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UK braced for new power regulations
- 13 years ago (2011-03-02)
- Junior Isles
The UK is ready to boost payments to factories, offices and supermarkets that reduce energy use, as rising demand drives up prices and the companies turn to cleaner but less-reliable power.
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The government, planning for a six-fold jump in wind capacity in the next decade, is seeking comment from power suppliers and consumers until March 10 on its so-called Electricity Market Reform.
The UK’s set of prudent new rules may include a market for “negawatts,” or power that users can do without. This follows a prediction that UK power demand may rise as much as 30 per cent in the next two decades.
“There’s huge revenue to be made, and no one is really doing it,” said Ziko Abram, a former Credit Suisse Group AG banker who co-founded Kiwi Power Ltd. in London to enroll power consumers in the UK programme. “You can reduce air-conditioning or some non-essential lights. Most places don’t even realise when demand response is taking place.”
Billionaire developers David and Simon Reuben signed up through Kiwi Power this year for payments amounting to five times the wholesale cost of electricity. Millbank Tower, London headquarters for the UK Conservative party, is their latest property to join, following Oxford Airport and nearby Eden Shopping Centre last year.
Wind farms built off the coast may increase to 33 000 MW over the next decade. That compares with the 5200 MW of UK wind capacity now.
Britain’s energy plan calls for strengthening the existing programme that lets National Grid ask companies to reduce demand. It may also establish an auction whereby companies bid for negawatts they can switch off, competing with companies that bid to increase power supply.
UK power consumers can earn an average £220 for every megawatt-hour they don’t use in response to a request, National Grid said. That’s on top of an annual payment of about £50 000 for a shopping centre just to sign up to the system, according to information from Kiwi Power. Payments come from charges to use the network and are ultimately passed through to electricity bills.
RWE AG, Germany’s biggest power producer, teamed up with Edinburgh-based Flextricity Ltd. last month to bid for supplying negawatts.
“It’s a cheque for doing almost nothing,” David Cockshott, RWE’s director of industrial and commercial markets, has said. “We will effectively be able to replace an oil-burning unit by making this available. All the carbon- dioxide emissions savings is a huge benefit.”
National Grid said it currently oversees 2600 MW of contracts in its so-called “Short Term Operating Reserve”, most is switching on small generators, while 200 MW is power use that can be switched off. National Grid said it had contracted 400 MW of demand reduction out till 2025 and predicts it will need to increase its Short Term Operating Reserve to about 8000 MW by 2020.
Demand-management programmes may help deal with the UK’s greater reliance on power from wind, said Richard Green, a professor of energy economics at the University of Birmingham.
The swing in power demand and supply balance could reach as high as 17 000 MW within an hour, according to Green’s research. He modelled power balances in Britain using 13 years of data. Such a high change would be brought about in exceptional circumstances, when demand rose and wind supplies dropped rapidly, he said.