Demand side reduction is gaining significant traction having been highlighted in a number of government reports as a potentially crucial element of the future energy market. Having deployed the technology within various high-profile businesses – including the likes of Sainsbury’s and United Utilities – Open Energi’s David Hill believes more and more C&I entities are coming round to the idea of DSR. And with storage costs tumbling month-on-month, it could be about to become all the more powerful.
Was it difficult to build trust in demand side reduction to start with?
I think the trust was more centred around the returns, people understood the value of the market we were operating in and there was transparency there in the price we could get them in the ancillary service market. We were always very transparent there. I think the big area of trust was generally that we could make requests and automate control of assets that are critical to the processes of that business.
Naturally organisations are concerned that it’s going to disrupt their core business structure and I think that was the biggest barrier to overcome, and we put a lot of investment into not only the control algorithms to make sure they never take things out of their control parameters, but also investing a lot of key areas and competencies such that when we’re chatting to water engineers, we have those who can really translate exactly what we’re doing and how that could impact that process.
How much of a role can falling technology costs, particularly storage, play in the uptake of DSR?
The whole strategy of how we can aggregate rapid responding carbon-free flexibility behind the meter for our customers to add value to them, and also change the electricity works – whilst we’ve been deploying that in a demand response context, essentially storage is the next asset class that fits very nicely into the way we operate. Batteries are very good for doing dynamic frequency response, they’re very good for doing peak price avoidance, and they’re simple to integrate within an existing software platform like ours. We are looking to work with our customers to deploy batteries within them so they can go deeper into their ability to manage peak prices, and also in their ability to participate in flexibility markets. Sometimes there are assets with our customers that just have no flexibility, so Sainsbury’s lighting and IT equipment don’t have any flexibility. The only way to unlock flexibility from these kinds of assets to operate within National Grid’s markets is to put a battery alongside them.
And obviously that extends as far as TRIAD periods and not just standard peak times?
You can really use the combination of demand response and batteries to create a very low-cost energy optimisation strategy across a range of markets like TRIAD, capacity market levy, distribution network charges, and dynamic frequency response markets and any future markets that haven’t been invented yet. They’re incredibly powerful assets that can respond to a range of different signals.
What kind of thought process goes behind what services are chosen to apply for?
It’s a relatively simple strategy of what’s the maximum value you can achieve within any half-hour of a day with that asset. There is now a range of different ways in which demand or flexible response can create value for C&I consumers. Not all of them are available to do the same thing at the same time, so effectively we spend a lot of time with our customers evaluating what are the best market options, and then you plot an optimisation strategy through those on a half-hourly basis which our software can automate. For the most point it looks like doing peak price avoidance services Monday to Friday, 4pm – 7pm, and then around that we’ll operate within frequency response markets or, if our customers have agreements with suppliers to do other types of arbitrage, we can build that strategy in. It’s very much a bespoke strategy to return the maximum amount of value to pay off the capital invested in deploying our Dynamic Demand software as quickly as possible.
How have you found engaging with these end customers?
The nice thing about bringing battery storage to our customers is all of them are a long way on a journey of understanding all the different parts of the energy market. By adopting our technology they’ve already taken a leap into how the energy markets work and how they can create value out of changing demand. When I first started selling our technology the real challenge was defining the difference between energy efficiency and demand response.
How are you going about engaging with more customers?
I think we’re definitely seeing a lot more interest in it just naturally. I think the general peak pricing structure of most peoples’ bills means that all of them are very actively looking for solutions to avoid peak prices. The fact the capacity market levy comes in this year, TRIADs are due to go up – everyone is now evaluating a range of different options. Batteries – even if you go in with a proposition of trying to avoid peak prices – it’s something that’s falling on happy ears.