9 Flares 9 Flares ×

Demand Side Response

Untitled

By Levent Gürdenli, Senior Associate at Bird & Bird

Introduction

Our energy system is undergoing a transformation. The transition to a cleaner, smarter and more flexible power system could provide benefits to consumers of up to £8 billion a year by 2030[1] by running our energy network in a more efficient and secure way. It will also change our relationship with energy by empowering us to take better control of our energy management in more sophisticated ways.

Demand side response (DSR) is one of the tools in the armoury that is required to achieve this transformation. DSR can help to reduce the demand for electricity at peak times and help to shift that demand towards times of plentiful and more cost effective low carbon generation. The increasing deployment of decentralised and non-intermittent generation also means that the ability to flex demand will become increasingly important to maintain the security of our supply.

Barriers

Work is already being done to promote wider participation in DSR. There is already significant activity in the industrial sector – although this is often generation led. National Grid has set up Power Responsive, a stakeholder led programme established to increase participation in different forms of flexible technology such as DSR. The Government has committed at least £50m of funding to support innovation in DSR, as well as other smart technologies over the next five years. A number of the technical building blocks to enable DSR are also currently being introduced. Crucially, this includes the nationwide rollout of smart meters.

That said, while there may be a higher level of interest in DSR, a number of barriers remain. For larger non-domestic customers, research undertaken by Ofgem[2] identified the following as barriers to wider participation:

  • Cultural barriers – the monetary value provided by DSR may not justify the cost and effort required to enter into the arrangements needed to provide a non-core service.
  • Information barriers – many businesses are not aware of DSR opportunities and there is a lack of accessible information on how to participate.
  • Commercial barriers – concerns about the potential disruption and impact on business performance may preclude participation in DSR activities.

For domestic customers, the challenge is more focused on consumer engagement. The vast majority of domestic customers still do not switch their electricity provider despite having the chance to save hundreds of pounds. How can we make the value proposition of DSR more appealing?

The way forward

The successful rollout of DSR will require careful consideration of a range of diverse and interconnected issues, including:

  • the rollout and development of smart enablers such as smart appliances and half hourly settlement;
  • the development of smart energy tariffs;
  • clarifying the role of aggregators and how they can provide third party services to facilitate DSR;
  • technical issues such as standards for smart appliances, interoperability of devices and dealing with simultaneous load shifting;
  • protecting personal data and issues surrounding cyber security; and
  • putting in place appropriate consumer protection.

Fundamentally any solution needs to be accessible and transparent. The energy system is complicated and often confusing.  The industry should keep this objective in mind in order to develop successful policies and solutions to facilitate the wider participation in DSR.

[1] https://www.gov.uk/government/publications/smart-power-a-national-infrastructure-commission-report

[2]  https://www.ofgem.gov.uk/system/files/docs/2016/12/smart_flexible_energy_system_a_call_for_evidence.pdf