National Grid predicts 'manageable' winter margins, but demand management push stalls
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- 15 Oct 2020
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National Grid has today sought to downplay perennial fears about a winter energy shortage, publishing a Winter Outlook Report for 2015/16 that concludes electricity margins are "manageable" and gas supplies are "expected to be comfortable".
The report notes that while there has been a slight increase in the peak transmission system demand forecast for this year, the de-rated margin figure for this winter stands at 5.1 per cent, which National Grid said was "well within the Reliability Standard set by the government".
The company also confirmed that it has secured additional balancing services of 2.4GW for the winter period that will be available to manage periods of peak demand.
"Electricity margins are manageable throughout the winter period and we believe we have the right tools in place to manage the system," said Cordi O'Hara, director of UK market operations at National Grid. "This includes using the 2.4GW of additional balancing services that we have ready in place for times of highest demand."
The balancing services are dominated by backup power plants, but also include 133MW of so-called demand-side balancing reserve (DSBR) where businesses have signed up for reduced demand at peak periods if called on, in return for payment.
The scale of demand-side contracts will likely prove a disappointment for the UK's nascent demand management sector, given the 133MW represents a marginal fall on the 136MW of DSBR contracts signed last year.
A spokeswoman for National Grid said the additional services secured for the winter did not give a full picture of the scale of the demand management sector, as a number of companies offer demand management services in the balancing services market year-round.
However, she added that the company would like to see more firms offering demand response services to the grid.
Advocates of demand management argue curbing demand at peak times offers a more cost-effective means of easing pressures on the grid, while also avoiding the carbon emissions associated with firing up backup power plants.
Many in the industry maintain that more should be done by government to support the sector through the new capacity mechanism, which offers subsidies to companies that can provide backup capacity.
Sara Bell, chief executive at demand response specialist Tempus Energy, said the government should do more to grow the fledgling sector.
"The government must resist playing the Big Six's costly 'generation game' and create a level playing field for demand-side innovation," she said in a statement.
"They only have to look at sectors disrupted by Uber and mobile telecoms to realise that it will be innovation not generation that will best cut bills, cut carbon and keep British lights on. People often forget there are two sides to managing the UK's 'capacity crunch' because the Big Six inevitably argue the taxpayers must fund more power stations to secure supply. However, big advances in storage technology, smart meters and the Internet of Things mean there is a much more affordable 'demand-side' solution to national energy security concerns. This is good news for taxpayers and also cuts bills for customers."
Separately, a report this week from the Energy Efficiency Financing (EEF) scheme, a joint initiative between the Carbon Trust and Siemens Financial Services that seeks to finance energy efficiency upgrades for businesses, warned small and medium-sized companies across the UK were overspending by more than £82m a year on their energy bills as a result of inefficient technology and old equipment.
The report calculates that potential annual energy savings of over £414m could be achieved across the UK's service sector, with small and medium-sized businesses forgoing more than £82m of potential savings through a failure to invest in more energy-efficient equipment.
"By investing in energy-efficient equipment as well as renewable energy technology, businesses can reap significant energy savings and cut down on their energy bills," said Myles McCarthy, managing director of Carbon Trust Implementation Services.
"Any sort of green investment is a step towards saving money, improving business competitiveness, and being a responsible citizen. Organisations that recognise the long-term benefits brought by energy efficiency will no doubt be better positioned than their competitors to grow their businesses more sustainably and profitably."
