Dylan Crompton, Head of Customer Solutions at British Gas Business, identifies the real issues and opportunities Demand Response (DR) management presents to large energy users.
Dylan explains how Demand Response management works, technologies that can be used to move and decrease demand, plus the need for an integrated procurement and energy strategy.
What is Demand Response management?
Many energy providers talk about the financial payments available for being both ready to reduce non-essential energy demand and participate in ‘dispatches’ to reduce demand when needed.
This needs to be viewed alongside the money that could be saved on your actual energy tariff rate, which is achieved by reducing your need for peak-price energy in the red rate banding and at the triads.
Looking at the cost distribution over a typical day in the graph below highlights the impact that time of energy usage has on overall energy costs. On the three triad days per annum (typically on a winter weekday in the early evening) this effect is magnified significantly. Your energy supplier may provide you with an electricity rate which averages your consumption across these time periods, including your demand for peak-price energy.By participating in a demand response programme, your use at peak times could decrease, which would clearly be vitally important to your energy procurement team. Savings here could lead to significant financial benefit beyond the capacity payments offered by demand response scheme providers.
Technologies that can be used to shift and decrease demand
Questions I often get asked focus on the length of time a business might need to shift their demand, by how much, and how often. These are all important questions to ensure business continuity; the good news is that you have the ability to set these parameters when you enter into an agreement with your supplier.
What’s more, participating in a demand response programme does not have to mean making substantial changes to the way your business operates. Rather, by working with technology you can protect your business’ most important processes.
Today, many of the hospitals that we work with have some form of standby generator, which once grid-synchronised enables them to reduce demand on the national grid for a short while and benefit from financial payments. Concerned about rising carbon emissions, we have converted the standby generators on our own premises to run on biofuel, enabling us to unlock both financial and carbon savings.
In the very near future, technologies such as battery storage will also become a financially viable solution to allow businesses to continue their operations unaffected by their demand response reduction target.
One emerging option for businesses is the opportunity to find a partner who can manage and adapt their energy demand on their behalf through the concept of a ‘virtual power plant’. In fact, earlier this year our parent company Centrica announced a Â£700m investment into a new distributed energy and power business over the next five years, in recognition of the growing material opportunity that this concept could offer to many businesses.
There will be more to come on this announcement in the near future, but it’s a clear signal thatÂ demand response programmes, as well as other energy management approaches such as on-site generation, is coming of age and should be taken seriously as part of any business’ strategic plan.
The importance of an integrated energy and procurement strategy
In an MEUC (Major Energy Users Council) poll of London members, nearly 29% of attendees said that their energy procurement and energy management teams operated separately. If you fall into this bracket, then it makes sense to discuss your plans in tandem. How you use energy can affect your overall energy price, so anything other than an integrated strategy could be self-defeating.
The best strategies are those that take into account the operational impact, incentives and underlying energy costs of your business.
I’ve been working with businesses as diverse as data centre providers, supermarkets and manufacturers for several years to help them integrate their supply and management programmes. As an energy and services provider, many customers look to us to provide an integrated service.
They also know that we already perform many of the activities their demand response strategy may require every day, includingÂ managing the supply and demand across our portfolio, working with National Grid demand response programmes, interfacing with Distribution Network Operators (DNOs), trading with power generators and delivering these services to energy consumers.
If you’d like to speak to me and my team about demand response programmes or other energy consumption reduction opportunities for your business, please get in touch at email@example.com.
Demand Response Dictionary
- Red Rate charges:Â This charge is determined by your local electricity distribution company.Â To manage capacity on their network, these charges are designed to incentivise consumers to use less energy in the peak periods, typically weekdays from 4pm to 7.30pm
- Triad charges: Triads are the three peak demand periods over any winter period. Your usage at these times determines the triad charge applied to your bill
- Demand Response: The art of managing your energy demand either through reducing your energy consumption, or generating energy on site and reducing the burden on the power network