As energy becomes less central, we have to be more flexible
The energy sector is entering a smarter new world of fundamental structural change, underpinned by cleaner generation and ambitious carbon targets.
Last year the UK finally began to implement the long-awaited Electricity Market Reform (EMR), setting in place new Contracts for Difference and Capacity Mechanism schemes designed to support more renewables in our daily generation mix, which by nature carries more intermittency. As Ofgem pointed out in its recently published Flexibility Study, we’re moving away from a largely linear one-way flow of electricity from generator to consumer, towards a system where generation is distributed and more variable – and involves new cutting-edge technologies and emerging business models.
But what does this mean for major energy users? While energy reduction and cost management has been the key focus for many over the last five to ten years, we’re now seeing unprecedented innovation in the flexible demand management space.
Large consumers have an increasingly pivotal role to play in managing the complexities of system balancing, and players across the industry are identifying ways in which generators, suppliers and consumers can work together to reduce consumption and harness flexibility in demand. In fact, National Grid’s Power Responsive initiative is designed to do just that.
Ofgem’s Flexibility Study is a publication that merits more attention. Within it, Ofgem indicates a priority area as facilitating the move to a smarter, more interactive energy infrastructure.
Unsurprisingly, a key focus area is encouraging a greater number of industrial and commercial customers to participate in providing flexibility. In particular, they are looking to overcome barriers such as a lack of understanding of the value of flexibility, a lack of confidence in existing programmes and ensuring that the right kind of commercial incentives and frameworks exist.
This perspective is strengthened by National Grid’s Winter Outlook Report, published last October, which confirmed that 2.4GW of additional balancing services have been procured for winter 2015/16. 0.13GW of this capacity will be provided from large energy users participating in Grid’s new Demand Side Balancing Reserve (DSBR) scheme. There is an increased likelihood that they’ll use that contingency this winter to assist system balancing, with far greater emphasis than previous years on the role of industry in supporting peak demand periods – and it’s a role that will only increase in future years as our energy system evolves.
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