National Grid to pay households to use less electricity in ‘demand flexibility service’ scheme

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Hundreds of thousands of households will be paid to use less electricity this evening as National Grid deploys its emergency scheme to avoid blackouts for the first time.

The company responsible for keeping the lights on is expected to pay more than £1 million to households and businesses to reduce usage between 5pm and 6pm, amid fears of a supply shortage as the cold weather leads to higher energy demand. It is the first time it has activated its new “demand flexibility service” because of security of supply concerns this winter.

National Grid has also instructed two coal-fired power units at the Drax power station in North Yorkshire and one at the West Burton A plant in Nottinghamshire to warm up ready to generate in case they are needed today. It is the first time it has put so many of the back-up coal plants on standby.

A spokesman for National Grid’s electricity system operator said: “Our forecasts show electricity supply margins are expected to be tighter than normal on Monday evening. This does not mean electricity supplies are at risk and people should not be worried. These are precautionary measures to maintain the buffer of spare capacity we need.”

The sharp drop in temperatures is expected to lead to high power demand, while wind power output is forecast to be lower than average. There is also thought to be uncertainty over how much power Britain will be able to import over subsea cables from Europe. National Grid set up the demand flexibility service amid fears that Britain could face blackouts if it was unable to import enough energy from Europe this winter, after Russia curtailed gas supplies to the continent.

Most households are expected to be paid only a couple of pounds for their efforts, though those making the biggest reductions could be paid significantly more. Households can participate in the scheme only if they have a smart meter to monitor their usage in real time and they are a customer of a supplier that has signed up to take part.

Rather than sitting in the dark, households are typically expected to try to cut their use by delaying when they cook dinner, or doing their washing earlier than usual, since appliances such as ovens and washing machines are particularly energy intensive.

More than a million customers and businesses have signed up to the scheme and have taken part in a series of test events, for which National Grid is thought to have paid out at least £3 million. Today is the first time the scheme is being called on operationally.

National Grid data shows that it procured up to 337MW of demand reduction during the hour for this evening, from suppliers including Octopus Energy, Eon and British Gas, and has provisionally agreed to pay participating companies about £1.3 million.

Most but not all of this cash is expected to be passed on to consumers, with suppliers retaining varying shares to cover their costs and make a profit. Octopus Energy has told participating customers that it will pay them £3.37 for every kilowatt-hour of power they avoid using between 5pm and 6pm.

The energy consultancy EnAppSys said: “While it looks tight, it’s not as bad as previous days this winter when [National Grid] ESO chose not to dispatch contingency coal plants.”

EnAppSys suggested that “the decision to deploy [the plants] shows an abundance of caution” related to the peak in French energy demand on Monday morning.

Britain has several power links that can be used to import power from or export power to France.

Adam Bell, head of policy at the Stonehaven business management consultancy, said that the use of the demand flexibility service “represents the normalisation of consumers playing a part in keeping the system running”.