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The new Demand Flexibility Scheme incentivises businesses to reduce their energy consumption. It’s a game changer, says Aaron Lally, Managing Partner at VEST Energy
While the public was focused on scare stories about potential blackouts this winter, the National Grid rolled out a new fund to ensure the lights stayed on across the country.
The Demand Flexibility Scheme (DFS) incentivises businesses and households to reduce their demand on the grid during peak periods. Essentially, companies can get paid for using less energy. This helps the electricity network to flatten out spikes and significantly reduces the risk of blackouts.
This scheme is a game changer for the energy flexibility market and is incredibly lucrative for businesses. For just a short amount of time, at set periods throughout the winter, businesses can earn a significant amount of revenue for very little inconvenience. And this is especially true for businesses which have energy storage on site.
HOW IT WORKS
Over the winter – designated as November to March – there will be at least 12 periods of time known as ‘events’, when the National Grid will ask businesses and homes to stop drawing energy from the grid. This will be at times when demand is exceptionally high, likely between 4pm – 7pm – and for short periods, typically an hour.
Each event could last up to four hours, but a business doesn’t have to participate for the full duration. The minimum period is 30 minutes – you get paid for the length of time you take part and the amount by which you reduce your site’s energy consumption. National Grid has quoted this as £3,000 per megawatt-hour (MWH).
We’ve already seen eight events taking place this winter, with some returns being at a higher price than we anticipated, and it looks likely that we’ll see more than 12 events this winter in total. It’s super flexible. A business can participate in all events or decide in advance if a session is not feasible. You’re not penalised if you don’t take part – you just won’t be paid if you choose not to.
HOW TO BENEFIT
While this all sounds enticing, for some companies the challenge is how to square the circle – after all, you need energy for your day-to-day operations.
This is where battery energy storage comes in. Any business with a battery energy storage system (BESS) can store the energy they need in advance and draw on that energy during the DFS event. Effectively, the BESS acts as an energy reservoir, meaning you can continue operations as normal while still reducing your grid energy consumption. This means no interruption to operations, no turning the lights off or stopping equipment from running – but still knowing that they will be paid at the end of the period.
A standard BESS from the likes of UK provider Connected Energy has a 300kW capacity, meaning it can generate £1,000 of revenue per DFS event. The systems are modular so companies can easily multiply the benefits. VEST Energy works with Connected Energy’s customers to make it simple for them to take part in this market.
So far this winter, there have been eight ‘events’ meaning a company with a Connected Energy system could have earned £8,000 by taking part.
“For many years, our customers have been using our battery energy storage systems to participate in grid balancing services,” says Nigel Dent, Head of Sales, Connected Energy. “But the Dynamic Flexibility Scheme makes it so much easier for businesses to benefit.”
The VEST Energy technology integrates with Connected Energy’s E-STOR battery energy storage system. This means that for facilities and building managers, there is very little resource required to make it work.
“With alerts provided in advance, we can ensure that the battery system is fully charged to take advantage of the event,” says Dent. “Our customers don’t need to do a thing and will only know they have taken part when they receive their payment at the end of the month.”
OTHER OPPORTUNITIES
DFS is just one of several ways that businesses can make money from their BESS. This is definitely the start of more schemes to come. The regulatory environment is becoming more and more pro-flexibility and the direction of travel suggests more schemes will be launched. Businesses will be financially rewarded if they can provide flexibility to the grid – and that’s what energy storage can give them.
We also see another opportunity around electric vehicle charge points. “Higher powered chargers are coming and they often require more energy than the grid can provide,” says Dent. “A battery energy storage system can deliver that additional power when needed, removing the need for an expensive grid infrastructure upgrade. With just a little bit of planning, the site can still participate in DFS or other schemes, meaning that the energy storage system becomes a revenue generator as well. We’ve done modelling with VEST for some clients and found they could easily earn up to £15,000 a year in this way.”
