Energy demand management ‘under utilised’

This was the conclusion of experts at a media briefing on energy demand management, hosted by the Energy and Climate Intelligence Unit (ECIU) and the Energy Saving Trust (EST).

Michael Grubb, Professor of International Energy and Climate Change Policy at UCL, said that conventional demand reduction or energy efficiency programmes have already had a very substantial impact of energy and electricity demand, which has been steadily declining in the UK over the past six or seven years.

He said that the CERT programme, the UK’s biggest energy efficiency programme, had already delivered lifetime savings of 300m tonnes of CO2 emissions, equivalent to between 100-200 terawatt hours, or the equivalent to taking all private cars of the road for six years. [Current annual CO2 emissions in the UK are around 550m tonnes; current annual UK demand is around 350 terawatt hours]

He said: “These savings are not trivial. Energy efficiency has already delivered quite substantially, and that is an important factor to bear in mind, because one hears a lot more about the costs of these programmes than the benefits.”

Andrew Benfield, a Director of the Energy Saving Trust, said however that misconceptions around energy efficiency remained. He said: “Consumer awareness levels around energy efficiency have never been higher and real progress has been made. However, barriers to action for many householders on energy efficiency are still there; people are still confused about what to do and how to do it and trust is still a major issue.”

Michael Grubb went on to say that ‘political framing’ of the issue, and concerns that industry has got to shut down to keep the lights on, was a problem and that this winter, in which supply margins are expected to be tight, would be test of ‘perception and reality’ in the electricity system.

Professor Grubb said that the increasing and developing role of demand side response is a valuable complement to the increasing role of variable renewable energy on the system.

Demand side response is a flexible approach designed to either curb electricity use at times when demand, and therefore the price, is high and shift flexible users to use electricity when prices are lower and supplies greater.

The benefits of effective demand side response include reduced energy infrastructure investments, lower electricity prices, increased energy security and lower emissions. It can also be more reliable: on the east coast of the US during last year’s ‘polar vortex’, which saw record cold temperatures hit the country, 20 percent of power stations were unavailable due to the cold, but demand response kept the lights on.

Capacity Market

The Capacity Market, the new mechanism intended to ensure security of electricity supply in the UK, discriminates against demand-side providers, said the speakers.

Sara Bell, CEO of the UK start-up Tempus Energy and Chair of the UK Demand Response Association, said that the Government had watered down proposals for including demand response providers in the UK capacity market, which were initially copied from successful US models. This is likely to lead to higher bills for customers because the market design discriminates against companies bidding to reduce demand, a point echoed recently by the Energy and Climate Change Committee.

She said that increasing generation and varying demand ultimately have the same impact on balancing the grid. But currently the capacity market is offering only one-year contracts for companies who are prepared to work with customers to constrain their consumption, but up to 15-year contacts to generators who are prepared to increase their production.

Research by NERA Consulting estimates that this could cost up to £359m extra in the first year of the capacity market alone because of keeping demand management providers out of the first capacity market auction this December.

Sara Bell said: “We now have a capacity market that discriminates against customers providing the same service as generators. If you want to balance supply and demand, you can either increase generation or you can reduce demand: ultimately it has the same impact of balancing the system.”

Michael Grubb said that that the changing energy market was challenging the assumption that Britain’s energy security relied on building new centralised power generation capacity.

He said: “Energy efficiency and demand management are the biggest areas of cost effective ways for meeting all three of the UK’s energy policy goals – environment, security and cost.”

He argued that it ‘remains to be seen’ how much demand side management can deliver saying that there were “a whole load more options that are still in their nascent stage in terms of efficiently managing the power system.”

Sara Bell echoed this point, arguing that the UK should not “lock itself into 15-year contracts for generation when we actually don’t know what the mix of solutions is going to be. In the US the longest contract length for a capacity market is five years – it’s hard to understand why we’re locking in for such a long period of time.

On 22 October the Energy and Climate Intelligence Unit (ECIU) and the Energy Saving Trust (EST) hosted a media briefing on demand management. The speakers were: Sara Bell, CEO of Tempus Energy and Chair of the UK Demand Response Association; Andrew Benfield, a Director of the Energy Saving Trust and expert on consumer energy advice; and Michael Grubb, Professor of International Energy and Climate Change Policy at UCL, Advisor on Sustainable Energy Policy to Ofgem. For more information read our backgrounder.