DSR: is the juice worth the squeeze?

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    Policy and regulatory decisions made in the past 12 months will have a significant impact on demand-side response (DSR) economics, while National Grid’s changes to service procurement will also reward those with more flexible strategies. 

    But what does this mean for businesses with flexible assets or consumption? Where is the market moving and how can end users ensure the best bang for their buck from flexibility and DSR provision? 

    These were just some of the questions debated at MCP publisher Energyst Media’s DSR Event, hosted at London’s Banking Hall in September.

    The event was attended by more than 200 people with an interest in DSR and brought together leading experts, aggregators and organisations engaging with grid balancing schemes to discuss key issues, share insights and explore opportunities. 

    Speaking on accessing the best value for DSR, Sam Scuilli from Enel X (formerly EnerNOC) said: “The juice has got to be worth the squeeze,” a view supported by the results of The Energyst’s 2018 DSR survey. 

    Money is still the main motivator for participants in DSR. However, sites are now having to rethink their approaches, following flattened Distribution Use of System (DUoS) rates and in the wake of the Medium Combustion Plant Directive (MCPD), which will, in many cases, require investment in abatement technology.

    One site currently participating in DSR is SES Water – a utility supplying 160 million litres per day to residents in East Surrey, and parts of West Sussex, west Kent and south London. A total of 85% of the company’s raw water is extracted from underground resources using borehole pumps, while a further 15% comes from natural springs and river sources. 

    Speaking at the DSR Event, SES Water’s energy and carbon manager Henrietta Stock provided an insight into the company’s experiences of DSR and plans to evolve its strategy. She reported that fears over the potential impact of DSR on operations have already been overcome, but the question, now, is how to manage risk in the future, as the company looks at engaging in new DSR markets. Having engaged in ‘traditional’ DSR, to date, the firm is now mulling how it might capitalise on emerging opportunities, such as the Balancing Mechanism. 

    Tapping into the benefits

    SES Water delivers flexibility through load assets such as pumps and motors, as well as generation. However, the Medium Combustion Plant Directive will take its back-up generators out of the equation, while flattened DUoS rates will also erode savings. To mitigate those changes, Stock said the firm is starting to look beyond traditional DSR approaches. 

    “If we don’t look for new, flexible opportunities, we will see a decrease in the savings and revenues that we achieve,” she said. “To date we have taken part in fairly standard mechanisms such as STOR, DUoS red band and triad avoidance, which are mature, reasonably well-defined and quite straightforward. But the future is responding throughout the day; smaller reductions more of the time, rather than big ‘clunky’ responses at defined periods. 

    “There are lots of suppliers and aggregators looking at the Balancing Mechanism and I think that is where we are heading.” However, Stock said that the business is rightly cautious when it comes to risk. 

    “There is value in budget certainty around costs. If we play in the Balancing Mechanism, an element of that will be uncertain. Getting people comfortable with the nature and level of that risk and what it means in terms of energy costs will be tricky,” she said.

    Nevertheless, changes to network charging regimes and legislation, such as MCPD, are driving the company to consider how to manage that risk. 

    “We know there will always be value in flexibility; the grid needs balancing and there are more renewables coming on to the system,” said Stock. “It is just a case of where that value lies. If the value is not in triad or red band avoidance, where is it? It looks like the Balancing Mechanism, which is why we need to consider moving away from simplistic forms of DSR and looking more at that opportunity.” 

    SES Water is considering battery storage but has concerns over predictability of revenue. 

    “We’ve had conversations with different companies that might be willing to provide and/or finance a battery and we have support internally, but it is still in the very early stages,” said Stock. She added that the cost of investing in battery technology is also decreasing. This could see the business case focus on using batteries for resilience, in the future. 

    Healthy returns? Trust looks at DSR potential

    Delegates also heard from Vikas Ahuja, energy projects manager at Imperial College Healthcare NHS Trust. A few years ago, the trust looked at the potential of DSR using standby generators for STOR. However, due to the age and condition of the generators, and the cost of enabling the assets to participate, participation was ruled out. 

    At the same time, STOR prices collapsed. Barriers at this time included concerns over staffing – the trust was not confident that it had sufficient manpower to manage switchovers from mains to standby or vice versa during the periods when STOR events were likely to take place. There was also a question mark over increased maintenance and running costs. 

    Other barriers were around the perception of risk – due to the critical nature of healthcare facilities, some stakeholders felt that the standby generators should only be used for their intended function – to provide back-up power when needed. The idea was shelved but the trust is now looking at battery storage. 

     “We are looking for a fully funded solution that includes maintenance,” Ahuja explained. “We are extremely interested in improving resilience of our electrical infrastructure and that is the driving factor. A share in the revenues that can be achieved from arbitrage, FFR and other options would be a very welcome bonus.” 

    The trust hopes to find an energy performance contract structure that guarantees savings or revenue share over a contract period of eight to 10 years. Ahuja has conducted feasibility studies with parties to try and find a suitable solution but, so far, providers have not ticked all of the boxes with business plans that detail the revenue share or guaranteed savings. 

    “We are looking for a minimum risk package,” said Ahuja. If the trust is successful with its storage solution, it may be able to combine the battery with its 2MWe CHP. 

    To persuade organisations to participate in flexibility, “customers need clarity and they need certainty,” commented Npower’s Ben Spry, adding that what is important is “having a diverse mix of revenue streams at your disposal”. 

    Part of the challenge, in Spry’s view, is educating organisations about the opportunities. 

    The 2018 DSR survey, launched at the event (theenergyst.com/dsr), suggests those who have taken the plunge are broadly satisfied with the outcome. For those yet to come on board, a lack of knowledge, perceived risk and a lack of certainty around revenues remain barriers to adoption. These concerns will need to be addressed to pave the way for increased uptake of DSR. 

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