The government has completed the first Energy Demand Reduction Auction after companies bid for a slice of pilot funding.
The first EDR auction in Britain was launched by Ed Davey, Secretary of State for Energy and Climate Change last year and he announced results this month, with 22 projects sharing £1.28 million to cut back on power consumption during peak times, reducing strain on the National Grid.
The Department of Energy and Climate Change (DECC) advises that the average weighted average price bid in the auction was £229/kW.and it predicts that the pilot scheme could reduce peak power demand by at least 1,855,548 kWh.
The government pilot will indicate whether reducing demand on the electricity grid can be a cost-effective solution in the challenge to provide energy security, cutting emissions and lowering energy bills. The private sector already has schemes from companies that offer ‘demand response’ or ‘demand management services’ on behalf of grid operators, with businesses being paid if they reduce power demand at peak times.
Stadco Limited offered the largest single energy savings commitment – curbing power demand by up to 573kW across multiple sites. Other successful bidders included Anesco Energy (with four projects) BAE Systems, Dixons Retail, David Lloyd Leisure Group, The London Borough of Havering, Network Rail, and Tata Steel, all of which committed to reducing power demand for lighting during peak times.
Cutting consumption seems like a no brainer to provide a larger part of the solution to the current ‘energy trilemma’ – with aging power stations being decommissioned and a gap until new productive capacity is built, along with the compunction to reduce carbon emissions and utility bills.
If the pilot succeeds, the government will extend EDR to compete alongside new back-up generation in future auctions under the Capacity Market umbrella.
EDR is seen by some analysts as a cost-effective way to manage business energy supplies while at the same time reducing CO2 emissions, unlike other options such as re-commissioning mothballed power plants to meet surges in demand.
Newer grid and building management systems also can enable companies to better manage reduction in power use at peak times without negative effects on operations.
The Association for Decentralised Energy advises that demand reduction could reduce power consumption by 45TWh within five years and has pressed the government to expand the boundaries of EDR rapidly to industrial sites and those with Climate Change Agreements, among others.
Auction winner will need to install measures by October 15th and deliver the contracted savings from November 1st 2015 to 29 February 2016. A final evaluation report will be released in December next year.