Dive Brief:
- Britain is looking to demand response — referred to as demand-side response (DSR) on the other side of the pond — to help meet climate goals and manage the electrical grid, but several market challenges are holding back full development.
- According to a report from the House of Commons' Energy and Climate Change Committee, contract lengths, required capital bonds and an inability to successfully bid against power plants in some auctions, all stand in the way.
- The report looks to California's demand response goals and dispatch order for clues on how to expand the market, and indicated lawmakers were considering subsidies as well.
Dive Insight:
Debates over clean energy resources are similar on the other side of the Atlantic, judging by a House of Commons report issued last week.
In its report, the climate committee writes "we heard that technology maturity was not a barrier to the development of DSR, rather, the problem was the slow development of the DSR market."
Among the barriers are a lack of long-term contracts available to providers; capital bonds that can top $12,000/MWh of promised demand reduction, and competition from power plants in supplemental auctions.
"Together these issues leave demand-side measures at a serious disadvantage. It is clear to us that current policy is still skewed towards generation to meet balancing needs and regulation is inhibiting the development of the demand-side," the report concluded.
Colin Calder, CEO of PassivSystems, told the committee that "there will need to be some form of financial support in the form of subsidies." Calder said every other form of energy has been subsidized in some way, and "it should not be for demand-side response to be left to find its own way into the market without some form of support."
The report notes that California has set demand response goals and developed an auction mechanism to procure aggregated resources. The state's three largest investor-owned utilities acquired about 80 MW of demand-side resources in the most recent auction, in addition to 40 MW contracted last year.
"In the United States, we heard about the loading order used by utilities when capacity is tight, starting with DSR, followed by energy efficiency, renewables and fossil fuels. We heard some support for such an approach being utilised in the UK," the House of Commons report said. "However, while California has the largest market for demand-side management, we heard that it too has barriers to overcome in incentivising large businesses to reduce their load."
The DSR report was the final one from the Energy and Climate Change select committee in the House of Commons. Last month, Prime Minister Theresa May announced she would scrap the Department of Energy and Climate Change in her new government, folding it into an expanded Department of Business, Energy and Industrial Strategy. Committees in the House of Commons will be changed to reflect the shift.