National Grid will pay industry to use energy flexibly next winter

New plan to help balance grid

National Grid is planning to recruit energy-intensive factories and process industries to a new Demand Flexibility Service, where they will be rewarded for shifting power use from times of peak demand, to periods of lower overall usage.

The move is designed to prevent blackouts in the event of a cold winter and possible further cuts in the availability of gas, which could lead to peak demand exceeding available capacity. According to National Grid’s winter 2023-24 forecast, the 4.8 GW (8%) capacity margin is worryingly low.

The industry initiative follows the success of the flexibility trial last winter for smaller customers, which saw 1.6 million households and businesses paid up to £10 a day for reducing consumption when demand was highest – saving more than 3,300 MWh in total. This will probably be expanded.

National Grid is finalising the scheme after consultation with the Energy Intensive Users Group (EIUG), which represents heavy industry.

Kyle Martin of the National Grid ESO said the service would only be used “only when we have, or expect to, exhaust our everyday actions. This offers the ESO additional access to flexibility during times of system stress.”

Jeremy Nicholson, an analyst at consultancy Alfa Energy, said the Demand Flexibility Service was likely to suit some industrial businesses more than others.

For example, those that run continuous production processes using blast furnaces and kilns – including many steel makers and ceramics firms – will be unlikely to switch off easily at short notice. 

Others that use batch processes, such as steel makers reliant on electric arcs, some chemical producers, cement producers and parts of gas production could be more likely to participate.

Arjan Geveke, director of the EIUG, said industry would participate in the scheme if the rewards were attractive enough and it did not damage their commercial output.

One concern is current rules, which stop companies that already take part in the capacity market – which requires them to make their own in-house generators available for the grid at certain times – from also joining the demand flexibility service, in which businesses would be paid to switch off their machinery in order to reduce load.

Mr Geveke argued the two were “different markets, with different objectives” and companies should be able to take part in both.