I’ve been talking to an electricity aggregator this week, exploring possibilities for getting better value for the electricity from small combined heat and power units (CHPs). This is important because better value for electricity = lower tariffs to the homes using the heat.
We were looking specifically at using these CHPs to take strain off the local grid during times of extraordinary demand. Having this spare capacity available in an emergency is worth a hell of a lot to the DNO, who runs the local network. In fact, for each megawatt of generation capacity, you might get paid several tens of thousands of pounds each year.
So what do you have to do to get paid? Just be ready to generate electricity at short notice. They’ll probably only call you 6 or 10 times each year, and probably only need you for an hour or so each time. Easy.
At last! The benefits of producing energy locally get some recognition, right? Well… no.
Because in order for the DNO to recognise the benefit you’re providing, they require that you only generate when they tell you to and not at any other times. In other words, if we want to get paid for taking strain off the grid, we need to keep our CHPs switched off 99.9% of the time. This leaves us with two possible scenarios:
- Scenario 1: We only run the CHP when the DNO tells us to. Local infrastructure will take more strain most of the time, but we’ll run on the 8 or so occasions when the DNO calls on us. We won’t save any carbon, but we’ll get paid.
- Scenario 2: We run the CHP everyday as normal. We’ll ease pressure on the local grid all the time (including during the 8 occasions when the DNO desperately needs us). We’ll also displace marginal generation (often more carbon intensive) and meet the spirit of our planning and building regs commitments. But because the DNO doesn’t notice a difference in local demand during those 8 crises, we don’t get paid.
The reality is that the CHPs are providing a continuous service to the distribution network by easing site import demand. We know this has a value because DNOs are willing to pay so much for it! But this benefit isn’t recognised because it’s not additional.
So it’s flippin payday for all those standby diesel gensets in the dusty basements of hospitals and banks. But if you’re a bit of low carbon kit, taking strain off the local grid (and reducing emissions) day after day, you’re not recognised. Your contribution is taken for granted.
How’s that for a perverse outcome?
carbon limited 
Agree, but I understand this is been currently dealt with in the proposed Capacity Mechanism (hopefully), where generators will get paid for those calls, even if generating before I.e., its doesn’t have to be “standby” anymore. The catch is apparently the high penalties proposed if the generator doesn’t generate in those calls.
Hi Minhaj,
In the case of on-site generation, I don’t think the Capacity Market will solve the problem. My understanding (please let me know if yours differs) is that the proof of providing capacity in a stress period is demonstrated on the export meter, which must be registered under Balance and Settlement. So anything used on site (behind the export meter) won’t be recognised as helping to reduce the stress. The ideal would be to work out a way of diverting all your CHP output to export when called on. Sure, your site demand would suddenly shoot up, requiring more import from the grid – but that would be fine as your electrons would flow out through the export meter and straight back into site again!