Demand Side Response – What’s it all about?

By Ken Warner, MD, Energy Renewals

Every industry has its jargon but this is one phrase all businesses should take note of simply because it can put money on the bottom line.

Right, now I have your attention!

I have been going on (and on) about demand side response or as we in the sector refer to it – DSR – for a long time. Basically, your company reduces its electricity output at peak times and the National Grid says ‘thank-you’ in the form of hard cash.

As the National Grid explains in their guide ‘Profiting from Demand Side Response’, electricity cannot be stored economically so the organisation has the arduous task of balancing demand and supply, attempting to keep them equal at all times to avoid equipment failure during over supply and blackouts when there’s not enough. Inevitably, there are peaks and troughs, we are all familiar with the surge when we all put the kettle on for a cuppa during the Coronation Street commercial break!

As technology becomes more sophisticated so ‘Smart Grids’ are coming into play and in the future they will deliver power as required and maintain the balance both by automatically switching customers off without affecting their requirements and drawing back unused power to use elsewhere.

DSR is already taking us in that direction and the National Grid financially rewards companies for taking part yet the vast majority do not participate.

Of the 200 end users surveyed by Energyst for its 2016 report on DSR, almost three quarters (73%) did not participate in the scheme although 87% said they would be interested in earning revenue from DSR if it did not affect their operation. However, 37% were worried about disruption to their company and 39% felt they didn’t have the right equipment or processes in place. A lack of understanding of the market was highlighted as an issue by 28% of non-participants, 24% thought the return on investment wasn’t good enough and 23% were reluctant to hand over control to third parties.

Most companies taking advantage of DSR switch to on-site power with much of it from diesel-powered generators, when the National Grid comes under pressure, according to the report. However, in its final report after being axed by Theresa May’s government, the energy and climate change committee made a number of recommendations to increase access to DSR and for a ‘merit order’ of power to be introduced with diesel being the last resort.

Already large companies and organisations are benefitting. For example, London Underground has been able to make use of its own stand-alone back-up supply at Greenwich Power Station currently using 200-300 hours per year equating to 55MW of demand reduction.

Sainsbury’s, United Utilities and Aggregate Industries are also pioneering DSR. According to a report in business sustainability online resource, between them, the three companies have the potential to free up to 39MW of flexible capacity. This is calculated to make carbon savings of almost 90,000 tonnes by 2020. As well as being incentivised to take part, the companies will reduce energy bills because DSR allows them to avoid peak-time pricing.

However, the concept of DSR can be difficult to understand especially when a host of technical terms are banded about, it is little wonder bosses think participation would take them way out of their depth.

The National Grid explains in its guidance, to benefit financially, first companies need to gain a working knowledge of electricity usage to indentify capacity and availability. Not surprising, then, many fall at this first hurdle. Effectively, it’s too big a mountain to climb even though it forms part of a cohesive energy strategy incorporating DSR.

That’s where we come in.

How did you guess I was going to say that?! Joking aside, we’ll explain everything and if you decide DSR could be for you but you think you would benefit from some specialist input, you can scale our services up or down depending on your requirements. Much like your electricity supply once you have DSR in operation.

In its guidance, the National Grid explains SMEs as well as large corporations can benefit from DSR and if the knowledge can’t be found in-house, it recommends making use of an aggregator or third party. According to the National Grid, third parties such as ourselves have a vital role to play in simplifying the process for smaller businesses and to help build a stronger demand for DSR as well as enabling such companies to take advantage of the financial opportunities and this is certainly something we’re committed to achieving.