On 9 August, the UK experienced its biggest power cut in a decade, causing disruption on the roads and railways and leaving almost a million homes without electricity. Although National Grid ESO’s report points to a lightning strike which was an ‘extremely rare and unexpected event’, the way industry generates and uses electricity has changed dramatically over the past few years, and we’re now becoming increasingly reliant on renewables and distributed generation, which can be intermittent and unpredictable.
While transitioning to lower carbon forms of generation is a necessary and positive move, it makes balancing the grid more complex.
However, businesses – particularly energy-intensive manufacturers - could play a key role in keeping the lights on – and in doing so, could see real benefits to their organisation.
Keeping the grid balanced involves maintaining a delicate equilibrium between supply and demand – so when demand drops, generation must also reduce, and when demand increases, so must generation.
One way that manufacturers can contribute to this balance is through demand side response (DSR), which involves the grid asking businesses to increase, decrease or shift their electricity consumption when necessary. By participating in DSR, manufacturers could both support a smarter, more flexible energy system, and they could earn revenue or reduce their electricity costs.
There are three ways manufacturers can participate in DSR services, which are outlined below:
1. Frequency response
There are two types of frequency response scheme, static frequency response and dynamic frequency response.
Static frequency response involves activating a fixed capacity for a fixed period, so participants must be able to respond to an automatic signal from National Grid within 30 seconds, adapting their consumption as required for up to half an hour.
With dynamic frequency, an organisation’s assets must be able to respond to frequency deviations in real time and activate capacity that’s proportional to any frequency deviation from 50Hz, which means eligible assets react around 80% of the time.
Frequency response programmes are the highest-paying DSR schemes, so businesses that are chosen to participate can make significant returns.
The Short Term Operating Reserve (STOR) is National Grid’s core capacity reserve scheme. Participating businesses offer an agreed amount of capacity as reserve to National Grid during predetermined windows of time (up to a maximum of two hours), and they must be able to reduce or increase demand within ten minutes if they are called upon to do so.
Organisations are paid a set availability fee for simply being available during these periods, which means they are paid even if they’re not called upon to adjust their load. However, if they are called upon to load manage, they’re also paid an additional utilisation fee.
3. Capacity Market
The Government established the Capacity Market in 2016, to secure sufficient capacity on the network up to four years before it is needed. Potential participants must bid for contracts in auctions, which are held both four years and one year in advance of the delivery date.
Those that win contracts in these auctions are offered one-year capacity agreements at the clearing price, and they will be notified four hours in advance of possible events in this period. If a response is required, they are notified fifteen minutes in advance.
The Capacity Market pre-qualification window for 2020/21 is open now, but it will close at the end of September – if so any interested manufacturers will need to act quickly.
So, how can your business get involved?
To participate in DSR scheme, a manufacturer will need to have flexible assets or load that can be turned down or off with little impact on its business operations. Larger energy users are more obvious candidates for DSR, as typically a minimum of 500kW of flexible load is required to sign up for a programme.
However, a smaller energy user with flexibility, may be able to get involved by aggregating consumption with other smaller users.
What is clear that, as we transition to a low-carbon world, DSR could enable both large and small energy users can play their part in the UK’s energy future.