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Businesses paid to cut energy at peak times

March 24, 2017

By Paul Homewood


h/t stewgreen




Emily Gosden seems to be listening to a wider range of views since she joined The Times.

This latest article poses some interesting questions:


Businesses that agree to cut energy use when national supplies are running low will receive subsidies six times higher than plants that guarantee to provide power.

The government this week awarded £14 million in subsidies to businesses to provide demand side response (DSR) capacity for a year from October.

This involves agreeing to reduce electricity demand when supplies are short, such as by temporarily switching off unnecessary lighting or machinery, or shifting processes to a different time of the day.

Subsidies will be awarded to 312 megawatts of capacity at £45 per kilowatt. This contrasts with a scheme last month that awarded power plants just under £7 per kilowatt to guarantee they could generate electricity when supplies were scarce.

Several plants that offered to provide capacity at a fraction of the cost of DSR were deemed surplus to requirements and rejected. Industry experts said that the discrepancy indicated a shortage of businesses that would be willing to reduce energy use.

The results raise questions over the value for money of DSR and highlight the challenges for the nascent energy-saving industry, which ministers hope will form a key part of their plans to help manage Britain’s increasingly intermittent energy system. Yoav Zingher, chief executive of Kiwi Power, which secured contracts on behalf of businesses offering 60MW of energy-saving capacity, said that it was “very hard” to find businesses that could dip their use at any point through the day.

Last year businesses offering to reduce their demand on the grid were awarded subsidy contracts for 2020-21 at £22.50 per kilowatt, the same price as power plants. However, industry experts said that instead of reducing their power usage most of those businesses were instead switching to back-up diesel or gas generators, which have been criticised as polluting. This week’s scheme awarded subsidies only to those genuinely cutting their usage.

UK Power Reserve, which won 10 megawatts of contracts on behalf of businesses this week, said that the risk of not being able to use back-up generation meant that participants were quite difficult to find.

In future, genuine DSR will have to compete directly against power plants and other capacity sources for subsidies. Gareth Miller, a consultant at Cornwall, an energy specialist, said: “£45 per kilowatt indicates that genuine DSR would struggle if it had to compete against other technologies in the capacity market.” He said that while the price “looks very expensive” the two methods could not be compared directly because power plants also enjoyed other sources of income, including the market price for selling power, which means they needed lower subsidies.

DSR also brought other advantages such as helping industrial consumers to cut their energy bills, he said. Winners in this week’s auction included Tata Steel.

The government is understood to believe that DSR requires higher levels of subsidy support while it is still an emerging sector but that costs should fall so it can compete with power plants.

A source said that the total cost worked out at less than 50p per household this winter.


As she points out, the payment of £45/KW for these new DSRs is very pricey, even compared to the T4 Capacity Market auction for 2020-21, where both DSRs and generators accepted contracts at £22.50/KW.

The difference this time is that contracts are only offered to companies “genuinely cutting their usage”. (I have no idea how we know this is the case).

Not only is the price of £45/KW high, but the capacity bought, 312MW, is a drop in the ocean. If the government wants to buy in a serious quantity in future, it is likely to have to go much higher on price.

As the article says, there appears to be a marked reluctance on the part of companies to interrupt their operations in any meaningful way.

  1. Joe Public permalink
    March 24, 2017 6:43 pm

    “The difference this time is that contracts are only offered to companies “genuinely cutting their usage”. (I have no idea how we know this is the case).”

    Large ‘leccy consumers have 1/2-hour billing. [Maximum Demand Charging] And have had that for a number of decades – nowt to do with Smart Metering, but exactly the same principle that SMs will enable.

  2. March 24, 2017 6:53 pm

    Kiwi Power is a company that specialises in installing lots of dirty diesel generators in the countryside to get the massive STOR subsidies. I wouldn’t trust anything they say as they are yet another company that is dipping deep into the trough.

  3. Curious George permalink
    March 24, 2017 7:00 pm

    “The total cost worked out at less than 50p per household this winter.” To achieve – what? But it pays a handsome salary for some bureaucrats.

  4. Dave Ward permalink
    March 24, 2017 7:01 pm

    “The difference this time is that contracts are only offered to companies “genuinely cutting their usage”. (I have no idea how we know this is the case)”

    I can see another “Spanish Solar Panels working at night” scam in the making. How long before a large company agrees to shed some of their load (and take the hefty payments), then start up the generator and run their operations at full capacity? Some alterations to their main electrical distribution switchgear would allow the genny to power such plant as they deemed to be “non essential”. The grid will see a consequent drop in demand, but only local “knowledge” would know about the real situation…

    • Joe Public permalink
      March 24, 2017 7:57 pm

      I sense a ‘Consultancy’ start-up in the offing.

      50/50 profit-sharing would be a nice little pension supplement!

  5. AlecM permalink
    March 24, 2017 8:06 pm

    It seems to me that people writing about energy are starting to wake up to the fact, easily deduced by any professional engineer, that our Power Grid has been taken over by sophisticated crooks.

    Industry insiders worked this out nearly a decade ago: in February 2011 the CEO of the UK’s National Grid Company warned that by 2020 domestic customers would have no guaranteed electricity supply at peak times. He was being a bit optimistic.

    • Dave Ward permalink
      March 24, 2017 8:40 pm

      “Customers would have no guaranteed electricity supply at peak times”

      I wonder if he realised that South Australia would be leading the way?

  6. Athelstan permalink
    March 24, 2017 8:37 pm

    Hmm, this smacks of the same effin whiff of idiot green policy = people taking the taxpayer for a ride and ride and ride.

    The Northern Ireland system, unlike a capped system in Britain, was flawed because there was no limit on usage and subsidies were over-generous. In short, for every £1 that users spent on their green heating systems, they got back £1.60 in subsidies. It was described as “cash for ash” or “the more you burn the more you earn”.

    What a friggin joke and biggest laugh – it will save FA life giving gas – so what you say! but even funnier – it’s all premised on a lie which is so vast it makes – Bernie Madoff’s Fifth Avenue penthouse and imfamous $100 million Ponzi scheme scam – a dime mart kids shuffle.


    Britain is situated on a high northern plane – even in a ‘warm winter’ – at a cold latitude, cold kills, lack of electrical power will kill thousands – hundreds of thousands – that’s no lie.

    Whats needed is a big bad wolf to blow their green house down, the trouble is, the wolves can see the means and the end in green and very green the ‘brotherhood’ has become.

    • bea permalink
      March 25, 2017 8:37 am

      Madoff’s Ponzi scheme involved roughly $50 BILLION.

      • Athelstan permalink
        March 25, 2017 1:16 pm

        Still peanuts by comparison.

  7. tom0mason permalink
    March 24, 2017 9:52 pm

    Oi! UK business, want to make some easy money?
    Simple! 🙂 If you are just below the government ordained limit for a high energy consumer, just ramp up your company’s electricity consumption until you are over the limit and wait for the hand-out to roll in.

    Can’t do that? 😦 Then buy more companies so you can, or buy-in to companies that are close to the limit. 😉

    And remember Mr. Business Leader —

    “Grab more government subsidies — you know it makes financial sense!”


  8. nzrobin permalink
    March 25, 2017 2:21 am

    The ratio of 6 between the cost of supplying versus the cost of curtailing could be partially rationalised through the ‘cost of supply’ versus ‘value of lost load’. The cost of supply need only consider the cost to produce the electricity, whereas the curtailment needs to take account of the value added by the consumer in their process. As this process is being curtailed the value of lost load, must include the value added by the customer. If this is not included then of course the customer won’t do it. Hence the difficulty to find companies willing to participate in the scheme.

    The other solution of course, which has now been ruled out, is to generate power and not curtail the production line. Which reduces to another cost of supply comparison.

    All this goes to show is the while there is a factor of 6 (or some other multiple) between the cost of supply and the value of lost load, curtailment does not make economic sense.

  9. Graeme No.3 permalink
    March 25, 2017 5:47 am

    Perhaps you should start a Grand National UK Sweep with the ‘runners’ being those who get the most expensive contract by the start date. I am not sure whether the first prize should be a year’s free electricity or your very own contract at the highest price given out (which would be a nice little earner if you stop using any electricity while you holiday in a warm climate).

  10. March 25, 2017 9:34 am

    ‘However, industry experts said that instead of reducing their power usage most of those businesses were instead switching to back-up diesel or gas generators’

    What a surprise. Offering money to ‘not do’ something is never going to work as intended as it’s an invitation to cheat.

  11. March 25, 2017 10:18 am

    Reblogged this on ajmarciniak.

  12. Rowland H permalink
    March 25, 2017 10:49 am

    The electricity market has become so skewed and complicated now that nobody knows what costs our bills contain anymore.

    • Gamecock permalink
      March 25, 2017 12:18 pm

      Thanks, government! Government messes it up, then we get all these absurdities by government to patch up the mess. Instead of government backing out.

  13. March 25, 2017 11:04 am

    It is some years since the MD of one of the generating companies said that consumers must get used to the companies managing demand instead of merely supplying electricity. Isn’t this one of the reasons to force smart meters on consumers?

  14. Ben Vorlich permalink
    March 25, 2017 11:44 am

    As the article says, there appears to be a marked reluctance on the part of companies to interrupt their operations in any meaningful way.

    I can’t think of a single business process where switching off any significant power is feasible. In fact many power hungry operations in manufacturing require 24 hours continuous running. For most businesses which run in normal working hours there’s preciously little opportunity to even turn the lights off.

    Whoever came up with the idea that this would save the country from blackouts is deluded.

    • mikewaite permalink
      March 26, 2017 6:21 pm

      I experienced that myself one day , when as chemical safety officer , I closed down a section of a factory because of a spillage of flammable isopropanol so huge that people were paddling in it , next to rooms where high voltage equipment was being tested .
      Well naturally I had the area evacuated , the fire officers called in and production ceased for a day until the area was declared safe again.
      The next day the Production Director thumped the table in the MD ‘s office and demanded that I be given the sack immediately for holding up production for part of a day. Well I survived that but the Prod Director never spoke to me again which was a pity because I was also the senior research chemist and he was responsible for seeing research go into production .
      Looking back I now appreciate that he had a point , continuous production was essential to the firm’s existence, but safety really is paramount . I think that the incident showed how critically balanced , financially speaking, are some of our manufacturing processes and we mess around with them at the risk of firms and jobs.

  15. It doesn't add up... permalink
    March 25, 2017 12:47 pm

    It’s evident that DSR is merely included for cosmetic reasons so ministers can refer to it in speeches.

  16. Reasonable Skeptic permalink
    March 25, 2017 12:58 pm

    “As the article says, there appears to be a marked reluctance on the part of companies to interrupt their operations in any meaningful way.”

    Which company prioritizes virtue signalling over profits?

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