The underused energy management tool that can offset rising energy costs

The non-commodity element of energy costs is set to push prices up considerably over the next few years – yet research by YouGov finds awareness of this seems limited. Energy market expert Ben Spry shares the detail behind the forecasts and assesses the impact Demand Side Response can provide to help mitigate price rises.

By Freddie Rand

Managing Triad costs

The most expensive peak-related cost is National Grid’s Transmission Network Use of System (TNUoS) charge.

“TNUoS charges are currently levied against consumption during periods of peak national demand (Triads) in the winter season (1 November to 28 February), and can be as much as £54,906* per megawatt,” explains Fred. “Whether part of an overall DSR strategy or as a stand-alone activity, active Triad management to reduce these charges is becoming commonplace, especially with TNUoS costs remaining substantial in the short term.”

nBS already offers a highly-regarded Triad Warning Service, operated by its in-house team of expert analysts and forecasters. Now, via the Energy HQ DSR team, it can also provide an Automated Triad Service.

“Using our Smart Controller, we can automate the delivery of Triad management as well as seeking to optimise the response businesses can provide to increase Triad savings year on year,” says Dan Connor. “In addition, our customers achieve coincidental savings on Capacity Mechanism and Distribution Use of System (DUoS) charges, as a result of Triad management activity.”

It’s worth noting, however, that Triad charging methodology is currently under review by Ofgem and changes may take effect from April 2020 if Ofgem’s Targeted Charging Review is implemented. “National Grid will still be looking at ways to engage consumers to help manage periods of peak demand,” says Helen Inwood. “And as the Distribution Network Operators start to transition into the proposed Distribution System Operator roles, we anticipate a growing requirement for DSR.”

The other non-commodity charge linked to winter demand peaks is the Capacity Mechanism. One of four new charges introduced in 2015 as part of the government’s Electricity Market Reform (EMR) legislation, the Capacity Mechanism is calculated according to consumption during peak periods throughout winter – i.e. 4pm to 7pm on weekdays from 1 November to 28 February.

Government policies to add £50+/MWh by 2020

“Since their introduction, EMR policies – which also include the Contracts for Difference low-carbon subsidy – are forecast to add around £15.10 per megawatt hour (MWh) to the average invoice by 2020,” explains Kate Garth, npower Policy Manager. “This is in addition to existing ‘green’ policies to support renewable generation already in place, which are also set to rise in cost.”

For example, business consumers will face an increase in the Climate Change Levy – by 45% for electricity and 67% for gas – from April 2019 (compared to 2018 charges). This is due to the government transferring the revenue lost from scrapping the Carbon Reduction Commitment scheme.

“Overall, government policies are forecast to add around £55.07/MWh to electricity invoices by April 2020, which is a 33% increase on April 2018 prices – and a 68% increase on April 2017 prices,” says Kate.

The good news for businesses is that DSR can not only reduce these costs, but also provide an opportunity to earn revenue.

Earn revenue from on-site assets

“If you have assets such as standby generators, combined heat and power (CHP) plant or battery storage – or your business operates an energy- intensive process that can be interrupted for short periods – you could participate in one of National Grid’s balancing services,” says Energy HQ’s Fred Howard.

“Our team of DSR experts will remove the complexity by managing all the necessary processes, including the relationship with National Grid. We will also work with you to maximise your DSR performance and revenue.”

In addition, nBS is the only one of the big six energy suppliers to provide a means for businesses to link their DSR activity with the wholesale energy market, to earn additional revenue at times of high market prices.

Tapping into wholesale market opportunities

“Our Wholesale Market Access service provides a managed route to the Day Ahead and Within Day wholesale markets, so customers can sell pre-purchased volume that’s freed up by DSR,” explains Dan Connor of Energy HQ.

“It’s simple to participate in and the whole process can be automated without any disruption to business activities,” continues Dan. “What’s more, Wholesale Market Access can be used as part of a wider DSR strategy or as a stand-alone DSR activity and carries no obligation.” (See our Fail Safe Way to Make DSR Pay article for more on this.)

Certainly, DSR has the potential to deliver savings and even revenue in a variety of ways to offset the impact of rising energy prices. “We estimate that DSR participation can typically save around £45-70k/MW per year – and often more,” says Dan. “But as each business is different, it’s best to get a bespoke quote based on your individual operation and flexibility to get a better idea of what’s achievable.”

To find out more about how DSR could benefit your business and offset rising energy costs, contact npower Business Solution’s experts at Energy HQ via email [email protected] or call 0800 994 9382. You can also visit the website.

And for a personalised forecast of your future energy costs – as well as visibility of what energy management measures such as DSR can contribute to reducing these – visit www.energy-hq.com/costrpredictor/

You can also check out the DSR Clinic from Energy HQ on our website, here.

This is a promoted article.