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UTILITY WEEK | 9TH - 15TH JUNE 2017 | 15 Policy & Regulation Produced in association with: KEY FINDINGS Potential of DSF • There is no doubt about the significance of DSF to energy businesses and the UK as a whole, with respondents rating it at 8.7 out of 10 for their businesses, and 9.1 for the UK, by 2030. These figures represent an anticipated rise in significance of about a third over the next 13 years. • The biggest expected benefits of DSF are its ability to cut peak energy demand, maintain system balance and create flexibility to compensate for inflexible sources of generation. Towards a DSF market • More than half (57 per cent) of businesses are adopting a limited or cau- tious approach to DSF. • Suppliers are the least enthusiastic, with 22 per cent not seeing DSF playing a big role in their business's strategy in the foreseeable future. • Of those businesses that have engaged in early DSF projects, distribu- tion network operators (DNOs) have seen the most success. Traders and flexibility providers rated success levels significantly lower than partici- pation levels, suggesting results have not lived up to expectations. • DSF has yet to play a significant role in the energy mix, with only 28 per cent of projects to date resulting in reduced energy demand, and 32 per cent in reduced pressure on infrastructure or reduced requirement for new infrastructure. Barriers to DSF • Most respondents (82 per cent) have experienced barriers to the success of their DSF projects to date, with economic barriers the most common. • The lack of incentives was highlighted as a significant barrier, with respondents selecting it as both the biggest regulatory and economic hurdle. • Respondents identified a lack of policy and regulatory clarity around DSF, ranking it just 4.2 out of a possible 10. • Confidence in the forthcoming regulatory reforms around DSF is low, with respondents rating their confidence that the reforms will remove the barriers to DSF at just 5 out of a possible 10. Customers and DSF • An uptick in customer appetite for DSF is expected around 2024, with domestic customers' appetite predicted to rise 64 per cent by then, and SMEs 50 per cent. It is expected to remain highest among industrial and commercial customers. • The lack of adequate price incentives is seen as the main barrier to non- domestic take-up of DSF by 63 per cent of respondents. • Lack of awareness is the biggest barrier to domestic take-up of DSF in the future, as more opportunities become available, according to 73 per cent of respondents. • More than half (54 per cent) of respondents say consumers are not adequately protected in the current market. • Vulnerable customers could be disadvantaged by the transition to a flex- ible power system, and should be protected by the regulatory system, our respondents believe. Technology and DSF • Energy storage for commercial customers is the most important technol- ogy to the development of DSF, at 7.5 out of a possible 10. • More important than any particular technology was increased aware- ness of and accessibility to the DSF market for industrial and commer- cial customers. Download the full report at: www.utilityweek.co.uk/downloads energy firms to admit much interest in the possibility that demand-side services might be lucrative for them. As well as providing some insight into the collective character of each group, the experience showed how communication and co-operation is a big challenge. While government must do its part to overcome the policy and regulatory barriers, market participants would do well to break down their established thinking and see the challenges from one another's per- spectives. Together, they can then work towards a solution. Time is short. riers. This perhaps reflects the open market nature of the supplier industry, and its par- ticipants' differing strategies. Given the relative immaturity of the DSF market and the barriers to deployment, it was interesting that respondents rated their current participation in DSF projects at an average 6.3 out of a 10. Once again, aggrega- tors and flexibility providers were the most involved, at 8.8 and 7.9 respectively. Traders scored their involvement highly at 7.8 out of 10, suggesting the market barriers that exist are not blocking all activity, and suppliers were once again the laggards at 5.4. Respondents were also asked to score the success of the DSF projects, and there were some interesting contrasts. While aggrega- tors' high success score of 8.4 reflected their high participation score of 8.8, other groups that had high participation reported more limited success. The biggest contrast was for traders, who scored their participation at 7.8 but success at just 5.3, reflecting the market barriers that have yet to be resolved. Flexibil- ity providers scored their participation at 7.9 and their success at just 6.2, again suggest- ing that systemic blocks are preventing the value of flexibility from being fully realised. Experience was mixed with regard to the successful outcomes that had been achieved to date. The clear winner was financial return for end customers, although with 46 per cent of respondents choosing this option, its success was not overwhelming. A lower proposition (32 per cent) had seen a financial return for their own business, and surpris- ingly low proportions reported reduced pres- sure on infrastructure or demand for new infrastructure (32 per cent); and just 28 per cent reported reduced energy demand. These figures reflect a market still in its infancy and suggest there are a number of practical issues around the use of DSF that have yet to be resolved. However, when the responses to this question were broken down by respondent type, DNOs were significantly more likely to report reduced pressure on infrastructure, at 75 per cent, with the aver- age being pulled down by suppliers, who scored it at just 15 per cent, reflecting the dif- ferent nature of the respondents' businesses.