DSR: market hit by uncertainty, but end users remain satisfied with outcome

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DSR Event, London
DSR Event, London

Firms helping to balance the power system via demand-side response (DSR) say they could provide significantly more flexibility – given sufficient reward and revenue certainty. Meanwhile, most companies that do not provide DSR would consider doing so – if it did not impact day-to-day operations.

The findings, from a survey conducted by MCP’s sister title, The Energyst, come as National Grid ESO recommends reviewing security of supply standards to determine whether they require strengthening – and whether further reserves may be needed. 

The 2019 DSR: Shifting value report acknowledges that it has been a challenging year for demand-side response. Uncertainty over charging reforms and removal of established cost avoidance and revenue streams has been compounded by the suspension of the Capacity Market.

Though frequency response prices have stabilised, they remain depressed, the effect of more batteries coming on stream. Aggregators are concerned, telling National Grid ESO’s Power Responsive forum at the start of the year that more providers could exit the market than enter and that “it’s hard to make a business case [for DSR] in the UK right now, compounded by Brexit”.

Aggregators and large customers that provide flexibility want Ofgem to delay making decisions on its charging reforms until the future of the Capacity Market becomes clear and to better align the reviews on residual charges with forward looking aspects. They fear key pillars of the business case for DSR will be removed before rewards for behaviour that benefits the system are put in place.

This year’s DSR survey reflects that sentiment. While the majority (58%) of end users that provide flexibility remain satisfied with the outcome, the trajectory is negative – from 86% in 2016, 77% in 2017 and 68% in 2018. Asked why they feel less positive towards DSR than 12 months ago, this answer from a water company is perhaps most succinct: “Regulatory change (TCR/MCPD), FFR drop in value, CM suspension – the removal of value seems to be fast while access to new markets/removal of barriers is slow.”

However, other providers cited wider access to the Balancing Mechanism as a reason for feeling more positive about DSR than 12 months ago.

Among the key findings included the fact that six in 10 DSR providers could offer more flex without affecting their business; Triad avoidance is the most popular activity, then frequency services and the Capacity Market; four in 10 are still using diesel backup for DSR/peak charge avoidance; while six in 10 said they were satisfied with DSR overall. 

In addition, almost nine in 10 businesses surveyed, that are not currently participating in DSR, would be interested… if there was no disruption. 

The report was launched at the 2019 DSR Event, held in London. Thanks to sponsors Power Responsive, EDF Energy, Enel X and UK Power Networks, the report is available as a free download at theenergyst.com/DSR/

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