In Part Two of BG Energy’s guide to DSR, we expanded on the basics, to look at more complex elements of how DSR works in practice. We recommend you read Parts One and Two before reading this guide, as together they outline the intricacies of this increasingly important business area.
Here, in Part Three, we lay out notes to guide you through the varying and complex jargon and terminology surrounding DSR. Together, we hope these guides help you get to grips with the subject. But if you need more help, don’t hesitate to get in touch with us.
The jargon made easy
These organisations offer commercial aggregation services for DSR to smaller businesses. You can think of them as a kind of ‘dating service’ which links small firms, wanting to get involved in DSR, with the National Grid.
Aggregators also offer technical installations, often providing the kit small firms need to get involved in DSR, and take care of contracting for them too. The overall point of an aggregator is to ‘run’ DSR for a smaller firm, taking the hassle out of getting involved.
BALANCING AND SETTLEMENT CODE SIGNIFICANT CODE REVIEW
This is Ofgem’s review process to modify the Balancing and Settlement Code. When the modifications are complete, there should be better financial incentives for firms to get involved with DSR.
Part of the government’s Electricity Market Reform (EMR) package, the Capacity Market aims to ensure security of electricity supply, by providing a payment for reliable sources of capacity. DSR is one such source of electricity capacity.
CRITICAL PEAK PRICING
These new tariffs clearly show the cost of electricity at different times of day, seeking to incentivise behaviour change to encourage firms to use cheaper electricity, when demand is lower.
Decarbonising the UK means reducing its carbon intensity; the CO2 emissions per unit of electricity generated (often given in grams of CO2 per kWh).
It is less carbon intensive to balance electricity demand using DSR than by turning up older, coal based power generation when UK demand peaks occur. Thus, DSR pays businesses, but it is very good for the environment too.
DEMAND SIDE BALANCING RESERVE (DSBR)
This is a new service, developed to help National Grid balance the UK’s electricity demand. DSBR is targeted at large energy users. They volunteer to reduce their demand during winter weekday evenings between 4 and 8 pm in return for a payment.
DUOS & TUOS
These are additional charges on your electricity bill, which help to pay for electricity infrastructure. They are relevant to DSR because by limiting your electricity usage, and understanding when electricity is more expensive (by using a smart meter) you can limit these extra costs.
A dispatch simply describes the moment when National Grid, or your energy supplier, asks you to turn up, or down, your energy usage. The request is generally made electronically or via automated systems.
DISTRIBUTION NETWORK OPERATOR(S) (DNO)
Distribution Network Operators own and operate the distribution network of towers and cables that bring electricity from our national transmission network to homes and businesses. Depending on how DSR develops, DNOs could take on a bigger role, potential becoming known as Distribution System Operators (DSOs)
DYNAMIC DEMAND SOFTWARE
An aggregator can install their Dynamic Demand software into a firm’s equipment controls, so they can respond to changes in grid frequency. It’s an entirely automated system and by turning up or down as required, companies are paid for providing National Grid with a faster response than other types of DSR, often reacting within seconds.
ELECTRICITY DEMAND REDUCTION PILOT SCHEME
This is a test scheme, which hopes to learn whether projects that deliver lasting electricity savings at peak demand times could compete for funding with generation, demand side response (DSR) and storage in the UK Capacity Market.
The second phase of the EDR Pilot was launched on 16 June 2015 with £6m of funding available.
Commercial scale energy storage, such as batteries, could see many more firms using or exporting more power in response to market signals. Investing in such tech could help firms get involved with DSR.
Frequency Response is a type of DSR. In it, firms use automated equipment to turn up or down their electricity demand responding to changes in the frequency of the UK grid.
The frequency of the UK grid should be maintained at 50Hz. If frequency rises or falls too far beyond this number, blackouts can occur. Frequency and demand are related; when demand rises, frequency falls. Firms offering frequency response therefore help maintain the correct overall balance.
There are many different types of frequency response contracts and types. Therefore, advice from a professional on how to work with frequency response is advised.
Fast Reserve offers rapid and reliable delivery of power, either through increased output from generation or a reduction in consumption from your business. You would offer this DSR service following receipt of an electronic dispatch instruction from National Grid.
This is a type of contract where your electricity supply can be interrupted and turned up or down. Firms which get involved with DSR will use contracts like these.
MINIMUM MARKET ENTRY REQUIREMENT
At the moment, this is widely seen as barrier to scaling up DSR. MMER is the minimum market entry requirement; at present the lowest threshold of any DSR programme is 1MW. Many commentators believe National Grid needs to lower this, to help smaller energy users get involved with DSR.
Ofgem regulates the electricity and gas markets in Great Britain.
These are the periods, generally between 4pm and 8pm on winter evenings, when UK electricity demand is highest. This is when DSR is at its most useful, when firms who get involved can make money by turning down their demand, helping balance the UK electricity system.
The Power Responsive Campaign is a collaborative programme of work, that aims to grow participation of demand side response in the UK by 2020.
SHORT TERM OPERATING RESERVE (STOR)
At certain times of the day National Grid needs access to sources of extra power, to deal with actual demand being greater than forecast demand and unforeseen generation unavailability. Therefore, National Grid signs contracts for Short Term Operating Reserve, which is provided by a range of service providers by means of standby generation or demand reduction/response.
The Government is in the process of making sure every UK business has a smart meter by the end of 2020. These will provide more accurate energy usage and charging data, and will enable firms to get involved in DSR.
SMART ENERGY SYSTEM
This describes a future, more intelligent UK energy system, where elements like smart meters deliver faster communications and data on energy usage and charging. In this system, DSR would be a key component.
DSR means that small, decentralised electricity generators, and owners of stand-by generators will be able to gain an income by selling the energy they don’t need.
National Grid is trying to make it easier for firms keen on DSR to take part in STOR (described above) through the launch of a new scheme called STOR Runway. Under the initiative, 200MW of the capacity to be provided through STOR in 2015/16 will be reserved for demand side response schemes.
TRIAD AVOIDANCE AND MANAGEMENT
Triad avoidance and management refers to incentives provided by suppliers to customers (often through aggregators) in order for them to reduce consumption during forecast Triad periods.
Triad periods occur during the ‘Triad season,’ which is a four-month winter period, during which the National Grid looks back to find the three half-hour periods when electricity demand was highest in the UK.