Ged Holmes, Commercial Director at Open Energi provides an introduction to Demand Management and how it can help Energy Managers offset rising energy costs.

Recent news headlines about the risk of blackouts this winter have shone the spotlight on National Grid and the security of the UK’s energy supply. Nuclear plants take a long time to build, and the next few years are expected to see spare capacity in the electricity network fall to record lows.

For energy managers facing spiralling energy costs, this presents an opportunity; when National Grid is feeling the squeeze, one tactic at its disposal is to ask large energy users in the industrial and commercial sectors to reduce their electricity demand and pay them in return.

In the past, Demand Management of this kind has only been applicable to a fairly narrow set of businesses; industrial processes which can be switched off in an emergency or organisations with standby generators on their sites which can provide a boost to capacity. However, the market is changing, and solutions now exist which have no impact on a business’ operations and provide a long-term income stream.

To understand how the options differ, it helps to know a little bit about our electricity network and what is happening behind the switch.

Keeping the lights on – a balancing act

For our electricity supplies to be maintained, it is vital that at any moment in time, the supply and demand for electricity are equal. An indicator of this is the grid frequency which National Grid must maintain at 50 Hertz. Too much electricity in the network causes the frequency to rise above 50 Hertz and could lead to equipment failures. Too little and the frequency drops below 50 Hertz, which could mean the lights go out.

National Grid manages this balancing act down to the last second, even monitoring when the X Factor finishes so that by the time we’ve walked to our kitchens to flick the switch on four million kettles, the power is there.

It has incredibly sophisticated forecasting techniques that help to ensure our lights stay on, and 99.9% of the time they get it right. But 0.01% of the time something unexpected happens; a power station goes off-line or the football goes into extra time.

This is where the grid balancing market comes in. Grid balancing services help National Grid to respond to unexpected peaks and troughs in electricity demand. Traditionally, it has ramped the supply of electricity from power stations up or down to meet fluctuations in demand but this approach is costly, inefficient and polluting. Managing the demand for electricity from our businesses and homes offers a quicker, cleaner and more affordable approach.

Demand Management – what are the options?

There are four main types of Demand Management and depending on the nature of your business and the equipment or processes you use, one or more may be applicable.

STOR (Short Term Operating Reserve)

STOR is a service which National Grid calls on when there is a shortfall in electricity supply.  Equipment responds to a signal sent by National Grid which turns it on (if the asset can supply power, such as a diesel generator) or off (if the asset consumes power, such as an industrial chiller). Equipment must be able to respond within 20 minutes and on average, will be used for around 1.5 hours. National Grid tends to use this service around 70 times per year.

FCDM (Frequency Control by Demand Management)

FCDM is also used to tackle supply shortages. It responds within seconds to a sudden, serious drop in grid frequency. FCDM is most suited to very large industrial assets where a relay can be installed to cut power to an entire site for 30 minutes, at zero minutes’ notice. It is usually only called on between 10-30 times per year,

Dynamic Demand

This can help National Grid when there is too much electricity as well as when there is too little.  It works with a range of equipment including heaters, air conditioning units, water pumps, refrigerators and chillers and makes subtle adjustments to the timing of a device’s electricity consumption without interrupting service or impacting performance. It is used all year round and must be able to respond within seconds, but usually only for a few minutes at a time.

Triad avoidance

This involves turning off assets during the afternoon/early evening on occasions when winter peak periods are expected to occur, to avoid an increased cost penalty. Since 1990, Triads have occurred between 17th November and 8th February, between 4:30pm and 6pm, on non-holiday weekdays.

A changing energy mix = a growing market

With more nuclear power on the way and continuing investment in wind and solar, you’d be forgiven for thinking that in the longer-term, as more capacity becomes available, the need for Demand Management of this kind would fall away, but in fact the opposite is true.

Together nuclear power and renewable energy make the supply side of National Grid’s balancing equation harder to manage.  Nuclear plants cannot be ramped up and down in the way that a gas or coal-fired plant could and are operated at a steady but inflexible output. And as we all know, renewable sources such as wind and solar are inherently unpredictable.

As a result, demand for grid balancing services is expected to increase by 25% by 2020, putting huge pressure on prices in what is currently estimated to be a £1 billion market.

For Energy Managers this sends a very clear message. Adopting Demand Management techniques now will unlock a recurring revenue stream that will grow over time and can help to offset the growth in energy costs your business is facing.