Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/535710
24 | 3RD - 9TH JULY 2015 | UTILITY WEEK Customers Analysis N ational Grid's chief executive Steve Holliday calls it an evolution. But in reality, the transmission system oper- ator's latest strategy to secure the UK's grid supply is nothing short of a revolution; a radical overhaul of the company's approach and an inversion of everything we have tradi- tionally come to expect of the firm. The operator has spent the past 25 years, and billions of pounds, managing the UK's power generating units – ramping up and cutting back on output to meet the ebb and flow of the UK's demand. But in less than 15 years' time this approach will play a minority role. National Grid is poised to shi its focus 180 degrees to make the most of the UK's supply by managing its demand. The idea is that by the end of the next decade, demand-side response (DSR) will be "the single biggest source of balancing – for us and for the market as a whole", says Holliday. The market is already familiar with National Grid's modest DSR offerings – con- tracts taken up by major energy users to reduce demand at peak load times – but for an industry set in its ways the greatest hur- dle will not be in solving how DSR can be implemented at scale, but why we should want it to be. National Grid needs to overhaul con- sumer minds before it can overhaul the sys- tem itself. And even for the operator, the step is a big one. "Three years ago I would not have said that demand-side response would play as big a role as we expect it to now," National Grid's head of commercial operations, Duncan Burt, tells Utility Week exclusively. Under the new plans, National Grid will be relying on demand-side measures for "well over 50 per cent of the time" by 2030, Burt adds. National Grid has long procured lim- ited demand-side services and encour- aged demand-side management, but the increased deployment of intermittent renew- able energy, advances in demand-side tech- nology and a greater need for business to reduce energy costs means that an active demand-side market is "critical", Burt says. "The fact is, tomorrow's electricity land- scape will be very different from what we grew up with," Holliday adds. "The need for low-carbon generation sources makes it vital that we find new tools to help electricity sys- tems function well and at an affordable cost. And DSR can be a large part of the answer." The first phase, Burt explains, will take place over the next five to ten years and will focus on the UK's industrial and commer- cial (I&C) space. Although I&C customers are already more engaged with their energy use and familiar with National Grid's mod- est moves towards DSR, communicating the scale of National Grid's ambitions requires education and communication. For some companies, the idea – in very simplistic terms – that they could be more profitable by being less productive is an uncomfortable sell in boardrooms. In oth- ers, a perceived risk to their own security of supply arises. Even those companies eager to sign up to schemes with National Grid need clarity on how the current offerings might grow and work together with new plans to create a cohesive approach to demand management. National Grid's latest market engage- ment campaign is seeking to address these concerns. Burt says the aim of its newly launched Power Responsive campaign is to "normal- ise" the idea of DSR at scale, and work with the market to build the framework which will allow it to flourish. Speaking to Utility Week on the side- lines of the Power Responsive launch event, National Grid's director of market opera- tions, Cordi O'Hara, said the industry is at "an inflection point" which will require the market to turn on its head. "For the most part, generation has fol- lowed demand, but now demand is going to follow generation – and we need to ask how demand can be more intelligent," O'Hara said. It's early days and exactly what this new reality will look like remains to be seen. But that's the point; National Grid is aiming to Balanced approach National Grid wants to "co-create" the framework needed for a demand-side market with industry, says Jillian Ambrose. Opinion Steve Holliday, National Grid I n the past, the electricity system was really quite simple and linear – large gen- erators on one side, and power flowing in a single direction, to consumers on the other side. We all knew our place in that schematic – and, within our respective domains, we could act in virtual isolation. Today, it's already quite different. And it will soon become very different. Just like you, National Grid is busily adjusting to this new reality. We are engag- ing more actively, not just with the big gen- erators, but with aggregators, customers and a new breed of smaller generators. If we, within National Grid, can turn debate into actions and can facilitate the rapid acceptance of demand-side solutions, we benefit – by saving money, avoiding unnecessary investment, and creating new customer opportunities. We see similarly sig- nificant benefits for practically every other stakeholder in the ecosystem. Real momentum is building. This is the perfect time to cata- lyse change. We are well placed to help the early movers. And we believe that National Grid is ideally placed to act as the DSR facilita- tor and coordinator. DSR is already a central theme in our organisation. We are producing a full range of educational resources and best practice advice. We are also lending support through the products and contracts we procure – and will bring real transparency to our decision- making, thereby ensuring fair and equal access for all players. And, of course, we are binding everything together and embark- ing on this programme of engagement on demand-side participation in electricity mar- kets under the Power Responsive banner. DSR does challenge many existing busi- ness models. The flip side is that it also cre- ates an opportunity for new models. So we need to continue to approach this with an open mind. We do not have all the answers, and we are being challenged to think differently about how we approach our traditional role as system operator and trans- mission owner. "We need to approach this with an open mind." "If we can facilitate the rapid acceptance of demand-side solutions, we benefit"