10 myths about Demand Side Response

Demand Side Response  is a vital part of our transition to a zero carbon economy and has the potential to transform how we use and deliver energy. But there are some common misconceptions about how businesses can get involved and what it means for them. To help cut through these, Chris Kimmett, Commercial Director at Open Energi, tackles some of the most common myths about Demand Side Response (DSR).

Myth 1: It’s too disruptive

This myth is especially prevalent in the press where headlines such as “UK factories shut down to prevent winter blackouts” are not uncommon. But this is a very outdated perception and technology advances have changed the game completely. There are lots of processes that have a degree of flexibility, where technology can be used to temporarily increase or decrease consumption without impacting performance, for example heating, cooling and pumping.

Take the air conditioning in a typical office building. It will be designed to maintain the temperature between certain bands, for example 18-22 degrees centigrade. Turning the unit on or off for a short period won’t have any discernible impact on the temperature and technology can automate its response so as soon as it approaches its upper or lower limit it stops responding.

Some demand is genuinely inflexible, such as lighting. The good news is that as battery costs come down, businesses can use these to participate in different Demand Side Response schemes and switch to battery power during peak periods.

Myth 2: It’s all back-up diesel generators

It’s true that there is a lot of back up generation participating in certain DSR schemes. Short Term Operating Reserve (STOR) is a good example; 93% of the response comes from generation and 22% (743MW) of this is from diesel. That’s because there are a lot of organisations with back up diesel generators which for much of the time are under-used, so it makes sense to earn revenue from these where possible. However, there is also a significant and growing portion of real demand participating across a range of markets, coming from all kinds of different equipment, including fridges, pumps, chillers, motors, and fans. To date, we have connected over 60MW of demand flexibility from these types of assets across the UK, of which around a third is usually available at any one time.

Myth 3: There isn’t enough value to make it worthwhile

There are lots of businesses out there participating in DSR who would disagree with this statement. In a recent Energyst Media survey, 81% of businesses said they participated in DSR to generate revenue and National Grid’s PowerResponsive website features a range of case studies. These businesses are seeing significant value from participating in DSR, not just in terms of revenue, but also because it is the right thing to do and it is supporting their organisation’s sustainability credentials. Accessing all a business’ flexibility means it should be possible to return around 5-10% of its energy bill in DSR revenue. National Grid has clearly stated its desire and need to grow demand side participation significantly, and its value is expected to increase over time.

Myth 4: It’s a winter peak problem

There is a winter peak problem and margins remain slim at around 6.6%, but National Grid increasingly faces challenges in the summer and with the year round second-by-second balancing of supply and demand. As more of our power comes from wind, solar and other sources of distributed generation over which National Grid has no control, it is having to cope with periods in the summer months where supply exceeds demand, often overnight or in the middle of a sunny day. Rather than pay wind farms to turn off, it has been using a new service called Demand Turn-up to encourage businesses to shift their demand to these periods to help absorb the excess energy.

A very different challenge is that of managing the real-time balancing of electricity supply and demand, which National Grid must do 24/7, 365 days a year. Whether a gust of wind means a surge in power or a gas plant tripping means a shortage, demand flexibility is cleaner, cheaper and faster than ramping power stations up and down in response. Fast acting real time flexibility is essential to keeping the lights on in the future.

Myth 5: Participating in Demand Side Response means handing over control of my processes

Absolutely not! It is not the place of DSR providers to tell you how to run your business and you should always retain ultimate control. This should be a fundamental part of how you approach DSR. We spend a lot of time working with our customers to understand their assets and processes and agree the parameters within which they want their assets to participate. Once a control strategy is in place, each individual asset is then able to decide if it can respond, and the technology will enable it to kick us out automatically if it reaches a point where it can’t.

The beauty of DSR is that because the response is aggregated from many thousands of assets, where one fridge can’t respond we know that a pump or a bitumen tank will. Added to this there is always an override switch which means the system can be disabled on site at any time.

Myth 6:  Demand Side Response is easy

It is getting easier, but it is certainly not easy just yet. As described above, much of the effort and resource is required pre-implementation, in understanding the assets and processes and developing a strategy to ensure there is no impact on operational performance. There is a lot of great learning happening in the UK and globally, connectivity is increasing, technology is improving, and we are starting to see equipment being manufactured “DSR” ready. These changes are making it easier for businesses to participate by the day.

Myth 7:  Energy storage = batteries

Batteries are very interesting and the cost curve has been plummeting – especially for Lithium-ion batteries. But energy storage comes in many forms; there is thermal storage in a fridge, in a building’s air conditioning or in a bitumen tank for example.

Working with Aggregate Industries, we have found that a modern, well-maintained and insulated bitumen tank – which stores the liquid bitumen used to make asphalt for roads at between 150-180 degrees centigrade – can be switched off for over an hour with only a one-degree change in temperature.

Similarly, the water pumped to a reservoir represents a form stored energy. If we can find these small amounts of stored energy in everyday processes and unlock this flexibility for National Grid, then we can start to deliver a transformation in how our energy system operates without the need to build new batteries.

Myth 8: There isn’t enough demand flexibility to make a difference

A number of recent studies have looked at this, including the Association of Decentralised Energy and the National Infrastructure Commission. Our analysis suggests there is around 6GW of demand that can be shifted during peak periods, and that’s real demand only, not including back-up generators. 6GW is more than the UK’s two biggest coal fired power stations combined, and almost double the proposed Hinkley Point C nuclear plant. Unlocking this flexibility means we can build fewer peaking plants, integrate more renewable generation and mitigate the effects of intermittency. It offers major advantages in terms of cost, network reliability and sustainability which is good news for the environment and bill payers!

Myth 9: It’s unreliable

In setting the Capacity Market Auction Guidelines, National Grid prescribed the reliability for each balancing technology class available. Demand Side Response was ranked as more reliable than Combined Cycle Gas Turbines (CCGT), coal, hydro, oil or nuclear power. For example, for a 100MW nuclear generator, National Grid estimate it can rely on 81.4MW being available, while for DSR they would expect 89.7MW to be available. Large centralised power stations do not necessarily confer reliability. By their very nature they represent large single points of failure with the potential to cause massive disruption should a problem arise. The aggregated nature of DSR which relies on many thousands of smaller assets working together has proved its reliability over many years.

Myth 10: I have no flexibility!

You probably have more than you realise. If you’re thinking about demand flexibility but not sure how or if it could work for your business, we recommend you:
1) engage the right people internally who know what equipment you have and understand how it is managed
2) find someone who understands the market
3) find someone who understands your industry and what you do

By overlaying the above in a meaningful you can identify how much flexibility you have and where you can use it in a way that doesn’t disrupt your business and delivers the value you need.



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