Case study: Lessons learned as an early adopter of Demand Side Response

npower’s own Real Estate Team became a guinea pig to trial DSR when the npower Business Solutions team first offered it back in 2010. Here they share their journey and the lessons they’ve learned along the way.

By Freddie Rand

Like any other company, npower has to justify its energy spend and be accountable for managing consumption responsibly and efficiently. “Just because we are an energy supplier doesn’t mean we don’t have to pay for our energy,” says Jonathan Hulbert, npower Sustainability Manager, whose team buy and manage energy on behalf of npower’s portfolio of UK offices and depots.

“But the advantage we have is that we get to try out innovative energy management approaches and technologies before most other businesses,” continues Jonathan. “We are seen as ideal guinea pigs by the npower Business Solutions Energy HQ and Innovation teams when they are developing new products and services for customers.”

Reducing costs and generating revenue

As a result, npower was an early adopter of Demand Side Response when it began participating back in 2010. “For us, a key benefit has been reducing our costs and even generating income – this has allowed us to free up budget to invest in other areas of energy management, which in turn deliver further savings,” explains Jonathan.

“But we didn’t know how things would work out when we started. When npower Business Solutions started providing DSR services, we were keen to find out more and be involved. As a team, we are always looking at where the future of energy is going and how can we help our nBS colleagues to showcase best practice. So we selected three sites that already had on-site generators,” says Jonathan.

“At that time, the focus was on participating in National Grid’s STOR (Short Term Operating Reserve) market. We also targeted DUoS red-band cost reduction, as well as Triad avoidance. So where possible, we’d power down and switch to on-site generators at opportune times.”

One of the first sites to participate in DSR is npower’s main North East Contact Centre in Sunderland, home to many of npower’s key customer service teams. “Given the importance of this building, it has a lot of inbuilt energy resilience to minimise the risk of interruption to important customer service functions,” explains npower Energy Manager Maxwell Evans.

Enhancing on-site resilience

“There’s a common misconception that participating in DSR somehow depletes on-site resilience – but for me, the opposite is actually true,” continues Maxwell. “It’s certainly one of the key benefits of DSR that appeals to me. If you regularly exercise an on-site generation asset, you minimise the risk of operational issues and reduce the likelihood of fault or failure. The generator engine also benefits from operating regularly at full load.”

This is a benefit that also appeals to Phil Downing, Senior Business Resilience and Crisis Management Expert from Innogy’s Group Security and Business Continuity Team, part of npower’s parent company. “If done correctly and with the proper planning, DSR can really enhance the Disaster Recovery position of a site by regularly testing the generators under genuine load conditions,” says Phil.

Full evaluation is key

As time has passed, npower’s DSR site portfolio has evolved to take account of new buildings and others being divested. “As things changed, the Energy HQ team conducted a full evaluation of our sites, reviewing all our standby assets across the npower estate, including fuel tanks and electrical supplies and local grid network connections,” explains Maxwell.

“All shortlisted sites with DSR potential were then subject to a thorough feasibility study, looking more closely at the status and condition of assets, assessing any maintenance requirements or any other potential barriers, and exploring local Distribution Network Operator (DNO) export capacities. This helped them to determine enabling costs (e.g. investing in larger fuel tanks or expanding DNO connections) and provide us with detailed commercial projections over a five to ten-year period.

“The business case was broken down into total cost avoidance plus the additional value from revenue generation streams, such as balancing services procured by National Grid and Energy HQ’s unique Wholesale Market Access product.”

Automating DSR participation

Energy HQ has also refined the original nBS DSR offering. “We now have their Smart Controller installed at our sites, which automates our DSR participation at times the DSR team at Energy HQ deem beneficial. But the terms of this are all agreed upfront. The process is also seamless. There is no interruption to our business operations, so we often aren’t even aware of our DSR participation until we receive our monthly statements and see the DSR-related savings or revenue.”

The gross benefits are certainly paying off. “In 2017/18 we generated almost £97k in income and cost avoidance from our DSR participation across three sites,” says Maxwell. “Our aim is to maintain or even increase this for 2018/19 and beyond.”

More recently, the Real Estate team has started participating in Energy HQ’s latest DSR offering, Wholesale Market Access.

Maximising market value

“We were their guinea pig last winter, alongside a major UK manufacturer,” explains Maxwell. “The foundations of Wholesale Market Access are built around a pre-agreed customer market Strike Price, which is discussed and finalised with Energy HQ prior to a delivery period – in this case Winter 2017/18. In essence, our Strike Price represents the point at which it is commercially-attractive to run our existing assets and sell-back volumes into the within-day and day-head energy markets.”

The biggest opportunity of the season arrived with ‘Beast from the East’ at the end of February 2018, pushing power prices sky high as UK demand soared in the freezing snowy conditions. “At one point, we made £4k in four hours through Wholesale Market Access by running our generation assets,” explains Maxwell.

“This is an ideal scenario, as we’re able to make money to reduce our operational costs, which ultimately benefits our customers, and we’re contributing flexibility to support balancing UK energy demand when it’s most needed. But like most of the country, we weren’t fully prepared for the cold snap and therefore reached our minimum fuel levels in some assets, which meant we missed out on a potential £15k income over the period.”

As the npower Real Estate team prepares for another winter DSR delivery period, they will continue to liaise with Energy HQ to optimise DSR activity. “A key driver of this discussion is to re-adjust our Wholesale Market Access Strike Price, in light of recent surges of wholesale energy and fuel costs,” explains Maxwell.

On the topic of fuel, Sustainability Manager Jonathan Hulbert also has this on his agenda. “We are looking at alternative sources of fuel for our generators that participate in DSR – and in particular biofuels, for example rapeseed oil,” he says. “Using lower carbon fuels is our ultimate aim.”

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