DSR aggregator slams capacity auction ‘trap’

The government’s initial arrangements to bring forward demand-side response are a “trap” that business customers wanting to participate in the market should avoid, according to the founder and chief strategy officer of the UK’s largest demand response aggregator.

Dr Alastair Martin, who founded Flexitricity in 2004, told Utility Week that business customers would be better off participating in the main capacity auctions, which happen in December and include all forms of generation, rather than the transitional capacity auctions.

The government is running the transitional auctions for two years in a bid to support the development of demand side response. This year’s transitional auction takes place later this month. Participants can bid their on-site generation or demand-reduction capacity into these arrangements, provided they do not already have a capacity agreement.

Martin said: “The transitional auction is a subset of the capacity market and is by no means the best bit. There are a minority of site types for which the transitional arrangements are good, but for the majority they are a trap.

“Most companies that want to be involved in demand response, we actually recommend going to the main auctions and in fact that’s where we’ve placed the largest part of our portfolio.”

Martin explained that participants in the transitional auctions face “very restrictive rules” about going on to participate in the main capacity auction.

He said: “Anyone that joins the transitional auction is excluded from the main auctions for the time that they’re in the transitional arrangements and that puts them essentially three years behind everyone else when it comes to building up a sequence of contracts that guarantee them revenue.

“We see that as a major flaw in the whole of the industry. In fact, that flaw is significant and detrimental to demand response.”

Martin was positive about the broader take up of demand side response, saying a “decent chunk of the FTSE 100” were already on the aggregator’s books.

Flexitricity manages assets for commercial, industrial and public sector companies, aggregating demand to provide balancing and peak services.