Demand flexibility to play key role in UK’s net zero transition

Raymond Shi

14-Jan-2022

LONDON (ICIS)–Power demand flexibility will play a pivotal role in the UK’s transition to net zero, with the introduction of time-of-use tariffs potentially reducing peak electricity demand by up to 23%, according to a study by National Grid.

Crowdflex, led by National Grid ESO, investigated how 25,000 households responded to price signals by reducing or increasing electricity demand.

The joint project, which includes participation from the Scottish and Southern Electricity Networks Distribution, Octopus Energy and Ohme found that engaged households could significantly reduce peak electricity demand using time of use tariffs.

Time-of-use tariffs are a recent development, which incentivise energy consumers to use more energy at off-peak times to shift the load profile through a day.

This will be important in balancing the grid given the increasing role of variable renewable output in the UK’s generation mix.

INTRADAY VOLATILITY

Intraday volatility on power prices has risen in recent years as the UK has transitioned away from controllable thermal supply towards greater renewable generation.

The UK power market operates in accordance with the electricity forward agreement (EFA), a calendar used to specify load profile for the electricity market.

The EFA day is composed of six blocks, each of four hours.

Overnight contracts, which include blocks 1 and 2, or 23:00 through to 07:00, are typically the cheapest intraday product given lower demand through the night.

In comparison block 5, which corresponds to delivery between 15:00–19:00, is the most expensive given greater energy demand through the evening peak hours.

The spread between the two products has grown over time, reaching a record high in September 2021.

“These prices are just doing what a market should,” one power trader said. “That is reward firm generation when it is needed.

“These are the prices needed to dissuade people from using energy, if the shape charges can get passed on.”

STUDY RESULTS

The study investigated the impact of both enduring and one-off price signals on end consumers.

Customers on time-of-use tariffs reduced their demand during the evening peak by 15%-17% and maintained that behaviour over six months.

The results were amplified for households that owned an electricity vehicle (EV), which achieved reductions of up to 23% in the proportion of the household’s daily demand during the evening peak.

The impact of one-off signals was also significant, with a ‘big turn down’ request resulting in a reduction of 59% and 41% over the stated period for EV households and non-EV households respectively.

“System flexibility is vital for future system operation, and we are encouraged to see that engaged consumers can help manage and reduce peak electricity demand,” National Grid innovation manager Geoff Down added.

CHANGING BALANCE

UK power generation is set for a dramatic change in its transition to net zero, with wind output expected to claim the lion’s share of the energy mix away from gas-fired generation.

ICIS analytics also forecast that national transmission demand is set to increase from 2025, with the greatest additions coming from increased demand from the hydrogen and transport sectors.

Greater heating efficiency savings have seen a downward trend in the overall load of the UK in recent years.

However, the wider demand profile through the day remains largely unchanged, with demand rising through the morning pick-up before climbing to its peak through the evening hours.

The ability to reduce evening peaks means there will be less pressure on UK infrastructure, helping to mitigate the frequency of system stress events.

“Now we have uncontrollable demand, we will require a greater build out of more controllable supply through hydrogen and batteries, or we will need to better control demand,” the trader added. “These initiatives will be the way forward to manage our demand.”

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