Energy policy changes create revenue opportunity for firms that can power down

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offGovernment has decided to only allow turn-down demand-side response (DSR) to bid in the transitional capacity auction.

That means generators of any kind will be blocked from the second Transitional Arrangement (TA) auction.

The department of energy and climate change (Decc) has also confirmed plans to reduce the minimum entry requirement to 500kW from 2MW.

The proposals were flagged in a consultation published in March. The department said that it believed generation-derived DSR was sufficiently mature not to require additional support.

By only allowing turn-down DSR to bid for contracts, bill payers would not be picking up the tab for a technologies that had other avenues of support, the department argued. Unproven DSR with a distribution connection agreement from first TA will be allowed to bid in main capacity market so its route to market not blocked, said Decc. That would create further liquidity in the main auction, increasing competition.

The move will likely increase competition in the aggregator market as parties will now need a quarter of the previous minimum aggregated capacity in order to make bids – and stand a greater chance of landing contracts because they will not be undercut in the bidding by more mature technologies.

It also presents another opportunity for energy managers to secure additional revenue by monetising process inertia or flexibility within their operations, but may have implications for other turn-down schemes .

See the full government response here.

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