The Potential Impact of Demand-Side Response on Customer Bills

Fri Aug 29 13:23:36 EDT 2014
By George Anstey, Matthew Mair, and Soren Christian

The Department of Energy and Climate Change (DECC) is planning to introduce a capacity market in Great Britain as part of its Electricity Market Reform (EMR) package. DECC’s aims for the capacity market include ensuring that British consumers receive a secure supply of electricity at the lowest cost.

A NERA team led by Senior Consultant George Anstey was commissioned by EnerNOC, Kiwi Power, and OpenEnergi to conduct an independent analysis of the circumstances in which the rules surrounding the participation of DSR in the capacity market may increase the costs of the capacity market to British consumers. In particular, this report identifies the potential impact of DSR on customer bills under a range of plausible policy alternatives and a range of DSR volumes. NERA's report found that with respect to its treatment of DSR, the market rules may result in consumers facing a higher cost than is necessary. In addition, the limited contract lengths available to DSR may discourage DSR from providing as much capacity.  

In the range of scenarios examined by the NERA team, the current rules surrounding DSR cost electricity customers up to £359 million in a single year.