Demand side supply measures should help ease pressure on the UK energy supply

National Grid to pay firms to cut electricity usage

The National Grid is offering to pay firms to cut their electricity use at peak times to prevent blackouts.

The UK’s electricity system operator is looking for large energy users willing to reduce their electricity use when demand is at its highest between 4pm and 8pm on winter weekdays in return for a payment.

The tool was approved by regulator Ofgem in 2013 following a consultation and National Grid has launched a tender for up to 330MW demand side balancing reserve (DSBR) to pilot the new service for winter 2014/15.

“It’s our job as electricity system operator to make sure we’ve got all the right tools at our disposal to balance supply and demand on the electricity network, 24 hours a day, 365 days a year,” said Peter Bingham, senior manager of National Grid's electricity market reform project.

“For winter 2014/15 we are inviting providers of demand side response services to offer a small volume of demand reduction capability to pilot the new DSBR service.”

Firms with back-up generation capacity are the most likely to sign up for the new service and, if the pilot is successful, National Grid hopes it will help foster a demand side response (DSR) market, which could help ease the pressure on the UK’s energy capacity as old plants shutdown.

They also want to introduce a supplemental balancing reserve (SBR) by contracting plants due to be closed or mothballed to provide reserve capacity on winter weekdays between 6am and 8pm. The company will run tenders this autumn and in early 2015 for up to 1,800MW of both DSBR and SBR for winter 2015/16.

Potential tenders for 1,300MW in 2016/17 and 800MW in 2017/18 will only go ahead if an on-going need for the services is identified and the funding arrangements are extended by Ofgem and the introduction of a capacity market in 2018/2019 should remove the need for them.

Nicola Walker, CBI Director for Business Environment, said: "It’s right for action to be taken to ensure we secure our energy supplies in the short-term. This also underlines the need for us to get the investment we need into our energy infrastructure to keep the lights on in the future.

“National Grid’s voluntary arrangement for large energy users to reduce their electricity use is sensible, but in the long-term we need to focus on better energy efficiency in our businesses and homes.”

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