On 18th June, we brought together senior business leaders, decision makers, policy creators and energy experts to discuss the issues crucial to achieving the business benefits of a more flexible energy system. Together at the event we collaboratively explored the opportunities for business, the incentives and barriers to growth, and sought solutions to deliver demand side response at scale by 2020. This slidepack includes all of the presentation material from the conference.

1. Demand Side Response
Conference
Being Power Responsive
18th June
London

2. Agenda
Opening Address Steve Holliday, National Grid
Session 1: Electricity Demand Side Markets Today
Chair: Professor Dieter Helm CBE, University of Oxford
Speakers:
David Capper, DECC
John Pettigrew, National Grid
Gab Barbaro, British Gas
Martin Wilcox, UK Power Networks
Coffee break
Session 2: Opportunities for Your Business
Chair: Professor Jim Skea CBE, Imperial College, London
Speakers:
Maxine Frerk, Ofgem
Paul Crewe, J Sainsbury plc
Dr Alastair Martin, Flexitricity
Neil Gillespie, United Utilities
13:00 Lunch

3. Agenda
14:00 Session 3: Incentives & Barriers for Businesses
Roundtable Chairs:
Judith Ward, Sustainability First
Eddie Proffitt, Major Energy Users
Council
Dan Roberts, Frontier Economics
Tea break
Session 4: Delivering Flexibility at Scale
Chair: Cordi O’Hara, National Grid
Interview panel:
Sara Vaughan, E.ON UK
John Barnett, Northern Power Grid
Maxine Frerk, Ofgem
Duncan Burt, National Grid
Closing Address John Pettigrew, National Grid
16:45 to 18:30 Networking Drinks Reception

4. Session 1:
Electricity Demand Side Markets Today

5. David Capper
Deputy Director &
Head of Future
Electricity Networks

6. Electricity system capacity is driven by peak
demand
0
10
20
30
40
50
60
00:00
02:00
04:00
06:00
08:00
10:00
12:00
14:00
16:00
18:00
20:00
22:00
Non dom. demand
Total Demand
Projected increase in peak electricity demand from
increasing electrification of heat and transport
(EA Technology 2012)
24hr business day demand profile
(DDM reference case)
Domestic demand
Demand – GW Peak Demand – GW
120
100
80
60
40
120
0
2012
2030
2050
Cumulative Total
Assumed base load
(load growth and
energy efficiency)
Heat Pump Load
EV Load
DSR: a perspective from Government

7. Can we reduce the costs of a conventional
response to this challenge?
Reduce the cost of our future low carbon energy system and
ensure the system remains stable so that customers’ bills are lower
and their supply is secure
Maximise the use
of low carbon,
inflexible
generation to get
value for money
Reduce the need
for conventional
generation,
including peaking
plant
Optimise short
term balancing of
the system
Defer or avoid
investment in
network
reinforcement
expenditure
DSR: a perspective from Government

8. There are alternatives which could balance
the system more efficiently…
Supply via
interconnector
Export of excess supply
via interconnector
Intermittent
renewable
generation
Excess electricity stored &
used when demand
exceeds supply
Intermittent renewable
generation
Demand decrease
Interconnection
Energy
Efficiency
DSR and Storage
(i.e. Smart
Energy)
DSR: a perspective from Government

9. So how much DSR potential is there?
• Current DSR restricted to large industry & embedded
generation (c.2 GW) and Economy 7 tariffs (c. 2.4 GW)
• Study has estimated total technical potential of up to
c.18GW of shiftable load on a winter weekday evening,
increasing over time
• Report has assessed the technical potential for load shifting
in the commercial sector at 1.2 - 4.4GW
• Extrapolating from UK trials, the present domestic potential
could be in the region of 1.3 – 2.5 GW
• Longer term potential likely to be higher
DSR: a perspective from Government

10. DSR in the Capacity Market
• Capacity market aims to deliver:
• Security of electricity supply
• Cost-effectiveness
• Specific features for DSR participation
• Transitional arrangements
DSR: a perspective from Government

11. DECC has launched Phase II pf the EDR Pilot
• £6million available to projects which improve energy efficiency at
peak times
• Wide range of projects eligible to take part, including replacement
of old pumps, motors, refrigerators and light fittings with new high
efficiency equivalents
• Improvements made from Phase I
• Register by 3 September and submit your full application by 15
October 2015. The auction will take place in January 2016
• Guidance, forms and information about workshops and other
events can be found on
www.gov.uk/electricity-demand-reduction-pilot
Electricity Demand Reduction Pilot
DSR: a perspective from Government

12. John Pettigrew
UK Executive Director
National Grid

13. Commercial and Domestic Customers
Electricity
Distribution
Networks
National Grid
Gas
Distribution UK
Other Gas
Distribution
Networks
National Grid
Transmission UK (Electricity & Gas)
Electricity
Generators
Gas Producers
and Importers
SystemOperator
Our Core Role in UK

14. Wind
Installed Onshore & Offshore Capacity (MW)
Fossil
Reduction in Generation Capacity (GW)
Solar
Installed Capacity (MW)
Demand
Weather Corrected Annual Electricity (TWh)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2008 2009 2010 2011 2012 2013 2014
2008 2009 2010 2011 2012 2013 2014
360
340
320
300
280
2008 2010 2012 2014
Changing Energy Landscape
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2009 2010
2011 2012 2013 2014
3
1
-1
-3
-5
-7

15. System Operation Changes
Replacement Energy Sources
Lower Minimum Demands
Future Supply & Capacity

16. Demand Side Response
Transmission Charging
EMR Delivery Body
Balancing Services
Industry Facilitation

17. Summary

18. Gab Barbaro
Managing Director,
British Gas Business
Services

24. Martin Wilcox
Head of Future Networks

25.  2015. UK Power Networks. All rights reserved
Agenda
• Why UK Power Networks and other DNOs are exploring DSR
• Our experience – Low Carbon London
• Our view on the current markets
• Next steps in UK Power Networks’ engagement with the demand
side

26.  2015. UK Power Networks. All rights reserved
Why are we considering DSR?
0
500
1,000
1,500
2,000
2,500
3,000
+ HIGH HEAT PUMP UPTAKE
+ HIGH ELECTRIC VECHICLE UPTAKE
+ HIGH RESIDENTIAL SOLAR UPTAKE
UKPN CORE
SCENARIO: £1545m
Costofreinforcement,
includingSmart(£m)
Source: UK Power Networks analysis using the Transform model
configured for its own licence areas

27.  2015. UK Power Networks. All rights reserved
Why are we considering DSR?
Smart solutions can help manage future networks peaks
Source: Forecast household demands in 2025 taken from P. Djapic, M. Kairudeen, M. Aunedi,
J. Dragovic, D. Papadaskalopoulos, I. Konstantelos, G. Strbac, “Design and real-time control of
smart distribution networks”, Low Carbon London Report D3, Imperial College London, 2014.
Business as Usual Smart
Time of day Time of day
Diversifieddemandper
household(kW)
Diversifieddemandper
household(kW)
Baseline Appliances Electric Vehicles Heat pumps

28.  2015. UK Power Networks. All rights reserved
Attractiveness of DSR to address the
challenges
• Established contractual arrangements led historically by the GB
System Operator (National Grid)
• It re-utilises standby generation assets
• Leverages increasing sophistication in building controls and building
automation
• In the case of some I&C customers, DNOs currently retain some
direct interaction with them
We started our initiative “Low Carbon London” in 2011 to trial I&C and
residential DSR at scale and build confidence of this service

29.  2015. UK Power Networks. All rights reserved
Low Carbon London
What did we trial?
£/Mw/hr
£0
£20
£40
£60
£80
£100
£120
0 1 2 3 4 5 6
Trial Period
Low Carbon London DSR Trials
Winter 2012-13 Summer 2013 Winter 2013-14 Winter 2014-15Summer 2012Winter 2011-12
Size
6MW Site
200kW Site
Diesel
CHP
Load Reduction
Gas
Type
Source: Analysis of Low Carbon London trial data
AvailabilityPayment(£/MW/hr)

30.  2015. UK Power Networks. All rights reserved
Case study: the use of I&C DSR
• Reliability: Out of 185 unique events called during our Low Carbon London
trials, only 19 events received a null response
• Shifting peaks: Payback after achieving load reduction is not as large as
the reduction itself
• Procurement: there is a need to account for availability risk
• Technology F-factors
𝐷𝑆𝑅 𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑏𝑒 𝑃𝑟𝑜𝑐𝑢𝑟𝑒𝑑 [𝑀𝑊] =
𝐷𝑆𝑅 𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑀𝑒𝑒𝑡 𝐸𝑛𝑒𝑟𝑔𝑦 𝑎𝑡 𝑅𝑖𝑠𝑘 [𝑀𝑊]
𝐹 𝐹𝑎𝑐𝑡𝑜𝑟 [%]
Number of DSR facilities
DSR technology type 1 2… 5… 9 10
Diesel 70% 72% 78% 80% 81%
Demand Reduction 54% 58% 62% 63% 64%

31.  2015. UK Power Networks. All rights reserved
What is our view of the current market?
• The use of DSR by DNOs, and residential DSR in general, are still in their
early stages
• DNO use of DSR
– I&C DSR contracted by DNOs require process and procedures for mass
roll out;
– However, I&C DSR can have real benefits for DNOs:
– Addressing network constraint issues
– Deferring and/or avoiding network investment
– Supporting difficult construction outages
• Residential DSR (excluding Economy 7) is not yet attractive to DNOs
– Residential customers do indeed respond to price signals
– However, it must be linked to other value propositions from suppliers and
the GB System Operator in order to provide a net saving

32.  2015. UK Power Networks. All rights reserved
Unlocking DSR
Next Steps for UK Power Networks
• ED1 Business Plan:
– £3.3m budget provisioned in our submission to Ofgem for DSR
• Based on a high utilisation price
• Based on an availability price in excess of National Grid’s given that we
operate in a niche market
– Expected total 64MW of DSR
– Allocated to 20 schemes which are under review thoughout the period as
load growth develops
• DSR aggregators and suppliers engagement was held in Q1 2015 to inform
our strategy
• Market engagement will follow in Q3 2015 following our annual load growth
review

33. Session 2:
Opportunities for Your Business
•

34. Maxine Frerk
Interim Senior Partner for
Smarter Grids &
Governance

35. • GB has seen a growth in intermittent generation.
• Flexibility is now important at both the peaks and at
times of low demand. The demand side can play an
important role in providing this.
The GB energy system is changing …

36. Price peaks
And this is being reflected in prices …
0
50
100
150
200
250
300
00:00 04:00 08:00 12:00 16:00 20:00
Intraday Prices - 17th October 2014 (£/MWh)

37. Negative prices
And this is being reflected in prices …
-20
-10
0
10
20
30
40
50
Apr May Jun
Daily Min. Intraday Price (half-hourly), Q2
2014 vs. Q2 2015 (£/MWh)
2014
2015

38. Balancing.
The SO uses flexibility
for reserve and
frequency purposes.
And suppliers and
generators want to
manage cash-out risks
Flexibility across the value chain
Capacity.
The system needs
to have enough
capacity to ensure
security of supply at
any time of the day
Networks.
Flexibility can
enable the deferral
or avoidance of
network
investments, and
support the
management of
faults
Flexibility is an essential feature of energy markets

39. 29,800
30,000
30,200
30,400
30,600
30,800
31,000
31,200
31,400
31,600
31,800
15:0014:00 16:00 17:00 18:00 19:00
Typical day
Men’s Final
Wimbledon Men’s Final
Murray vs Djokovic, 7 July 2013
Match begins
End of 2nd set
Murray breaks for match drop
End of broadcast
Murray wins
End of 1st set

40. How flexibility can help
Demand
Time
Demand
Time
Demand
Time
Demand
Time
Demand
Time
Time-shift
load
Time-critical
reduction
‘Smooth’
general load
shape
A net load
turn-down
Load turn-
up
Source: Adapted from ENA & Energy UK.
Discussion paper on Demand Response. 2012.

41. There are some ways in which demand
can already provide flexibility ….
National Grid
Demand
Balancing
Services
- STOR (Short –
Term Operating
Reserve)
- Fast Reserve
- Frequency
Response
Cost Avoidance
- Triad
- General demand
reduction/
participation in
wholesale market
Aggregators
Act as
intermediaries
between I&C
customers &
National Grid/
electricity
market

42. And more are on the way ….
• Demand Side Balancing Reserve (DSBR)
• Capacity Market Participation
• DNO – assistance with constraint
management

43. Ofgem’s work on flexibility
•Identifying the barriers to provision and uptake
•Looking to capture value of DSR across the value chain :
- “Stack” of benefits
- Coordination important
•Recognise complexity a challenge for I & C customers not core
business:
- Building understanding
- Need for tailored contracts
- Role of aggregators?
•Storage prices falling – need clarity over the regulatory position
•See non-domestic as where the immediate opportunity lies for DSR

44. Summary
• The GB electricity market is changing and price volatility is
increasing, incentivising more flexibility.
• Ofgem has sharpened these price signals to reward flexibility
through our EBSCR reform, half-hourly settlement.
• Ofgem working to remove barriers and facilitate flexibility.
• DSR already plays an important role in providing flexibility,
and has the potential to develop further in the future.
We are keen to hear from DSR providers on how we
can facilitate their participation in the market.

45. Session 4:
Delivering Flexibility at Scale

46. Delivering Flexibility at Scale
Education and engagement
• Simplification of information
• Clarity of value proposition
• More promotion of opportunities
• Greater understanding of schemes
Customer led products
• Clear packages for customers
• Examine product specification
• Longer term product opportunities
• Flexibility of product design
Certainty and stability
• Investigate longer term incentives
• Address longevity problem
• Elimination of uncertainties
Coordinated approach
• Use collaborative pilots
• Customer focussed forums
• Collectively agreed targets for DSR

47. Demand Side Response
Conference
Being Power Responsive