Your guide to the Demand Side Response market

Matching electricity supply to demand is crucial to keeping the grid stable.

Electrical frequency is a factor of power supply that a nation’s electricity grid needs to carefully manage to keep the lights on. Great Britain’s grid operates at a frequency of 50Hz – a deviation of more than just 0.2% can cause outages and damage grid equipment. Historically, when there was a spike in electricity demand, the supply had to increase to meet it.

This becomes challenging in a system increasingly dependent on intermittent renewables, like wind and solar, that are unable to generate power if weather conditions are unfavourable. Such technologies also typically contribute less to the system’s resistance to change in frequency, or ‘inertia’. This reduces the scope for deviation – and makes balancing an even more delicate operation.

Demand side response (DSR) offers a solution to maintaining the balance by creating flexibility in demand.

Businesses can participate in the DSR markets by reducing their electricity consumption when demand’s high or increasing it when supply outweighs demand. Generators can also take part by increasing supply at a moment’s notice when demand spikes.

DSR markets not only allow businesses to help the grid operate reliably, they also enable them to generate revenue and reduce electricity costs across the supply chain.

Building flexibility into the grid

DSR’s about flexibility – making the electricity system responsive to changes in supply and demand and softening spikes and troughs. This in turn helps to make electricity more affordable throughout the supply chain, as well as more resilient and flexible at times of system stress.

DSR isn’t a case of businesses and facilities shuttering operations at the sudden request of National Grid. Instead, it’s about understanding the controllability of electrical assets and optimising their performance around peaks and troughs in power demand in a way that also helps stabilise the grid.

Drax Electric Assets Lead Jake Miller points to cold storage as an electrical asset type with more flexibility than you might expect:

“Freezers need to operate at between -10 and -20 degrees Celsius, and typically run at about -15 Degrees Celsius,” he explains. “If you switch off the power to those freezers for an hour, the temperature only rises by a few degrees Celsius, remaining within working parameters. This makes cold-store freezing ideal for optimisation services, and there are many other assets – those that store heat or water, for example – which have similar capabilities.”

DSR could also make energy bills cheaper – and save £3bn - £8bn per year by 2050 in UK electricity system running costs.

Which businesses can take part in DSR?

The most obvious beneficiaries of DSR are organisations with energy-intensive day-to-day operations. These hold a significant financial incentive for avoiding peak electricity costs and can have a noticeable impact on balancing supply and demand.

However, DSR markets are also open to smaller electricity consumers and generators. What’s important is the flexibility of your electrical assets – both in terms of consuming power and generating it.

DSR participants must be able to shift their level of electricity demand up or down. Within certain flexibility markets, the system operator may issue flexibility requests with a day’s notice. In others, it might give only hours – or even seconds – of notice.

Meeting these requirements can depend on the availability of technology that enables organisations to automate their electrical assets to respond immediately to grid needs.

Other technologies, such as batteries, can immediately discharge power to grid or absorb and store excess electricity, providing valuable instantaneous power inertia to the grid. Batteries, both up-stream and behind-the-meter, are likely to play an important role in balancing an increasingly intermittent power system.

What DSR markets are there?

There are a range of markets capable of offering revenue to power users’ meters on a half-hourly basis. However, the user needs to be able to successfully operate DSR on their site.

As the grid continues to adapt to higher levels of renewable sources, what it needs is evolving. This evolution brings with it new opportunities for organisations with responsive assets.

Demand Flexibility Service

National Grid Electricity System Operator (NGESO) introduced Demand Flexibility Service (DFS) during the winter of 2022/23 as part of its winter contingency toolkit. The purpose of DFS was to provide additional support to the normal electricity market in accessing additional megawatts (MW) during times of high national demand.

During winter 2022/23, 1.6 million households and businesses participated in the scheme, saving over 3,300MWh. For winter 2023/24, this increased to over 2.6 million participants, and a saving of over 3,700MWh.

The derogation for the initial scheme has now expired. National Grid’s now reviewing the service and plans to deliver a revised version of the product that better aligns with its wider objectives. We’re likely to know more in autumn 2024.

Capacity Market

The Capacity Market (CM) offers revenue to a wide range of generators for making DSR available and accordingly contributing to security of supply. Providers receive payments based on capacity, price (determined via auction) and the de-rating factor of their technology. Capacity Market revenues are also ‘stackable’, meaning consumers can combine revenues from CM flexibility with those from other, non-CM events.. Although we haven’t yet seen any CM events, NGESO will give providers four hours’ notice when it schedules one in.

NGESO expects providers to comply with the requirements of the scheme and be able to demonstrate the delivery of their flexibility during test events.

Markets also exist for Dynamic Containment, Dynamic Moderation and Dynamic Regulation to help the grid recover from, manage and avoid system faults. However, as NGESO requires responses to its requests within seconds (or less!), they’re not suitable for manual-dispatch DSR.

Distribution network operator flexibility provision

In order to minimise operational and reinforcement costs, distribution network operators (DNOs) are also increasingly procuring services from local energy flexibility providers. However, the opportunity to provide these services is very geographically limited, and depends on what parts of the distribution system are in most need of support.

Websites such as PicloFlex can support you in understanding whether there’s an appropriate opportunity for flexibility in your area.

Explore how to earn revenues from your flexibility

Drax can help your organisation identify opportunity in DSR markets.

By analysing your electric machinery, equipment and other assets, and by reviewing your operations and energy usage, our experts collaborate with you to understand the controllability of your assets. Once we’ve identified the opportunity, we’ll then manage your flexibility and guarantee a fixed cost saving upfront.

We’ll also help you benefit from grid flexibility requests through our ElectriFlex scheme. This service – which encompasses the existing DFS – can help your organisation benefit from manual DSR, whatever the time of year. It offers a simple and commitment-free way to explore the opportunities of demand flexibility, enabling you to retain control of whether you opt in or out of each request. Through the service, we’ll look to stack your flexibility in a way that maximises your revenue without adversely affecting your operations.

It’s important to remember that even when you’re established as a DSR provider, you still have ultimate control over how you use power. Balancing the grid never comes at the cost to your businesses.

Get in touch to find out if your organisation has the potential to provide grid flexibility and generate revenue from the DSR markets.

Please note that since 1 October 2024, NGESO is now the National Energy System Operator (NESO).