Annual demand side auctions represent value for money, MPs told

The decision by the Department of Energy and Climate Change (Decc) to hold annual auctions for demand side response (DSR) measures in the capacity mechanism will ensure the best value for money for bill payers and taxpayers, MPs have been told.

Appearing in front of the Energy and Climate Change select committee, energy minister Matthew Hancock dismissed fears that annual auctions would stunt the development of the DSR sector.

He said that the yearly contracts would allow the sector to “flourish” while ensuring the best value for money for consumers and the taxpayer.

Hancock told the committee: “We have to see this as a technology that is maturing rather than the finished article and we’ve got to drive value for bill payers.”

He added: “We have put in place transition arrangements to support and encourage DSR market in order to get it moving before the capacity market comes in in full.

“They’ve been put in place to ensure that some DSR expansion can happen in the short term while the long term structure is put in place which will allow it flourish.”

Despite Hancock’s reassurances, there remain concerns in the sector that annual contracts will hamper the industry’s growth.

Yoav Zingher, co-founder of demand side management company Kiwi Power, told the committee that, while the capacity market is a “great place” for DSR, it will “remain marginal” without further support.

He said: “At the moment, power stations can get long time contracts but DSR is the only kind of asset that can only get one year contracts.

“That’s a quite a big disincentive for businesses to invest and for customers to participate not knowing what will happen year on year.”