Last-minute axe for DSBR scheme

National Grid is confident that the supply/demand ratio for electricity will be “manageable” during 2016/17.

This is despite axing at the last minute its proposed demand-side balancing reserve (DSBR) scheme, with experts warning the move will push up greenhouse gas emissions and could lead to higher costs for consumers in the long run. The grid operator states it will not be procuring any additional back-up capacity through the DSBR scheme this winter, due to there being “insufficient bids” to justify running the scheme again.

The DSBR operates by paying businesses or public sector bodies, primarily through demand-side response aggregators, to reduce power demand during periods of peak demand. Businesses and demand response specialists were invited to bid to provide capacity that they are willing to manage in response to National Grid requirements.

The approach proved highly effective last winter with over 40MW of capacity taken off the system at times to help manage the grid. Advocates of the DSBR argue it is more cost-effective than paying fossil fuel plants to provide always-available back-up power, results in lower carbon emissions, and will become increasingly important as the UK grid becomes more reliant on intermittent renewables.

For its part, National Grid insists it had little option but to cancel the DSBR this year due to low levels of interest. “Our decision not to procure DSBR for 2016/17 has been made using all relevant information available to us at the time and following detailed analysis of volume over peak; giving appropriate consideration to the cost and expected benefit of DSBR and our licence requirement to procure services on an economic and efficient basis,” it explained in its letter outlining the decision.

The main reason for the apparent dearth of interest is simple. Under the DSBR, payments to businesses and DSR aggregators offering capacity were capped at £17,000/MW. In contrast payments to coal power plants through the accompanying Supplemental Balancing Reserve can reach £88,000/MW.

Dan Byles, former Conservative MP and chair of trade group SmarterUK, has demanded that the government to address the “perverse disincentive” that undermines National Grid’s efforts to promote DSR.

“How can the UK be serious about moving towards a smart grid if we cannot make an essential component like demand-side response work?” asks Byles. “National Grid should not be responsible for this essential policy. They are unable or unwilling to make it work. More generation and bigger network means more capital for the Grid.”

Shortly before the Grid made this unexpected decision, the regulator OFGEM had approved expenditure of £4.5m by National Grid to support DSR efforts. Much of this will now have to be returned.

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