Demand-side measures key to energy 'revolution' says former Grid CEO

Comparing the situation in the UK with the US, Holliday said that in Britain, demand-side response (DSR) evokes inaccurate comparisons to the power shortages of the 1970s, whereas in the US it is accepted as being a desirable part of the system.

“We need to change the story on demand-side measures, stop seeing them as 1970s-type rationing and start seeing them as part of the future,” he said. “Supply-side measures are always more expensive than demand-side measures, which are bound to be cheaper, although they currently still need to be incentivised.”

Steve Holliday was speaking at a briefing ahead of National Grid’s Winter Outlook report, which is expected to say that electricity supply margins this winter are tight but manageable. The buffer between available supply and peak demand is forecast at 6.6% - about 30% higher than last winter. The cost of contingency measures is expected to be somewhat higher, though, accounting for about 0.3% of the average bill rather than last winter’s 0.1%.

This will be the last winter during which the ‘confusion’ of temporary measures are needed, said Holliday, as they will be supplanted by a new instrument, the Capacity Mechanism.

“National Grid has said year after year that it has measures in place to balance supply and demand and that interruptions in electricity supply are highly unlikely, and the proof is in the pudding; there’s only been one generation-related blackout in the last decade,” he said.

“But a lot of the criticism of tight margins comes from an out-dated understanding of the UK’s electricity system, which evolved markedly during my time at the Grid. We’re moving away from a system dominated by relatively few large power plants to one with a high proportion of renewables and various flexibility mechanisms such as interconnection, storage and demand response to keep supply and demand in balance.

“This revolution will continue. And one of the big takeaways is that measures such as demand-side are not ‘rationing’ energy, but cheap, efficient ways to manage supply and demand, which if it’s done well is good for energy security, good for carbon emissions and good for customers’ bills. It really is nothing less than a revolution in the provision of our energy.”

Chris Kimmett, Commercial Director at DSR provider Open Energi, agreed that DSR offered significant opportunities to save energy and reduce bills – but only if there is a level playing-field between demand- and supply-side providers.

“To fully realise the potential of demand-side response to help balance the grid, save energy and offer lower costs for consumers, the key is market access,” he said.

“Currently, there isn’t a level playing field in the UK; the market favours existing power generators to a disproportionate extent. If DSR is allowed to compete on equal terms it will be a move towards the freer energy markets that we all want to see, as well as supporting British innovation and rewarding entrepreneurship.”

Open Energi acts as a DSR aggregator, pooling together companies wishing to take advantage of demand-reduction opportunities and making contracts with National Grid. Businesses with which it works includes Aggregate Industries (AI), part of the LafargeHolcim group, a manufacturer and supplier of a wide range of heavy building materials to the construction industry.

Donna Hunt, Head of Sustainability at Aggregate Industries, said that using DSR was a ‘no-brainer’ as it saves energy, cuts carbon emissions and is a revenue stream for the company.

“Taking part in National Grid’s demand-side response scheme is a sensible way for our company to take control of our energy consumption and helps us deliver our carbon reduction strategy,” she said.

“It's entirely voluntary and we decide what assets can be utilised. As a major energy user, DSR reduces our energy costs, keeps us competitive and has the added benefit of making the grid more flexible for the benefit of everyone in the UK."

A new report published today by the Energy and Climate Intelligence Unit (ECIU) found that increased use of DSR could have reduced the cost incurred by invoking National Grid contingency measures on a day of very high demand last winter by one-fifth.