Using demand flexibility to reduce supplier imbalance risk

Bitumen tanks

At Open Energi, we are teaming up with energy suppliers and their customers to help make the most of the flexibility in their energy consumption. Using smart demand flexibility to sustainably balance the system, we can mitigate the risk of volatile prices and help reduce rising system charges.

The balancing act

Electricity can’t be stored efficiently or cheaply at scale, so electricity suppliers must balance the energy that they produce themselves or procure from third parties with the energy that their customers use. This means, ahead of time, forecasting how much electricity is going to be generated, forecasting customer demand, and taking any actions to balance them out: buying or selling additional electricity as required.

Any imbalance between generation and demand can result in suppliers facing costly charges from National Grid, who are forced to act in real time to balance the system. Some of the balancing actions that National Grid takes to ensure the lights stay on are expensive and polluting, and lead to gross inefficiencies in the system. During periods when the system is short (insufficient generation / high demand) it might call on a thermal power station to increase its output. Similarly, when the system is long (too much generation / low demand), a thermal power station could be asked to decrease output.

For the flexible energy generators of the UK – namely CCGTs – to be able to respond to these calls, they are run at < 100% of their maximum capacity. The inefficiencies here are twofold. The plants are not run optimally – they use more fuel and produce more carbon per MWh of electricity produced – and, more power stations are required to meet the nation’s electricity requirements. Balancing actions, by their nature, are also taken very close to real time, often outside of the market, which pushes prices up.

An alternative to balancing on the generation-side is to do it on the demand-side: instead of increasing or decreasing the output of a power station, decrease or increase the demand of electricity users. By enabling flexibility behind the meter, for example using battery storage alongside inherent process flexibility, demand-side response can provide an efficient and economical (roughly an order of magnitude cheaper than more traditional methods1) way to balance the system.

Rising system prices

National Grid recovers the cost of balancing from suppliers and generators through Balancing Services use of System (BSUoS) charges, which are passed onto the consumer. A large part of these charges are driven by the imbalance, or system price, which quantifies the cost of balancing energy of the system per half hour period by asking power stations to turn up or down. High prices usually occur when system margins are small; when there is a lack of surplus generation that can be called on. Similarly, low, or even negative prices can occur when there is a surplus of generation. This typically happens during periods of low demand, when solar power is at a maximum – for example on a sunny weekend day.

In the last 6 months or so we have seen the highest and most volatile system prices ever. They peaked at over £1500/MWh in November 2016, compared to an average cost of about £40/MWh over the last year. This peak was caused by a combination of factors. Much of the UK’s aged coal fleet was placed in Supplemental Balancing Reserve (SBR) to be called upon only as a last resort. Then, maintenance to the French nuclear fleet (causing the UK to export rather than import power through the French interconnector) coincided with maintenance to some UK gas peaking plants and low wind speeds, creating a situation where the system got very, very short. When one generator pushes prices up, and these high prices get accepted by National Grid, other generators are likely to follow suit to maximize their profits. For suppliers, this means that an imbalance of a few MW over a few half hours at the wrong time can suddenly become very, very expensive.

Figure 1 shows how system prices have risen since January 2016. With BSUoS similarly rising, suppliers can no longer afford to be complacent with their self-balancing.

 

Suppliers must manage their imbalance to mitigate the risk of volatile system prices
Figure 1: System price over the last 15 months, for periods when the system has been short (insufficient generation) and long (insufficient demand). Prices have increased compared to the mean over the period for both cases

Thus, suppliers are increasingly looking to protect themselves against the risk of coming up short. This is particularly true of renewable generators: you can’t make the wind blow harder at the same time as customer demand peaks (whereas you can burn more gas). Rather than buying in more conventional ‘brown’ (rather than ’green’) generation to make up any gaps at the last minute, or paying the imbalance price on any shortfall, an alternative is to use the inherent flexibility in connected customer loads to alter your demand, and better align with the power being generated by the wind. Instead of flexing the generation, flex the demand.

Flexing electricity consumption

Here at Open Energi, we are using our experience with Dynamic Frequency Response to flex the energy usage of large industrial & commercial consumers to balance the books of their renewable supplier. By intelligently talking to equipment which has energy stored in its processes we can shift electricity consumption without affecting the operation of a customer’s site. For example, the stored energy in a bitumen tank means we can delay heating it for an hour with very little impact on its temperature. Given notice by a supplier that they are short in the next hour and so require a reduction in demand, or, they think system prices will be high, we can delay turning on the tank’s heater until after the price spike.

Figure 2 shows a typical bitumen tank. The blue line shows the tank under ‘normal’ operation and the orange line shows the tank under Open Energi control. Following a request from the supplier (given approximately 30 minutes before hand) to reduce demand at 11am, we can delay switching the tank on, without affecting its operational parameters (the temperature always remains within set limits). We then allow the tank to switch on and heat up after the price spike, shifting its power consumption.

Demand flexibility can help suppliers to manage their imbalance risk
Figure 2: Flexing the power consumption of a single bitumen tank, such that it’s temperature always remains within predefined limits

Do this across a portfolio of tanks, and you make a sizeable reduction in the supplier’s demand during periods when they would otherwise be short: see Figure 3. The energy is recovered later, and, given the energy storage in any one asset, this definition of ‘later’ can be flexible.

Open Energi is working with businesses and their suppliers to manage imbalance risk using demand flexibility
Figure 3: Resulting shift in electricity consumption when flex energy across a portfolio of bitumen tanks

Suppliers save money by avoiding costly imbalance prices and mitigate the risk of price volatility, while managing renewable intermittency and reducing the need for brown generation. By partnering with innovative suppliers who create a market for such flexibility in an open and accessible manner, businesses can use technology to deliver smart demand side flexibility, in real time, with no impact on their operations, while saving money on their electricity bills. This kind of smart, digitized demand side flexibility is crucial to building the decentralized, decarbonized energy system of the future.

1Open Energi analysis

Robyn Lucas is a Data Scientist at Open Energi. She works on demand side flexibility in the UK electricity network; modelling, forecasting and optimizing the usage and performance of a variety electrical loads and enabling customers to intelligently control their electricity consumption. Prior to Open Energi she worked for a technology consultancy, helping clients make the best use of their data. Robyn graduated from Imperial College London in 2015 with a PhD in Physics, during which she worked on one of the experiments at the CERN LHC.

 

How Artificial Intelligence is shaping the future of energy

Artificial Intelligence can unlock demand side flexibility for end users

Across the globe, energy systems are changing, creating unprecedented challenges for the organisations tasked with ensuring the lights stay on. In the UK, large fossil fuelled power stations are being replaced by increasing levels of widely distributed wind and solar generation. This renewable power is clean and free at the point of use but it cannot always be relied upon. To date National Grid has managed this intermittency by keeping polluting power stations online to make up the difference but Artificial Intelligence offers an alternative approach.

What’s needed is a smart grid which can integrate renewable energy efficiently at scale without having to keep polluting power stations online to manage intermittency. This requires energy storage to act as a buffer, reducing demand when supply is too low or increasing it when it is too high. Most people associate energy storage with batteries, but the cheapest and cleanest type of energy storage comes from flexibility in our demand for energy.

This demand-side flexibility takes advantage of thermal or pumped energy stored in everyday equipment and processes, from an office air-con unit, supermarket fridge or industrial furnace through to water pumped and stored in a local reservoir. The electricity consumption patterns of these types of devices are not necessarily time-critical. Provided they operate within certain parameters – such as room temperature or water levels – they can be flexible about when they use energy.

This means that when electricity demand outstrips supply, instead of ramping up a fossil fuelled power station, certain types of equipment can defer their electricity use temporarily. And if the wind blows and too much electricity is being supplied instead of paying wind farms to turn off we can ask equipment to use more now instead of later.

Making our demand for electricity “intelligent” in this way means we can provide vital capacity when and where it is most needed and pave the way for a cleaner, more affordable, and more secure energy system. The key lies in unlocking and using demand-side flexibility so that consumers are a) not impacted and b) appropriately rewarded.

At Open Energi, we’ve been exploring how artificial intelligence and machine learning techniques can be leveraged to orchestrate massive amounts of demand-side flexibility – from industrial equipment, co-generation and battery storage systems – towards the one goal of creating a smarter grid.

We have spent the last 6 years working with some of the UK’s leading companies to manage their flexible demand in real-time and help balance electricity supply and demand UK-wide.  In this time, we have connected to over 3,500 assets at over 350 sites, operating invisibly deep with business processes, to enable equipment to switch on and off in response to fluctuations in supply and demand.

Already, we are well on the way to realising a smarter grid, but to unlock the full potential of demand-side flexibility, we need to adopt a portfolio level approach. Artifical intelligence and machine learning techniques are making this possible, enabling us to look across multiple assets on a customer site, and given all the operational parameters in place, make intelligent, real-time decisions to maximise their total flexibility and deliver the greatest value at any given moment in time.

For example, a supermarket may have solar panels on its roof and a battery installed on site, as well as flexibility inherent in its air-con and refrigeration systems. Using artificial intelligence and machine learning means we can find creative ways to reschedule the power consumption of many assets in synchrony, helping National Grid to balance the system while minimising the cost of consuming that power for energy users.

Lack of data is often an obstacle to progress but we collect between 10,000 and 25,000 messages per second relating to 30 different data points and perform tens of millions of switches per year. This data is forming the basis of a model which can look at a sequence of actions leading to the rescheduling of power consumption and make grid-scale predictions saying “this is what it would cost to take these actions”. The bleeding edge in deep reinforcement learning shows how, even with very large scale problems like this one, there are optimisation techniques we can use to minimise this cost beyond what traditional models would offer.

Artificial Intelligence model learning to control the electricity consumption of a portfolio of assets

Graph of AI model

More rapid progress could be made across the industry if energy companies made more anonymised half-hourly power data available. It would enable companies working on smart grid technologies to validate these ideas quickly and cheaply. In the same vein, it would be a major breakthrough for balancing electricity supply and demand if energy companies made available APIs for reporting and accessing flexibility; it would allow companies like Open Energi to unlock enormous amounts of demand-side flexibility and put it to good use balancing not just the grid but also helping to optimise the market positions of those same energy companies.

In the UK alone, we estimate there is 6 gigawatts of demand-side flexibility which can be shifted during the evening peak without affecting end users. Put into context, this is equivalent to roughly 10% of peak winter demand and larger than the expected output of the planned Hinkley Point C – the UK’s first new nuclear power station in generations.  Artificial Intelligence can help us to unlock this demand-side flexibility and build an electricity system fit for the future; one which cuts consumer bills, integrates renewable energy efficiently, and secures our energy supplies for generations to come.

Michael Bironneau is Technical Director at Open Energi. He graduated from Loughborough University in 2014 with a PhD in Mathematics and has been writing software since the age of 10.

Can a sharing economy approach to energy deliver a more sustainable future?

Sunshine through tree tops - green energy

As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?

Technology is shaping our lives like never before, making our world smarter, more efficient and more connected. In the last decade, it has fuelled an explosion of sharing economy business models — adopted by the likes of Uber, Airbnb and Zipcar — who in just a few short years have revolutionised established industries. But can a sharing economy approach help to tackle one of man-kind’s greatest challenges and deliver clean, affordable and secure energy to all?

Sharing economies are a consumer-led phenomenon which work by exploiting excess capacity or inefficiencies in existing systems for mutual benefit. Take Airbnb for example. The wasted asset is your property and the excess capacity is the space you are not using. By creating a user-friendly platform and giving homeowners the security they need Airbnb have built the biggest hotel chain in the world, surpassing the Intercontinental Group in less than four years. They have achieved this because they haven’t needed to construct a single thing.

So how could this apply to the energy industry? As global demand for electricity grows, are there alternatives to building more power stations which make smarter use of existing infrastructure? And in an industry renowned for high levels of consumer mistrust, could an Airbnb of energy finally deliver a consumer-centric energy market?

Since the world’s first power station was built in 1882 the global energy system has worked on the basis that supply must follow demand. Consumers — businesses and households — have been passive users of power, paying to use what they want when they want, whilst electricity supply has adapted to ensure the lights stay on. This has created inefficient systems built for periods of peak demand — in the UK this is typically between 4–7pm on a cold winter evening — which most of the time are massively underused.

But this is no longer the case. Today, our ability to connect and control anything from anywhere means we can manage our demand for electricity in previously unimaginable ways, and consumers are emerging as a driving force for change.

By connecting everyday equipment to a smart platform (just as you might upload your property to Airbnb), it’s now possible for consumers to take advantage of small amounts of “flexible demand” in their existing assets and processes — be it a fridge, a water pump, or an office air con unit — and sell it to organisations tasked with keeping the lights on — like National Grid.

Applying artificial intelligence and machine learning to govern when and for how long assets may respond gives consumers confidence their equipment’s performance will not be affected, and in return for sharing their “flexible demand”, they benefit from cost savings or direct payments.

This sharing economy approach relies on the power of tech and our ability to orchestrate many thousands of consumer devices at scale. Any one piece of equipment can only make small changes to the timing of its electricity consumption — e.g. delaying when a fridge motor comes on for a few minutes during a spike in electricity demand at the end of a football match — but collectively, the impact is transformational.

It means that when electricity demand is greater than supply, we don’t need to fire up fossil-fuelled power stations. Instead, we can reduce demand by asking non-time critical assets to power down for a short while.

If the wind is blowing and too much electricity is being supplied, we don’t need to let this clean, abundant power go to waste, but can ask equipment to shift its demand and make use of this power as it is available.

And we don’t need to keep building more power stations to meet occasional peaks in demand. Instead, we can distribute demand more intelligently throughout the day, reducing the size of these peaks and making better use of existing capacity.

In the UK, Open Energi’s analysis suggests there is 6 gigawatts of peak demand which can be shifted for up to an hour without impacting end users. Put into context, this is equivalent to roughly 10% of peak winter demand and larger than the expected output of the planned Hinkley Point C — the UK’s first new nuclear power station in generations.

This doesn’t make it easy. Unlike other sharing economy success stories, energy is a public good. The need for incredibly robust solutions means the barriers to entry are high. But, if we can get it right, the prize is enormous; a cleaner, cheaper, more secure energy system which gives consumers control of how, when, and from where they consume their energy.

Businesses have already recognised the power they hold and the benefits it can bring, with the likes of Sainsbury’s, Tarmac, United Utilities and Aggregate Industries adopting the tech and demonstrating what’s possible. Households look set to follow, but wherever the flexibility comes from, it’s clear that consumers and the environment will benefit from a sharing economy approach to energy.

David Hill is strategy director of Open Energi. He is an expert on electricity markets and demand-side flexibility, including demand-side response and energy storage. He joined Open Energi in 2010 after completing an MSc Energy, Trade & Finance at Cass Business School.

Making a success of batteries

Tech image

The surge in interest in battery storage projects has highlighted a fundamental change in the energy market, as commercially viable systems become progressively more available. We explore critical success factors, from choosing the right battery to managing state of charge.

The deployment of physical energy storage assets can broadly be separated into two project categories. The first kind of project consists of grid-scale assets in “front of the meter”, which are usually implemented by industry partners on large grid connections. The second type is “behind the meter” batteries which provide an added layer of flexibility to energy consumption patterns of sites already connected to the electricity network – and offer tremendous potential to unlock previously inaccessible revenue streams for industrial and commercial customers.

Both project types require different approaches to select the best battery type and optimise operational strategy and performance over time.

Selecting the optimal battery operating strategy

Battery flexibility has the ability to unlock several non-mutually exclusive revenue streams. For example, a battery can be used to reduce site demand (for “behind the meter” projects), or export to Grid (for “front of the meter” opportunities) during peak price periods, reducing costs associated with wholesale, Duos, Triads and Capacity Market levy charges. Outside periods of peak tariffs, batteries can participate in the frequency response market and earn a revenue from National Grid for helping to dynamically balance electricity supply and demand.

The characteristics of Battery Energy Storage Systems (BESS) differ widely between manufacturers, with important factors to consider including capital and operating costs, power rating, energy storage capacity, energy density, cell chemistry, operating temperature, round-trip efficiency, self-discharge, degradation profile and tolerance to various depth of discharge. All these parameters have an influence on the economic viability of the project, so it is important to select the appropriate technical solution for a given project.

Once the different parameters are known, the determination of the most economical operating strategy becomes an optimisation problem in response to an aggregated electricity price signal and a potential frequency response revenue, under several constraints such as the battery technical characteristics and the site operational constraints (existing demand/generation on site if any, and import and export capacity).

The operating strategy might change over time, for example because one component of the price signal has changed, or if there is a new opportunity for flexibility that is more financially viable than current revenue streams. In that case the optimisation process will be performed again and the operating strategy modified accordingly.

Battery State of Charge profile
State of charge profile of a BESS doing peak price avoidance from 4PM to 7PM and participating in the frequency response market the rest of the time. The energy stored in the system is maximised before 4PM in order to optimise arbitrage revenues.

Choosing the right battery

The next crucial decision is choosing a battery that is optimal for a given project and operating strategy. The goal here is to select the battery that will be commercially viable under the constraints of a given project. For a “front of the meter” BESS the main factors driving the battery characteristics are the Authorised Supply Capacity (ASC) for importing and exporting, the capital and operational costs and the electricity tariffs for import and export.

There are additional parameters for a “behind the meter” battery. As most of these projects are implemented in sites with no or a small export capacity, the battery would respond to a low frequency event by discharging power into the site, reducing its overall energy consumption. It is therefore crucial to forecast the demand on site to choose the optimal battery size and tender an accurate power availability in the frequency response market.

The same approach can be used for generating sites (like wind or solar farms) where there must be sufficient potential for export in addition to the generating activity on site. The potential energy savings are also dependent on the demand and the site constraints, which might in return drive the optimal power/energy ratio of the BESS.

Managing battery state of charge and maintaining performance

Once installed, the challenge is to manage batteries while ensuring high performance following the operating strategy selected. A requirement of entering the frequency response market is to be able to provide the power tendered for 30 minutes at a time, which highlights the need for a performant state of charge management.

There is an inherent efficiency in BESS, with average efficiency ranging from 75% to 90 % for conventional systems. When used in the frequency response market, successive cycles of charge and discharge will progressively cause a net discharge of the battery, and ultimately cause the battery to be fully discharged if no corrective actions are taken. Similarly, if several large high frequency events happen in close succession, a frequency-responsive BESS might reach a high state of charge at which it will not be able to respond to high frequency events anymore.

Battery charge management graph
State of charge of a 1MW/2MW.h frequency responsive battery. An appropriate state of charge management helps keep the energy stored in the battery at an optimal level over time.

A control strategy should ensure that the battery state of charge always stays within appropriate boundaries in order to meet its contracted obligations at any given point in time. It should also ensure that the total throughput of the battery (which is the cumulative sum of discharge processes over time) is minimised while in operation. A reduced throughput decreases the wear and tear of the battery, enhancing the BESS lifetime.

At Open Energi we are working with several customers to successfully operate batteries in the frequency response market, optimising their operating profile to maximise revenues, applying designed state of charge management techniques, while limiting the degradation of the battery lifetime to the lowest value possible.

 

 

Why the UK needs an energy security rethink

London at night
Sebastian Blake
Sebastian Blake, Commercial Analyst, Open Energi

Blackout Britain is a headline which has become increasingly common over recent years. Many argue that decades of under investment in generation infrastructure has left the margin between demand and supply in the UK desperately short, raising the possibility of network outages at times of high power demand. Given the blame that would be landed at the Government’s feet were the lights to go out, energy security has been given top priority over the other facets of the energy trilemma; decarbonisation and affordability.

The Government’s solution to this was to devise the Capacity Market as a mechanism to encourage investment in new power plants, with yearly auctions for participants who can provide capacity over the winter peak. Crucially, auctions are held four years in advance of the capacity ‘go live’ date, to guarantee revenue and give investors the confidence they need to build new power stations.

There are, however, major flaws in the thinking behind such an approach. There is much evidence to suggest that the UK is in fact well supplied with power station capacity, that building more stations is unnecessary and that running the system more efficiently on tighter margins is a good thing. And by ensuring there is sufficient power plant capacity to meet the instance of highest demand in the year other potentially greater threats to security of supply are being ignored.

The graph below shows the frequency of the UK grid, which is the primary indicator of the system stability. The network is in balance when the frequency is hovering around the 50Hz mark, however any significant variation either side is a sign of a serious imbalance between generation and demand and could result in a potential shutdown of the network. This isn’t a distant threat: whole towns had to be shut off as an emergency measure in 2008 when grid frequency dropped to 48.8Hz.

Grid frequency graph

In this case, we can see what happed to the frequency when a large supply source – an interconnector between the UK and France – failed, leading to more power being drawn by consumers than was being supplied to the grid. To counteract the resulting frequency drop and avoid a system shut down, a series of automatic measures kicked into action, including turning up thermal power plants (coal and gas) and sending water reserves cascading through turbines of hydroelectric plants.

More recently on the 9th May 2016 there were 37 significant failures across 27 different coal and gas plants as well as the France interconnector; with each one disrupting frequency and testing the grid’s resilience. At one point in the day National Grid issued a warning that insufficient spare capacity would be available in an hour’s time. This is too short notice for a thermal plant to start up (which takes around four hours) so not something the Capacity Market would have helped with.

National’s Grid’s Head of Commercial Operation Cathy McClay has said managing the grid frequency is becoming an increasing headache for our island system. However, the technologies traditionally used to respond in these situations look increasingly unfit for the role. The best new candidate is demand side flexibility – in the form of batteries and demand side response – which offers numerous benefits.

 Energy storage and demand side response offer five core advantages over traditional solutions

  1. Speed of response: Demand side response and batteries can deliver their full power in under 1 second from receiving a request from the network. By comparison thermal plants and hydroelectric generators need around 10 seconds. As the interconnector example shows, this difference is crucial for avoiding a potential network shutdown and will be needed more and more due to continued reductions in system inertia.

 

  1. Decentralisation: Demand side response and batteries are distributed technologies meaning a required level of response can be made up from aggregating together many smaller sites. We have seen how relying on large centralised technologies (like the undersea link to France) poses increased risk to system stability as they represent significant single points of failure. Thermal power stations fail on a daily basis so individual plants cannot be relied upon for response; whereas with distributed technologies this risk is shared across many assets; if one fails the whole service is not compromised.

 

  1. No need for spinning reserve: Traditional providers are only able to achieve the 10 seconds or so when starting from an already running position, hence the generators must be operating at some partial output to provide the quick response. This impacts fuel efficiency by around 10-20%, greatly increasing costs and CO2

 

  1. Flexibility: The network can only absorb as much power as there is demand, so at times of low demand, National Grid must turn down clean and zero marginal cost power from renewable sources like wind to accommodate the thermal generators which must be kept running for frequency response. Demand side response and batteries overcome this problem.

 

  1. Low carbon: By maximising the use of demand side response and energy storage technologies, the UK will be able to achieve further growth in renewable generation; while reducing its reliance on interconnectors and its exposure to volatile gas prices.

 

The high capacity fossil fuel plants which have historically been used to respond to the demands of the grid are increasingly unfit for purpose in a modern electricity network, yet the Capacity Market fails to encourage the development or implementation of smarter, cleaner and decentralised solutions which would provide a more efficient means of addressing both our energy security and other elements of the trilemma.

Neglecting these alternative solutions via the Capacity Market will undermine exactly the thing Government is trying to advance: security of supply. National Grid should be applauded for its efforts to implement change through its Power Responsive campaign – designed to encourage demand side participation in the balancing markets – but many policy makers remain locked into the old paradigm of an archaic industry; no doubt weighed down by the stranglehold of well-established energy incumbency (better known as the Big Six).

For these parties, using distributed assets to balance the system still represents a significant departure from the orthodoxy of constructing and operating a few large centralised assets like Hinkley Point C, which will deliver 7% of all UK electricity when completed.

To achieve a real paradigm shift towards a secure, affordable and low carbon economy, we don’t even need to find new solutions. Distributed and demand side technologies are ready to deliver; we now need to change the supply-focused mind set of our policy makers and operators.

By Sebastian Blake, Commercial Analyst, Open Energi

New EEF report: DSR should “be one of the first options” for electricity security

Metal company scores win-win of cash and cost savings

Under Theresa May’s Government BEIS has been tasked with delivering a comprehensive industrial strategy, ensuring that the UK has secure energy supplies that are reliable, affordable and clean, and tackling climate change.

The UK’s manufacturing sector has an important role to play but a report published this week by the manufacturers’ organisation, EEF, found that its members’ confidence in the Government’s handle on security of supply is tepid at best. Only one third of its members agreed with the statement that “the Government has a long-term strategy to ensure security of supply” and just 3.6% felt energy infrastructure had improved in the last two years.

The report “Upgrading Power: Delivering a flexible electricity system” makes a series of recommendations for Government to help manufacturers play a part in boosting UK energy security and improve how our electricity system operates. Demand Side Response (DSR) is identified as one of the first options that should be looked to in achieving electricity security.

As the authors note “Continuing to be over-reliant on supply side options and leaving DSR options untapped is rather like having the heating on at home, deciding it’s too warm and then opening a window rather than turning the heating down. Both actions will achieve the intended outcome but the former wastes energy and money.”

In a recent EEF survey only 9% of respondents took part in some form of DSR activity – compared with 29% in a recent cross-sector survey conducted by Ofgem – citing varied reasons from insufficient financial incentive to those that had utilised all of the available flexibility on their sites. However, by the far the most common reason given was the complexity of the system and resulting lack of understanding within manufacturing companies.

The report found that even manufacturing companies well versed in the DSR markets find the system bewildering and unwelcoming to new entrants. One company commented that “it is genuinely stressful to be in a regulatory environment alongside the big six”, further noting that energy companies have entire departments to deal with these markets, whilst even a large manufacturing company may have only one individual covering energy.

Those manufacturers who are engaged in DSR activities adopt a common approach and hierarchy to maximise potential savings and revenue streams. Where possible, companies will seek out opportunities to reduce exposure to higher power (wholesale) prices first, followed by minimising their network costs (Triads and Distribution red band charges) and finally participate in specific DSR products.

To help unlock the estimated 9.8GW of DSR flexibility available in the UK EEF recommends first increasing the number of businesses acting on straightforward price signals through time-of-use tariffs. Beyond this it calls on the Government, National Grid and Ofgem to look at what can be done to reduce the complexity of specific DSR services and regulatory barriers to entry.

Finally, it highlights the forthcoming ADE code of conduct for aggregators as an important step which will improve manufacturers confidence in these companies. Open Energi strongly supports this move. Aggregators occupy a position of trust and have a responsibility to educate businesses and be open and transparent about the benefits that exist.

Donna Hunt, Head of Sustainability at Aggregate Industries summed this up in a recent interview with edie, saying “businesses want to see what the value-case is. They need the confidence and trust in it. It’s not new technology but it’s perhaps not at scale yet. That’s a big reason why Aggregate Industries is proud to be out there talking about how it works. We should be doing more of it because we need a more responsive energy system that works for everyone.

“We need to prove that value-case, share knowledge and open doors. We just need there to be a level playing field between the aggregators to remove the confusion so people are clear about how they can engage.”

Unlocking the full potential of DSR is going to take time but National Grid is looking to source 30-50% of balancing services from DSR by 2020, creating a potential revenue stream for businesses of around £1 billion. As the world strives to find ways of delivering energy which is clean, affordable, and secure, the more that can be done to facilitate DSR participation – from business of all sectors – the better.

EEF Report: Demand Side Response Recommendations

  • The Government should investigate how to maximise the DSR benefits for manufacturers of smart meters, half-hourly settlement and time-of use tariffs.
  • National Grid, as part of its charging review and in consultation with industrial energy consumers, should seek to reform the Triad charging system to deliver greater predictability for industrial energy consumers.
  • The Government should explore the incorporation of DSR aims and related electricity cost reduction strategies into energy efficiency schemes such as ESOS.
  • National Grid, in collaboration with energy consumers and the Government, should seek to reform the ancillary market to reduce complexity and create greater transparency.
  • Ofgem should amend the Balancing Settlement Code rules to allow participation of DSR in the balancing market.
  • The Government should reform the Capacity Market to allow easier access for DSR assets in future auctions.

Download the full EEF report “Upgrading Power: Delivering a flexible electricity system”

 

 

The 4th industrial revolution: a smart power revolution?

Sainsbury's deliver demand side response from its stores UK wide

On the 8th September, James Heappey, Conservative MP for Wells took part in a House of Commons debate on the 4th Industrial Revolution.

In his speech he talked about the “smart energy revolution” that is underway in the UK today, and highlighted the pioneering work of two of Open Energi’s customers, Sainsbury’s and Aggregate Industries. Here’s what he had to say:

Speaking twice in 25 hours is a record for me, and I am grateful for the opportunity. I congratulate my hon. Friend Mr Mak, who has secured a worthwhile debate and opened it brilliantly. I apologise for being late, but I was working on the Energy and Climate Change Committee’s paper on renewable heat and transport targets, which will be released this evening. I commend it to the House: it is probably one of the most insightful Select Committee reports that Members will read all year. Indeed, all of our Committee’s reports are insightful.

In summing up yesterday’s debate, the Minister used some fantastic theatrical references, which I hope will become a tradition of his summing-up speeches. He has an encyclopaedic knowledge of the theatre, so we look forward to that. Today, I present, to use my own theatrical reference, the second part of my play in two parts, in which I will talk about the energy opportunities provided by the collision of emerging technologies and our existing energy infrastructure.

There is some dispute over whether this is the third or fourth industrial revolution. A book by Professor Jeremy Rifkin has become a bit of a bible for me, as I have sought to develop my thinking on how energy policy might evolve. He thinks that this is the third industrial revolution, but none the less it is an excellent read that very much pulls in the same direction as those who are advocating the fourth industrial revolution.

Ministers will already have looked in great detail at the National Infrastructure Commission’s “Smart Power” report, which is a fantastic publication setting out how we can harness all these wonderful technologies as we digitise the energy system. The reality, as the report observes, is that we could save £8 billion a year for the UK economy if we digitise our energy system and harness those technologies. That figure represents not just immediate savings on our energy bills, but gains in productivity.

Nicola Shaw, the head of National Grid, told the BBC “Today” programme last week that we are seeing

“a smart energy revolution across the country with consumption adjustments reflecting when energy is cheapest”.

The idea that we have to change our consumption habits to meet a changing energy market sounds like a nightmare to most people, but the reality is that we already have many of the technologies in our homes. Most major white goods manufacturers are producing smart appliances already: they are in our shops and, probably unknowingly, we already have them in our homes. Through the internet of things, they will all start to speak to one another to make sure that they operate at the most efficient and cost-effective time. They also report faults, so people will not have to carry on for years with a fridge that uses more power than it should, because it will already have flagged up its fault to whoever manufactured it. These are exciting times and the technologies already exist. It is not, in my view, going to be a case of opting into them, because manufacturers are building them as standard and they will increasingly do so.

The Government face a challenge in preparing our homes, businesses and society for the internet of things from an energy perspective, so I will give my thoughts on our system preparedness before moving on to examples of where we are already seeing the huge economic advantages.

As Ministers know only too well, the smart meter programme is the keystone in achieving the digitisation of our energy system, and I know that they will be keen to push on with that roll-out at best speed. Everything that we seek to do in bringing technological innovation into the energy space depends on those smart meters being in place to digitise the system. Similarly, on the way in which our grid is put together, we want all our generational capacity—from the smallest to the largest—to be able to speak in real time about what it is producing, so that we can have a more dynamic generation system. We also need to sort out the regulatory framework for storage, because at the moment people have, in effect, to pay for their energy twice: first when it is generated, and secondly when it is released from storage. Surely, that cannot continue for much longer.

We also have to make sure that our distribution networks—the substations in our communities—are capable of dealing with more dynamic demand and clustered demand, particularly overnight, when people might be taking advantage of cheap energy to charge cars, run the washing machine and tumble dryer, and heat immersion tanks. None of that will happen automatically without the Government paving the way. Thereafter, however, I am sure that these technologies will find their place in the market by themselves. They will make life better, and people will buy them as a result. The Government do not need to encourage people every year or so to change their mobile phone, because people just want to have the latest technology at their disposal. I am sure that that will be the case in this area if the Government create the right regulatory framework with energy policy.

I turn to storage. The price of storage has already come down from $3,000 per kWh to about $200 today, and it will come down even more quickly still. We saw over the summer reports about the Tesla Panasonic factory in Colorado, the construction of which is being accelerated quite rapidly given the increase in demand. These are exciting times, because storage is the key to flattening the energy supply curve and unlocking the real potential of renewables.

The real technological wizardry, however, is demand-side response. That may be a combination of words that many in the Chamber have not heard before, but it needs to be at the forefront of the way in which we discuss energy. Flattening the supply curve through the availability of storage deals with only half the problem; flattening the demand curve through demand-side management is equally important.

I have been hugely impressed as I have become enthused about DSR, and as I have gone around various companies that are delivering it, by the scale of the savings that it is bringing to businesses. Marriott hotels have signed up to a DSR contract that saves them hundreds of thousands of dollars a year. Workers at Aggregate Industries’ bitumen plants used to just turn up in the morning and fire up the boilers to get the bitumen tanks up to heat. They would operate over the course of the day, and then they would be switched off. Aggregate Industries now employs technologies that allow it to say, “Our tolerance is that we need to keep these tanks at a certain temperature, and provided that they are at that temperature, we can release energy back to the grid.” It does so, and it gets money for nothing as a result. By employing those technologies, it can sell back energy that it does not need, which it would otherwise just have paid for and wasted. That creates a huge saving.

Similarly, refrigeration is a massive cost for supermarkets and the food industry in general. Sainsbury’s has employed demand-side response, and the store in my constituency in Street, Somerset has released 20 kW of capacity back to the grid simply from DSR. That is extraordinary.

The other area that I want to touch on was the electrification of the transport system. I had to check very carefully with the Clerk of the Energy and Climate Change Committee about when I would find myself in contempt of Parliament, but I understand that if I draw on the evidence rather than on the report itself, it is fine. This is a hugely exciting opportunity for us to employ electric cars and electric haulage systems in the UK. The problem is that I am not sure that we yet have the infrastructure in place to support them, and I am not sure that we have the right fiscal structure to support them either.

I tried to buy an electric car over the summer, and sadly I found that their range was probably not quite enough to allow me to do my duties around my rural Somerset constituency. They are getting there, however, and we just need to incentivise the acceleration of the technology, so that we get beyond the 100-mile range to a range of 200 or 300 miles. If that happens, I think that people will, all of a sudden, go for electric cars quite quickly. All the incentives that the Government have in place—the £4,500 that they contribute towards the car and the contribution they make towards a charging point at the buyer’s home—are fantastic. The Government’s emphasis on establishing a charging infrastructure at motorway service stations and on main roads is also fantastic, but we really need to grow the infrastructure much more if people are to buy the cars and make the saving that we hope they will. The argument is that electric cars will make us more productive as well, particularly when we go beyond merely electric cars to electric autonomous cars, and we find that we can move around our towns and cities much more freely.

Interestingly, in the United States, Coca-Cola has employed hydrogen-electric hybrid vehicles for its entire fleet, and it has made a 20% reduction on its fuel costs. It made that huge saving by employing those technologies and electrifying its transport fleet, which is very exciting. We should look across at that and realise that this is not just something that people do if they are green and they want to be environmentally sensitive. It is something that an individual or a business can do if they want to reduce their operating costs—technology colliding with energy generation and energy consumption to make us more efficient and more cost-effective, and to make all our operating costs that bit cheaper.

Mr Deputy Speaker, you encouraged us to keep within 10 minutes, so I will summarise, rather than go into the many more examples that I am itching to provide. The bottom line is that, while we will focus very much on our digital infrastructure with broadband and 5G mobile phones and we will worry very much about the preparedness of our airports and air routes, as well as of our roads and rail, the energy infrastructure is just as important. In my view, alongside the broadband and mobile phone networks, the three sets of infrastructure of telecoms, broadband and energy will drive the fourth—or third—industrial revolution and allow us to harness all these fantastic technologies. We should seek to do so not just because we are seeking to arrest climate change, but because it is cost-effective, makes business sense, will increase productivity and, ultimately, will be great for our economy.

Access the full debate here.

How can machine learning create a smarter grid?

Dynamic Demand 2.0

Across the globe, energy systems are changing and creating unprecedented challenges for the organisations tasked with ensuring the lights stay on. In the UK, National Grid is facing shrinking margins, looming capacity shortages and unpredictable peaks and troughs in energy supply caused by increasing levels of renewable penetration.

At the recent Reinventing Energy Summit, Michael Bironneau, Head of Technology Development at Open Energi, explored how the same machine learning techniques that have let machines defeat chess and Go masters, can also be leveraged to orchestrate massive amounts of flexible demand-side capacity – from industrial equipment, co-generation and battery storage systems – towards the one goal of creating a smarter grid; one that is cleaner, cheaper, more secure and more efficient.

For World Cities Day 2016, Michael talked to Nikita Johnson of Re:work about utilising data science in energy, creating a smarter grid, political challenges, and more.
What are the main transformative technologies that will help create a smarter grid?
A smarter grid is one where we can integrate renewable energy efficiently without having to keep polluting power stations online to manage intermittency. This requires energy storage to act as a buffer, reducing demand when supply is too low or increasing it when it is too high.

The cheapest and cleanest type of energy storage comes from flexibility in our demand for energy. Open Energi’s Dynamic Demand platform unlocks small amounts of stored energy from commercial and industrial processes – such as refrigerators, bitumen tanks and water pumps – and aggregates and optimises it second by second, creating a virtual battery.

How can machine learning be applied to help balance the grid?
The most transformative application of machine learning for grid balancing comes from unlocking and utilising flexibility in demand-side power consumption. Such algorithms can find creative ways to reschedule the power consumption of many demand and generation assets in synchrony to keep the grid in balance while helping to minimise the cost of consuming that power for energy users.

With sufficient data, a ML model can look at a sequence of actions leading to the rescheduling of power consumption and make grid-scale predictions saying “this is what it would cost to take these actions”. The bleeding edge in deep reinforcement learning shows how, even with very large scale problems like this one, there are optimisation techniques we can use to minimise this cost beyond what traditional models would offer.

What are the regulatory and political challenges to achieving a national smart grid in the UK?
Whatever your role in the vibrant menu of demand side innovations that are offered across Europe, a shared goal for serving consumers is advocating for the framework of flexibility adequacy at the energy system level. This opens so many possibilities – to facilitate Electric Vehicles, mitigate renewable intermittency, replace aging coal infrastructure, and realise a smart grid.

The key is market access. Currently, the UK market favours existing power generators to a disproportionate extent. To fully realise the potential of demand-side flexibility to help balance the grid, save energy and offer lower costs for consumers, we need a level playing field. Without it, there is a very real risk that we will lead ourselves into multi-decade contracts for power plants, paying for a system which is already over capacity and which has no incentive to get any smarter.

How can energy companies work with engineers and data scientists to achieve a more efficient energy system?
One obstacle that prevents many ideas from taking off is the lack of data to support them. If energy companies made more anonymised half-hourly power data available, data scientists and engineers working on new smart grid technologies would be able to validate these ideas quickly and cheaply. In the same vein, it would be a major breakthrough for grid balancing if energy companies made available APIs for reporting and accessing flexibility; it would allow companies like us to unlock enormous amounts of demand-side capacity and put them to good use balancing not just the grid but also helping to optimise the market positions of those same energy companies.

This post originally appeared on Re:work’s blog on the 31st October 2016.

Demand flexibility is putting consumers in control

Tarmac has installed Demand Side Response at around 70 sites UK wide

A smart power revolution is underway putting your business in control of how, when and from where it consumes its energy. At last week’s Energy Live 2016 Open Energi’s David Hill explored how technology can unlock demand flexibility to deliver maximum value from your assets  – connecting industrial equipment, batteries and self-generation – and coordinating their behaviour in real-time to turn the vision of a smarter grid into reality.

David was joined by Steffan Eldred, Senior Energy Optimisation Manager at Tarmac, sharing their approach to demand flexibility.

Download a copy of the presentation.

The move to a low carbon economy coupled with rapid advances in technology and innovation are transforming electricity supply and demand. Grid agility and flexibility are essential as we move away from models of centrally dispatched generation and incorporate more intermittent renewable energy generation onto the system.

This flexibility can be provided in a variety of forms, from demand side response (DSR) and energy storage to new build gas generation. However, there is a clear merit order emerging in terms of both the carbon and consumer cost of these offerings.

DSR is the cheapest and cleanest form of flexibility. At its core, it is an intelligent approach to energy that enables aggregators to unlock flexibility in our demand for energy to build a smart, affordable and secure new energy economy.

Flexibility Merit Order shows Demand Side Response is lowest cost optionThe technology can be used to invisibly increase, decrease or shift users’ electricity consumption, enabling businesses and consumers to save on total energy costs and reduce their carbon footprints, while at the same time enabling National Grid to keep the system in balance.

It is part of a wider energy market picture that must focus on flexibility and achieving the lowest cost for consumers. If just 5 per cent of peak demand was met with flexible power, the response would be equivalent to the generation of a new nuclear power station, without the huge costs to consumers.

Tarmac is one business benefiting from this approach. The company has been a pioneer of DSR, partnering with Open Energi to install Dynamic Demand on over 200 bitumen tanks at 70 asphalt plans across the UK. What this means is the heating elements in each of those tanks, which keep the bitumen warm, can switch on or off in seconds to help National Grid balance electricity supply and demand.

Collectively Tarmac’s tanks are providing the grid with capacity that can be shifted in real-time, so they’re able to use more when there is a surplus – for example when it’s particularly windy – and less when there’s a shortfall. Its enabling Tarmac to help build a smarter, more responsive energy system which is paving the way for more renewable power and reducing the nation’s reliance on fossil fuelled power stations.

 

 

10 myths about Demand Side Response

Sainsbury's deliver demand side response from its stores UK wide

Demand Side Response  is a vital part of our transition to a zero carbon economy and has the potential to transform how we use and deliver energy. But there are some common misconceptions about how businesses can get involved and what it means for them. To help cut through these, Chris Kimmett, Commercial Director at Open Energi, tackles some of the most common myths about Demand Side Response (DSR).

Myth 1: It’s too disruptive

This myth is especially prevalent in the press where headlines such as “UK factories shut down to prevent winter blackouts” are not uncommon. But this is a very outdated perception and technology advances have changed the game completely. There are lots of processes that have a degree of flexibility, where technology can be used to temporarily increase or decrease consumption without impacting performance, for example heating, cooling and pumping.

Take the air conditioning in a typical office building. It will be designed to maintain the temperature between certain bands, for example 18-22 degrees centigrade. Turning the unit on or off for a short period won’t have any discernible impact on the temperature and technology can automate its response so as soon as it approaches its upper or lower limit it stops responding.

Some demand is genuinely inflexible, such as lighting. The good news is that as battery costs come down, businesses can use these to participate in different Demand Side Response schemes and switch to battery power during peak periods.

Myth 2: It’s all back-up diesel generators

It’s true that there is a lot of back up generation participating in certain DSR schemes. Short Term Operating Reserve (STOR) is a good example; 93% of the response comes from generation and 22% (743MW) of this is from diesel. That’s because there are a lot of organisations with back up diesel generators which for much of the time are under-used, so it makes sense to earn revenue from these where possible. However, there is also a significant and growing portion of real demand participating across a range of markets, coming from all kinds of different equipment, including fridges, pumps, chillers, motors, and fans. To date, we have connected over 60MW of demand flexibility from these types of assets across the UK, of which around a third is usually available at any one time.

Myth 3: There isn’t enough value to make it worthwhile

There are lots of businesses out there participating in DSR who would disagree with this statement. In a recent Energyst Media survey, 81% of businesses said they participated in DSR to generate revenue and National Grid’s PowerResponsive website features a range of case studies. These businesses are seeing significant value from participating in DSR, not just in terms of revenue, but also because it is the right thing to do and it is supporting their organisation’s sustainability credentials. Accessing all a business’ flexibility means it should be possible to return around 5-10% of its energy bill in DSR revenue. National Grid has clearly stated its desire and need to grow demand side participation significantly, and its value is expected to increase over time.

Myth 4: It’s a winter peak problem

There is a winter peak problem and margins remain slim at around 6.6%, but National Grid increasingly faces challenges in the summer and with the year round second-by-second balancing of supply and demand. As more of our power comes from wind, solar and other sources of distributed generation over which National Grid has no control, it is having to cope with periods in the summer months where supply exceeds demand, often overnight or in the middle of a sunny day. Rather than pay wind farms to turn off, it has been using a new service called Demand Turn-up to encourage businesses to shift their demand to these periods to help absorb the excess energy.

A very different challenge is that of managing the real-time balancing of electricity supply and demand, which National Grid must do 24/7, 365 days a year. Whether a gust of wind means a surge in power or a gas plant tripping means a shortage, demand flexibility is cleaner, cheaper and faster than ramping power stations up and down in response. Fast acting real time flexibility is essential to keeping the lights on in the future.

Myth 5: Participating in Demand Side Response means handing over control of my processes

Absolutely not! It is not the place of DSR providers to tell you how to run your business and you should always retain ultimate control. This should be a fundamental part of how you approach DSR. We spend a lot of time working with our customers to understand their assets and processes and agree the parameters within which they want their assets to participate. Once a control strategy is in place, each individual asset is then able to decide if it can respond, and the technology will enable it to kick us out automatically if it reaches a point where it can’t.

The beauty of DSR is that because the response is aggregated from many thousands of assets, where one fridge can’t respond we know that a pump or a bitumen tank will. Added to this there is always an override switch which means the system can be disabled on site at any time.

Myth 6:  Demand Side Response is easy

It is getting easier, but it is certainly not easy just yet. As described above, much of the effort and resource is required pre-implementation, in understanding the assets and processes and developing a strategy to ensure there is no impact on operational performance. There is a lot of great learning happening in the UK and globally, connectivity is increasing, technology is improving, and we are starting to see equipment being manufactured “DSR” ready. These changes are making it easier for businesses to participate by the day.

Myth 7:  Energy storage = batteries

Batteries are very interesting and the cost curve has been plummeting – especially for Lithium-ion batteries. But energy storage comes in many forms; there is thermal storage in a fridge, in a building’s air conditioning or in a bitumen tank for example.

Working with Aggregate Industries, we have found that a modern, well-maintained and insulated bitumen tank – which stores the liquid bitumen used to make asphalt for roads at between 150-180 degrees centigrade – can be switched off for over an hour with only a one-degree change in temperature.

Similarly, the water pumped to a reservoir represents a form stored energy. If we can find these small amounts of stored energy in everyday processes and unlock this flexibility for National Grid, then we can start to deliver a transformation in how our energy system operates without the need to build new batteries.

Myth 8: There isn’t enough demand flexibility to make a difference

A number of recent studies have looked at this, including the Association of Decentralised Energy and the National Infrastructure Commission. Our analysis suggests there is around 6GW of demand that can be shifted during peak periods, and that’s real demand only, not including back-up generators. 6GW is more than the UK’s two biggest coal fired power stations combined, and almost double the proposed Hinkley Point C nuclear plant. Unlocking this flexibility means we can build fewer peaking plants, integrate more renewable generation and mitigate the effects of intermittency. It offers major advantages in terms of cost, network reliability and sustainability which is good news for the environment and bill payers!

Myth 9: It’s unreliable

In setting the Capacity Market Auction Guidelines, National Grid prescribed the reliability for each balancing technology class available. Demand Side Response was ranked as more reliable than Combined Cycle Gas Turbines (CCGT), coal, hydro, oil or nuclear power. For example, for a 100MW nuclear generator, National Grid estimate it can rely on 81.4MW being available, while for DSR they would expect 89.7MW to be available. Large centralised power stations do not necessarily confer reliability. By their very nature they represent large single points of failure with the potential to cause massive disruption should a problem arise. The aggregated nature of DSR which relies on many thousands of smaller assets working together has proved its reliability over many years.

Myth 10: I have no flexibility!

You probably have more than you realise. If you’re thinking about demand flexibility but not sure how or if it could work for your business, we recommend you:
1) engage the right people internally who know what equipment you have and understand how it is managed
2) find someone who understands the market
3) find someone who understands your industry and what you do

By overlaying the above in a meaningful you can identify how much flexibility you have and where you can use it in a way that doesn’t disrupt your business and delivers the value you need.