DSR needs new commercial frameworks to succeed, warns DNO

Demand side response (DSR) could play a bigger role in shaving peak electricity demand at distribution level but new commercial frameworks are needed to prevent clashes of interest with National Grid, according to a DNO.

Western Power Distribution (WPD) said that DNO trials to test the viability of using demand side response for managing network loads have run into problems as conflicts with National Grid’s balancing mechanisms cause price escalation. 

In a feedback report from WPDs Falcon project – a £10 million research initiative into the potential of a variety of engineering and service solutions to create flexible, smart, low carbon electricity networks – experts said that competition for asset availability have caused significant problems in DSR trials.

Over the course of the Falcon project, WPD conducted DSR trials with industrial and commercial customers, including Anglian Water, in the Milton Keynes area over two years. In the first year of the project, it found that conflicts with National Grid’s STOR (short term operating reserve) scheme caused competition for asset availability to escalate and become uneconomic.

In the second year, informal agreements and cooperation with National Grid to share the benefit of asset availability strategically increased the reliability and economic viability of distribution level DSR.

Learnings from the Falcon DSR trials have also taken to a shared services group at the Energy Networks Association which is gathering evidence on the technical and commercial challenges facing DSR and Active Network Management Zones.

However WPD’s future network manager Roger Hey emphasised that “it is not for the [shared services] group to develop the market. That is for Ofgem and Decc”.

Hey concluded that it is unlikely DSR will become commercially attractive as a tool for managing network loads until new shared service frameworks are introduced.

“We need to create market structures which do not lead to [National Grid and DNOs] competing on price,” he said. “This works out well for the single customer contracting for availability of their assets, but is not in the interest of customers more broadly.”

The Falcon project report was presented to a small group of stakeholders last week by Roger Hey and WPD commercial trials lead, Gary Swandells.

WPD will publish a full report on the project this week and present this formally at an event in London in November.