton, pushing the costs of clothes down by half?

In the electricity market, however, this barely happens. This results in power stations that are built to run for just a few hours per day during the winter, when demand is at its highest. For the rest of the year they sit unused, hurting balance sheets and representing a waste of investment. Considering the cost of building new power stations, around £800 million for a large gas plant, or the widely discussed £18 billion cost of building Hinkley Point C, this seems like an awful waste of cash.

High demand

National Grid has set up a scheme to reduce this wastage. Power Responsive is designed to increase the uptake of demand-side response (DSR). Typically used to soften peaks when electricity consumption is at its highest, DSR is increasingly finding favour among heavy energy users, attracted by both a secondary source of income, and green credentials on offer.

This month, however, National Grid is running a tender for demand turn-up (DTU), a scheme through which businesses are financially rewarded for ‘turning up’ energy demand when it is most abundant, such as during the middle of a windy night, or on a sunny Sunday afternoon.

DTU will reward rescheduling the use of non-time sensitive processes to fit with electricity being at its most abundant, greenest and cheapest. It can also provide a signal to turn off embedded generation, such as back-up generators and CHP units, and receive cheaper power from the grid instead.

Adding to a range of tools to impart flexibility on the grid, such as pumped storage, interconnection and growing battery capacity, DTU will ease the cost of managing the system, trimming pounds from household bills in the process and countering claims that we will struggle with ‘too much electricity’.

Closing on the 17^th of February, the tender looks to secure an impressive 3-5 GW of ‘negative reserve’ services, of which DTU could form a large proportion following a successful trial of the service last summer. DTU will run alongside more traditional balancing methods, such as requesting power plants run at lower capacity than planned.

For context, the upper end of this range is close to 10% of the maximum demand we’ve seen so far this winter, providing significant footroom. Running during the night and in weekend afternoons from May to November, DTU will reduce the ‘stickiness’ of demand, allowing the wholesale power market to function in a more traditional manner.

Sound, checked

For participants, it couldn’t be easier. If successful in the tender, companies submit plans to National Grid on a Friday detailing how flexible equipment can be in the coming week. If needed to turn up, National Grid issues a notice, asset-owners decide whether to respond then are paid dependent on the amount of power consumed. During the summer 2016 trial, these payments amounted to £1.50/MWh for availability and £60 per MWh consumed.

During the summer 2016 test, the system was used 323 times and offset 10,800 megawatt hours of power, roughly equivalent to the electricity needed to power London for two to three hours. Operators found that use of DTU was predictable, following weather patterns, as participants responded with good reliability.