Government has determined that electricity demand projects are not ideally suited for participation in the Capacity Market; instead, Electricity Demand Reduction would be more likely to come forward if energy efficiency projects can leverage multiple sources of funding.
The pilot Electricity Demand Reduction scheme offered financial incentive to organisations in Great Britain to undertake projects that would deliver significant reductions in peak electricity demand. It was designed to test whether projects delivering lasting electricity savings at peak could, in future, compete for revenue streams in the Capacity Market. However the findings have shown that electricity demand projects are not ideally suited for participation in the Capacity Market, as outlined in the final evaluation reportpublished today (22ndJuly 2019).
The Department for BEIS noted in the report that participation in the EDR pilot was low. This was due to several reasons: the risk of facing penalties, the complexity of the auction processes and difficulties with metering.
However, all of those barriers to take-up of the pilot scheme would also need to be considered if electrical energy efficiency projects were bidding into the Capacity Market.
Instead, Electricity Demand Reduction is expected to be more likely to come forward if energy efficiency projects can leverage multiple sources of funding.
This will enable energy efficiency to compete for investment alongside generation, demand-side response (DSR) and electricity storage and thus help reduce future capacity requirements.
In that context, BEIS launched a competition in March 2019 to encourage the take up of energy efficiency by SMEs. There is £6M of funding for innovative solutions that reduce transaction costs for energy efficiency.
The final report and associated documentation, including technical appendices and data tables are available from gov.uk