Perspective

OPINION: a holistic approach is crucial to establishing the credibility of DSR

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Robert Owens, VP asset optimisation at SmartestEnergy, argues that DSR providers must maintain standards to maintain confidence in this important new market

 

With this week’s Transitional Arrangements auction clearing higher than expected at £45/kW, there is now a chance for Demand Side Response (DSR) to continue gaining momentum and start delivering on its promise to support the UK energy system.

The high price is good news for the contract winners, including SmartestEnergy, and will help to build confidence for businesses to participate in DSR. But it does raise concerns about the ability of DSR to compete with existing and peaking generators. Going forward, DSR will participate in the main Capacity Market auction, with no capacity ring-fenced to support it. The ability to access energy market and balancing revenues will be fundamental to growing the sector.

Winners of this auction need to work hard to demonstrate the viability of this emerging technology. The first challenge will be to get through the complex testing regime, which is onerous and not designed for turn-down but to give National Grid confidence it can rely on the capacity when the time comes. This is vital for DSR to be taken seriously. Following the 2016/17 TA auction, not all winners passed the testing requirements. For the sake of the industry, let’s hope we do a lot better this year and show DSR as a serious participant.

This also applies to accessing other revenue streams for flexibility.

Some aggregators have called for rule changes to enable them to access the wholesale and balancing markets along with the capacity auctions. These markets are only available to licensed electricity suppliers, who are regulated by Ofgem and have posted significant collateral to prove their financial position.

It is important to maintain these current standards, not only for customer protection, but also for the overall stability and security of the grid. If flexibility is to be effectively integrated into our energy system, it needs to remain linked to energy rather than viewed in isolation, and that means applying the same standards to everybody. Only with this level of accountability will DSR flourish and support the transition to a low-carbon economy.