Elexon’s head of market design, Justin Andrews, said during a panel debate at an energy consultancy conference yesterday that the current market rules should be “ripped up” to “start again” after the principles of the market have been “bastardised” by new schemes.
Andrews said: “Ofgem consulted a couple of years ago on what we need to do, what barriers are there to DSR, and our view was that we have typically tinkered around the edges of the energy market over the years and now we’ve got the imbalance mechanism and BSC, we’ve got the feed in tariff scheme and renewables and now Electricity Market Reform (EMR), and from a simplistic point of view that changes the principles of the way the market is working and adding all these things on the original intent of the market has been lost.”
“For me in order to get the right value to the end consumer it’s more than just an auction or bidding in, you’ve got to try and extract maximum value and therefore to do that I personally believe that we need a new market.”
However fellow panel member and architect of EMR while at the Department for Energy and Climate Change, Jonathan Brearley, said that “any version of the UK market has produced very little DSR”, and the failure was instead with the capacity market to support it.
Brearley said: “I think we need to look at the evidence of where we have had DSR previously, when we have had any version of the UK market we have had very little DSR, especially after the reforms in 2008 promised lots of DSR it never came.”
“The place where you do get lots of DSR is the United States and the reason you get that is because they have a capacity market and I don’t think the capacity market here is yet designed well enough to support DSR, but it’s there and actually if it was amended I think you’ve got a great vehicle to produce a decent set of DSR.”
DSR will make up less than half a per cent of the capacity market after the first auction price closed lower than expected in December, undercutting bids from developers of DSR technologies.
More than 70 per cent of pre-qualified DSR capacity failed to secure a contract. The government’s decision not to offer contracts longer than one year to DSR was criticised by the burgeoning industry, with market newcomer Tempus Energy launching legal action against the government late last year.
Ex energy minister Matthew Hancock told the Energy and Climate Change select committee in January, before the general election, that changes could be made to the capacity market to boost DSR in the next auction.
Northern Power Grid’s head of regulation and strategy closed out the discussion saying: “I think people need to think about it in a fundamental way. DSR does have a part to play in the future, but not alone, it’s not going to be the panacea.”