Thousands of UK businesses could save at least £20,000 a year by helping National Grid balance supply and demand, according to SmartestEnergy, which is currently bidding to provide 100MW of demand side response (DSR) in the capacity market.
The renewable energy supplier has said businesses that can identify flexibility in their energy consumption can make significant sums of money by providing DSR to the grid. In addition, for every £1,000 businesses earn in these capacity market payments they can save a further £5,000 by avoiding peak energy charges.
They can also sell purchased energy back to the grid once flexibilities have been identified at times of high demand. SmartestEnergy claims businesses buy electricity in advance at £40-£50 per megawatt-hour while prices this winter have reached over £200/MWh 37 times and even hit £792/MWh on 31 October 2016.
Robert Groves, chief executive of SmartestEnergy, said: “Electricity isn’t just a utility you take for granted but a valuable commodity. Matching demand to supply is key to a cost-effective and reliable energy system, and businesses which can help do this stand to gain by tens of thousands of pounds a year. The average business can shift 10% of its energy usage with little impact on operations.”
The company says businesses which are able to deliver at least 250kW of capacity – typically those spending at least £1 million on electricity and consuming 10GWh a year – can take advantage of this opportunity.
According to Cornwall Insight, this includes 9,700 businesses that could save nearly £20,000 a year if they have a 250kW DSR contract according to SmartestEnergy. This is made up of £2,812 capacity market payments and an additional £15,000 by shifting consumption to off-peak times, or £17,150 by stopping consumption altogether.
DSR is a rapidly growing market in the UK and has become one of National Grid’s main strategies for balancing the grid. The system operator spends £1 billion a year on balancing services to ensure the supply and demand are matched.
The number of capacity market auctions is also increasing, with DSR rapidly taking up considerable levels of capacity. SmartestEnergy has secured 90MW of DSR capacity for 2020 and has 100MW prequalified for the current auction which opened on 31 January and the next in March.
The capacity entering the current auction is over 59GW of de-rated capacity and has already concluded the fifth round of bidding, with prices down to between £50-45/kW per year.
National Grid has set a target of meeting 30% to 50% of balancing services from DSR by 2020, and spending could double to £2 billion a year within five years as renewables replace fossil fuel generation.