Tuesday, 07 July 2015

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John McKenna, Editor

Plan to pay process plants to use electricity

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Offshore wind farm at dusk

Exclusive: National Grid is considering paying major energy users such as process plants to use electricity at off-peak times.

The January issue of Process Engineering reveals that the grid operator is considering the move as it seeks to tackle the spiralling sums of money it is forced to pay to wind farms to keep their turbines shut down during off-peak hours, typically the middle of the night.

According to data from the Renewable Energy Foundation, these payments, known as constraint payments, had already cost National Grid £27 million in 2013 by the time Process Engineering went to press in mid-December.

This accounted for an effective 315GWh of wind generation shut down because it occurred at a time when there was insufficient demand for the electricity that would be produced, and National Grid is forced to make the payments to balance the system.

[We] are at the very early stages of considering mechanisms and services by which…expensive generator actions could be avoided

National Grid spokesman

As more and more wind farms come online, these payments have rocketed, up from £5.9 million covering 45GWh of constrained generation in 2012. The average price paid per MWh has fallen though, down from £136 in 2012 to £99 last year.

However, £99 per MWh is still more than double the wholesale price of electricity, which is currently trading at around £46 per MWh.

As a result National Grid is exploring the possibility that a “Turn-Up Service” paying users to take electricity off the grid might prove more cost-effective than paying wind farm operators to cease generating.

“The team involved are at the very early stages of considering mechanisms and services by which demands could be time-shifted in such a way that expensive generator actions could be avoided,” said a National Grid spokesman.

National Grid is planning a Demand Side Forum late Spring to “talk more about this and other services” with industry.

However, Process Engineering has learnt from a source close to the discussions that National Grid is already working out the details of how the turn-up service could be rolled out.

This includes National Grid applying to Ofgem’s Network Innovation Competition (NIC) for funding to support the roll-out of technology such as smart meters as part of the turn-up service. Last year’s NIC electricity transmission winners included Scottish Hydro’s project to simulate the impact of high voltage direct current (HVDC) technology, securing £11.3 million.

National Grid is also considering a pilot study covering demand usage from industrial users equivalent to 10MW of electricity generating capacity, which could run as early as the second financial quarter.

“We will reach out to the process industries for that pilot,” said the source.

Processing accounts for 73% of UK industrial energy usage, so process plant owners such as chemicals manufacturers and paper mills are considered key participants for the turn-up service, which would typically run between midnight and 6am.

“It needs to be useful electricity, such as moving when you pump water to holding tanks from mid-afternoon to the middle of the night,” said the source.

“It can’t just be turning on the office lights at night.”

The technology that would be used in the turn-up service would be very similar to the smart meter technology currently being used in schemes where major energy users are asked to cut down their electricity usage at times of peak demand (more on this in the January issue’s cover feature on demand response).

Many process plant owners currently take part in these demand-side schemes through so-called energy “aggregators”, companies that group together businesses’ demand loads and sell them as spare capacity to the grid.

It is understood that National Grid is also considering the possibility of by-passing the pilot study and rolling out the turn-up service through the aggregators and their existing clients as early as possible.

Any firms taking part in the turn-up service would still be required to pay their existing electricity suppliers for electricity used while taking part in the turn-up service at off-peak hours. However, these bills would be offset by payments from National Grid, meaning the firms’ usage would either be free, or they could even potentially earn money from using electricity at these times.

Readers' comments (4)

  • I can't make my mind up whether this is just an overdue alignment of consumption to generating characteristics, or another example of the looney economics of carelessly subsidised wind power. The balance works better in Denmark as their grid system is linked into Norway & Sweden, in effect giving them a huge hydro reservoir/ storage system next door. We in the UK do not have that option. Anyone out there got a sensible energy policy!!??

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  • Use the surplus wind-power to turn the street-lights on all night on Motorways, trunk roads and suburbs. This would improve people and road safety. It might also encourage more heavy lorries to use the roads at night instead of during the day.

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  • 1. I thought the constraints were due to transmission grid issues ie insufficient cable capacity to move electricity from Scotland and North to the South East. In which case, this would occur at peak load times (ie v windy winter evenings?)
    2. Would it not make more sense to turn down (or off) some of the coal and gas fired baseload plants?

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  • Demand side management is well established and a good economic approach to power system operation. However, this always reduces the added value of generation. the use of low reliability and intermittent sources such as wind really needs electricity storage: and the only proven form is pumped storage.

    Traditionally unreliable generators were penalised by charging for the stand-by capacity that was needed, now they are paid to avoid generation - have the madmen taken over the asylum?

    One final point to raise is that now global warming is surely a dead-duck to all but the global warming religeos, why not throw out the LCPD and other stupid regulatory processes and also extend the operating life of our excellent coal burning power stations to reduce the cost of generating electricity by a significant percentage.

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