National Grid to pay households and businesses to cut electricity use again

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British households and businesses will be paid to cut their electricity use again as National Grid aims to reduce the strain on the energy network.

The electricity system operator (ESO) said on Monday it was looking for bids from suppliers to help save up to 341MW of power between 4.30pm and 6pm on Tuesday.

The plan, which could still be abandoned if conditions improve, would help balance supply and demand across Great Britain by encouraging consumers to cut their usage or shift it outside the time period.

We have taken this decision as we currently see a similar operational picture to the one available on Sunday. The use of these additional services is not an indication that electricity supplies are at risk, but that we require greater options to manage the network as normal.

— National Grid ESO (@NationalGridESO) January 23, 2023

The “demand flexibility service” had only been used in trials before its first live use – during a “saving session” scheduled for between 5pm-6pm on Monday.

The scheme is only open to businesses and households with a smart meter whose supplier or aggregator is one of the 26 firms to have signed up.

More than 1m households and businesses have signed up to participate and most suppliers have closed the scheme to new participants. The household suppliers include British Gas, E.ON, Octopus Energy and EDF.

Under the initiative, a household’s power use will be compared with their normal usage for that time of day, and they will receive about £3 for every kilowatt hour saved.

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Consumers could receive up to £6 depending on their supplier, meaning a household that normally uses their oven during an hour-long session could save up to £12 for not doing so and changing their use to either before or after the period, according to the consultancy firm LCP Delta.

The scheme was first trialled by Octopus Energy last year but took on more significance in the autumn when National Grid announced it was rolling out the service to more suppliers as part of its contingency plans to keep the lights on this winter.

A cut in Russian gas supplies after the invasion of Ukraine stoked concerns over gas supplies in Europe this winter, and the potential knock-on effect on Britain’s energy network.

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National Grid had warned that a scenario in which a full cut to Russian supplies coincided with a cold snap could cause power cuts. However, the fears have largely receded as gas prices have fallen because of mild weather and strong storage levels in Europe.

As part of its contingency plans, National Grid also signed a series of deals to keep units on standby at coal-fired power stations that were due to be retired as Britain phased out the use of coal power.

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To ensure supplies were available on Monday, National Grid asked Drax on Sunday to warm up two of its coal units at its North Yorkshire site and EDF to do the same with one its units at the West Burton plant in Nottinghamshire. It is understood those units were not called upon. However, the network operator said the units had been put on standby to produce power for Tuesday.

ESO data showed more than half of Britain’s energy generation was from gas-fired power plants on Monday, with 14% from wind generation and 12% from nuclear. Windfarm generation hit record highs last year but the use of gas also rose.

The periods of very elevated gas prices during the past year have fed through into higher consumer energy bills, raising concerns about the treatment of struggling households using prepayment meters in particular. The regulator Ofgem on Monday launched an investigation into energy suppliers’ treatment of prepayment customers.

Separately, the director general of the Confederation of British Industry, Tony Danker, condemned the government’s failure to invest in the green economy, saying the UK is falling behind the US and EU.

In a speech at University College London on Monday, he said the US and Europe were “outspending and outsmarting us” on green growth. “While our competitors across Europe, Asia and the US are making their move, and going hell for leather, we seem to be second guessing ourselves and hoping for the best,” he said.

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