Isra-Mart srl: London firms to be paid to curb energy use at peak times

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Large businesses in London will be paid to curtail their energy use during peak demand periods as grid operators seek to avoid costly upgrades to the capital's congested electricity networks.

Around 30 large commercial and industrial businesses could enter bilateral contracts with UK Power Networks under a proposed £30m scheme from the Low Carbon London (LCL) initiative.

The project, backed by £24m from Ofgem, will run a series of trials to explore the impact of electric vehicles, heat pumps and renewable and distributed energy generation on the capital's grid.

Dave Openshaw, UK Power Networks' head of future networks, predicted that bilateral contracts will appeal to companies with cooling, refrigeration or standby power generation facilities.

LCL partner Siemens has already agreed that its £30m sustainability centre in London's Docklands will sign a bilateral contract. The conference and exhibition centre, due to open next year, will reduce its power demand at peak times using controllable heating and lighting systems, batteries and thermal storage.

Responding to questions from BusinessGreen, Openshaw said that bilateral contracts could reduce the need for UK Power Networks to reinforce London's congested network of underground electricity cables.

"We could spend tens of millions of pounds reinforcing the network to deal with unexpected congestion, but if we can secure a couple of contracts with large customers that can drop demand for a few hours, that would be sufficient to get us over that peak demand," he said.

The contracts will be based on a commercial aggregation scheme run by National Grid which helps the operator to cope with unexpected shortfalls in energy generation or demand forecasting errors.

To this end, commercial aggregators Flexitricity and EnerNOCUK have been brought on board by LCL to identify potential customers across 10 substation areas.

Openshaw explained that businesses will get two payments, one for being available to reduce demand, and one when the service kicks in. The payment rate has yet to be decided, but will be based on projected savings from deferring any network reinforcement.

"If the numbers stack up then we'll go for it," said Openshaw.

Basil Scarsella, chief executve of UK Power Networks, pointed out that a similar system is already common in Austrailia.

"The businesses make a judgement over the cost of reducing electricity use during peak demand compared to the fee that the operator is prepared to pay," he said.