DSR opportunities expand as technology improves and intermittent renewables grow

(Written for FM World, Dec 16)

Demand side response (DSR) is a favourite of the UK’s National Grid, which believes it will meet 30-50% of the required system flexibility of our new intelligent grid as more and more intermittent renewables are added into the mix – by moderating peak demand and absorbing surges of cheap renewable power. For those with significant energy needs DSR represents an opportunity to lower energy costs by reducing demand when prices are high at times of peak demand, and raising demand when prices are low during renewable surges. It can be taken a step further by establishing on-site generating facilities that cover demand and sell back to the grid at peak times, while at the same time providing a guaranteed insurance against blackouts.

With short-duration, low-impact changes to when a site consumes or generates, energy consuming facilities of all sorts can earn revenue, help absorb renewable energy and make the national electricity system cheaper and greener. Big data analytics, cloud technology and other advances, combined with the UK’s half hourly priced market are making this possible, and the technique offers facilities the chance to improve sustainability and meet carbon budgets, as well as cost cutting and black-out avoidance.

“Over the last 15 years reducing energy consumption has been the main consumer focus. This could now switch to making energy use as cost effective as possible by buying when it is cheapest and selling when most expensive”, said Marc Borret, CEO of Reactive Technologies1, an award-winning DSR cloud technology developer.

Giving in winter and taking in summer

The highest potential for DSR comes firstly during times of peak demand focused on winter evenings, which is normally when the highest power prices occur, especially when winds are light. Secondly it comes at times of peak supply, when prices tumble, which is normally on windy, sunny days in the summer – although it can occur any time of year, with, for example, the 20th November this year seeing negative power prices in Germany due to strong winds.

At times of high demand, DSR can help spread consumption more evenly across the day, and therefore reduce the need for reserve capacity to meet peak demand. Responders can absorb cheap power in the morning and then sell early evening, when it’s expensive. This also helps avoid using power during the three most expensive half hours of the winter season (Triad management), which influences the wider price commercial users are charged.

The gap between peak winter demand and total capacity has been falling for some time, as old polluting plant has been closed to meet emissions goals. Intermittent renewables have been replacing it, but they need back-up, or some other form of flexibility in the system. The capacity market is incentivising supply back-up, but flexibility can also come in the form of DSR – which, as mentioned, the National Grid expects to meet 30-50% of what’s needed – and to a lesser extent, storage.

DSR can also be used for emergencies as well as peak demand, including when power station experience problems. One such occasion was September 2016, when UK Day-Ahead Baseload prices shot up to £999/MWh, their highest in five years. Avoiding such spikes, or even being able to profit from them, represents a considerable incentive for energy users to adopt some form of on-site power and/or demand management.

At the other extreme, during periods of high wind or sun and low demand, grid operators often have to pay wind farms not to generate. These actions are expensive, and a waste of free, renewable electricity. This is when demand aggregators can raise demand, taking advantage of the low renewable prices, and absorbing renewable power that would otherwise go to waste.

During a demand turn-up event combined heat and power (CHP) sites can switch off and keep their heat customers supplied using either a heat store or back-up boilers, while importing electricity from the grid. The site makes a profit above the cost of keeping the heat customers supplied – but whenever that’s not the case, the service can be suspended. Energy consumers without on-site generation can raise demand by changing their consumption schedules or ramping up a process.

Analysts Navigant Research, estimate that worldwide demand response load curtailment (i.e. DSR) will grow from 30.8 GW in 2014 to 196.7 GW in 2023, and the UK, with its competitive half-hourly priced power market and tight reserve margin, is likely to lead the trend.

Picking the right partner

Awareness of DSR is growing among energy consumers, but there is still a great deal of misunderstanding around participation and practice. For all but the biggest users, consumers will need an aggregation partner, and to find the right one asset managers should be ready to ask difficult questions, covering track record, experience of working with similar customers, and how the aggregator will protect the core business operations of participating sites.

Companies that offer demand response aggregation programmes include Flexitricity and Restore.  Such aggregators install an outstation at a participating site, which will interface with the site’s control systems and send signals back to its control centre. When there is excess generation on the system and prices fall, a signal is sent to the outstation to either increase demand or reduce generation, (or if prices rise to increase generation or reduce demand).

While DSR doesn’t require much capex, and some of what is needed would likely come from the aggregator in any case, a great deal of management time is required. Demand response performance will improve once DSR aggregators and energy users have built up experience. Automation, security and speed are very important, as are aggregation methods, flexibility in communications, and defensive engineering.

However, none of this will help if the site isn’t right for DSR, such as those with inflexible demand and without back-up. The most suitable facilities include those with flexible load – such as cold stores, and facilities with controllable on-site power. Gas, or best of all biomass-fired CHP gets better returns from DSR than diesel, because market conditions are rewarding low delivery cost and frequent delivery more than consistent availability, and diesel scores badly on cost as well as sustainability.

Market out-performs central planning

National Grid is incentivising the market, but the commercial sector may have pipped its centrally offered demand response scheme, as this year the Grid cancelled its winter demand side balancing reserve (DSBR)2. The DSBR was designed for consumers that don’t already reduce/shift demand or run embedded generation during peak times in response to pricing signals. But it appears most large consumers that are keen to employ demand management already do it themselves or through a private aggregator – a sign the market is working.

The DSBR is one of several measures to secure reserves for times of emergency, inviting heavy electricity users such as industrial plants and factories to volunteer to reduce demand on early winters’ evenings, in return for a payment. National Grid can also procure extra generation capacity at peak time to avoid shortages using the Supplemental Balancing Reserve (SBR) – a scheme that pays power plants to be available on standby that would otherwise be closed or mothballed.

In times of excess power output, demand surges can be provided under the Grid’s Demand Turn-Up (DTU) system, which was launched last May. Industrial, commercial and public-sector sites can earn revenue from DTU if they can either decrease generation or increase electricity consumption on request. National Grid now holds an annual Power Responsive conference that discusses the next steps for DSR, including delegates from industrial and commercial energy users, CHP operators, public sector organisations, and aggregators.

Driving technologies

Clean-tech innovations should help electricity customers who want to manage their energy consumption in a smarter, more flexible and profitable way, while also aiding in the integration of renewables and cutting peak backup capacity in the process. Over coming years, the roll-out of smart meters, advanced monitoring equipment and above all cloud based demand management technology, are all expected to make a contribution to facilitating more flexible demand.

The resulting smart grid will be able to more efficiently and reliably balance power demand and supply. As well as reducing the risk of outages and the need for back-up capacity, smart grids will also be able to safely and efficiently integrate more intermittent renewable and other distributed energy sources into the electricity network. On the demand side, it will be possible to accommodate more major offtake points, including for electric vehicles, and make DSR easier.

Smart meters will not only provide information to suppliers and grid operators, they can also provide customers with visibility of what is used and when, which helps with behavioural demand reduction – knowing how much a device is consuming has been shown to alter consumer behaviour as they attempt to save money.

Cloud cover

The most important element in the demand management mix could be cloud-based software systems linking the hardware, which can shift the energy use of many individual consuming assets from one period to another, using advanced communications and software technology from the mobile phone sector. This contrasts with fitting hardware that will trip out when certain parameters are reached, and it enhances energy trading opportunities in competitive markets priced by the hour or half-hour – as in the UK – as well as the option of instantaneous rapid reduction.

Rather than treating each energy customer as an individual entity, such systems can make aggregated use of the consumption flexibility of many customers’ individual consuming devices, including fridges and heating – which do not need constant power. The wider the flexibility range for that customer’s devices, the more demand can be varied. By using the cheapest energy, a share of the saving can be passed back to the customer for providing the flexibility. Large consumers with many sites and consuming devices are best placed to benefit initially, but the principle could eventually be applied to individual residential users as well.

Any facility seeking improved sustainability and efficiency in their use of energy today should look to DSR, whether or not they have their own source of power. As the technology snowballs, multiple opportunities are likely to be offered, aimed at turning the increasingly volatile power markets into an opportunity, rather than a threat.





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