Is the Triad past its peak?

The Triad season has concluded for another year and the three Triad dates, as published by National Grid, are listed in the table below. EIC have once again called an alert on each of these days.

 

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The Triad season runs from the start of November to the end of February every year. In this period, National Grid identifies the three highest half-hour periods of demand. Each Triad needs to be at least ten clear days apart from each other.

These three Triads form the basis of National Grid’s electricity transmission charges. For half-hourly consumers with direct pass-through of transmission costs, these Triad points are of particular importance. If these consumers can predict when the Triads will occur and reduce their demand when they happen then their final transmission costs can be significantly reduced.

 

Demand continues to decline

Total UK winter electricity demand for 2018/19 (Nov-Feb) has declined by 19% since 2009/10 as a result of energy efficiency, demand side management, and warmer weather trends. Consequently, these trends, supported by targeted demand-side management schemes such as the Triad, have created a declining trend in the Triad peak demand and, more recently, a flattening of the profile seen during the peak periods.

Another factor contributing to the decline in demand is the steady increase in installed wind capacity over the past decade. Most of this capacity is connected to the Grid so does not impact demand. However, around 6 GW (~30%) of wind capacity is embedded so is connected to local distribution networks. Embedded wind generation is invisible to National Grid and can instead influence outturn demand. Average embedded wind output has increased by more than 1 GW over the past 10 years which has contributed to the decline in average demand seen in the graph below.

 

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Throughout the past winter embedded wind generation varied by 3 GW, depending on nationwide wind conditions, which led to a demand swing of the same amount. Embedded wind generation is having a growing influence on Triad forecasting as the increasing demand swing reduces the risk of a Triad occurring on days with high wind output. This was demonstrated during the previous winter as all three Triads occurred on days when embedded wind output was less than 1 GW.

 

Errors in National Grid forecasting increase

This winter, National Grid demand forecasts showed a significant error against outturn demand. The graph below shows that across the Triad period National Grid day-ahead forecasts averaged 2.4% higher than demand outturn on 76 days and 1.3% lower than demand outturn on 6 days. Furthermore, on EIC alert days National Grid day-ahead forecasts were 3.6% higher than actual demand levels. This equates to a difference of 1,600 MW which is the equivalent of 2 million microwaves or half a million kettles being used at the same time. In comparison, the average day ahead error for the last Triad period was 1.5%, which shows that uncertainty in forecasting has increased.

 

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Warmer weather trends

Another contributing factor to the fall in peak demand was milder temperatures, with an average UK temperature of 5.7°C this winter. This is higher than the previous winter average of 4.1°C and the 10-year average of 4.7°C. There has only been one milder winter in the past 10 years; in 2015/16 when the average temperature was 6.2°C. The graph below shows the link between low temperatures and high demand. This winter there were only 36 days below seasonal average temperature, whereas last winter there was 61. Nearly half of these days fell within the same cold spell at the end of January so only one Triad fell during this period. This meant there was an increased chance that the remaining two Triad dates would fall on milder days with low wind. This was the case with the Triad on 10th December as the temperature was above seasonal average but wind output was only 1.7 GW.

 

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Demand Side Response

National Grid estimate that demand side response (DSR), where consumers reduce energy usage during peak times, can lower national demand by up to 2 GW. The impact of DSR is typically larger during periods of cold weather and when all suppliers have issued a Triad warning. However, as we have seen from the December Triad, a lower level of demand response on milder days can inadvertently increase the risk of that day being a Triad.

The implementation of DSR has also affected the timing of the peak demand period. The graph below shows that the evening peak on Triad alert days was both longer and flatter than on non-alert days. When EIC issued a Red or Amber alert the evening peak typically lasted from 4pm to 8pm and was 4 GW higher (~10% increase) than afternoon demand (12pm to 2pm). Whereas on Green alert days the evening peak occurred between 5pm and 7pm and was 5.7 GW higher than afternoon demand (~15% increase). This suggests that a large number of businesses are reacting to Triad alerts by reducing demand during the typical evening peak.

 

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The flattening of the evening peak on Triad alert days created problems with several suppliers’ Triad forecasts. The table below shows that six large suppliers all incorrectly predicted the peak time period on a number of occasions. For example, on 3rd January all six suppliers in the table below recommended reducing demand at some point between 4:30pm and 7pm. However, the peak half-hourly period fell between 4pm and 4:30pm before many businesses started to reduce demand. EIC managed to correctly predict the timing of the peak half-hourly period for all 24 of the alerts issued, eliminating the risk to our customers of reducing demand at the wrong time and potentially missing a Triad.

 

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Uncertain future for Triads

As a result of the success of the Triad scheme in reducing peak demand as well as other fundamental changes to supply and demand, we have now reached a point where Ofgem are considering a different charging methodology. The Targeted Charging Review aims to introduce a charge that Ofgem consider is fair to all consumers and not just those able to reduce consumption during peak periods. Ofgem’s preferred option is for a fixed charge, however there is also the potential for a capacity based charge.

It is possible that next winter will be the last for Triad forecasting although at this point no timescales have been confirmed. The removal of the Triad scheme will increase costs for many business that currently benefit from Triad avoidance. An innovative way for these businesses to reduce future electricity costs is to invest in on-site generation and Intelligent Buildings solutions. EIC can help with this.

 

Next Steps

As the Triad dates have been confirmed for the 2018/19 season we are now able to calculate your Transmission costs for the next year. This forms part of our 360 Strategic Review which is the ideal first step to creating a Strategic Energy Solution for your business. It is key to unearthing hidden savings potential within your business. We’re offering businesses this insight for FREE. Claim yours here https://hubs.ly/H0gG7j20

 

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Our IoT-enabled Intelligent Buildings solution brings together the required technologies to integrate your critical energy systems with a single, remotely-managed platform. This means you can manage your buildings in real time, reacting to Triad alerts, saving valuable time, money, and hassle. Find out more here https://hubs.ly/H0gYtTJ0

Energy Policy Dates for 2019

As we look ahead to 2019, we’ve outlined key energy industry changes and dates to take action by.

EU ETS – Market Stability Reserve (MSR)

1 January – MSR Implementation

The European Commission is introducing a solution to the oversupply of allowances in the carbon market, which will take effect in January.

EU carbon allowances, or European Allowances (EUAs) serve as the unit of compliance under the European Emissions Trading Scheme (EU ETS). In response to a build-up of these allowances, following the 2008 global financial crisis, the European Commission has introduced a long-term solution known as the Market Stability Reserve (MSR). With Brexit looming, there’s uncertainty as to whether these changes will affect the UK.

 

Energy Price Cap

1 January – Price Cap implementation

Price protection for 11 million customers on poor value default tariffs will come into force on 1 January 2019. Ofgem has set the final level of the price cap at £1,136 per year for a typical dual fuel customer paying by direct debit.

When the price cap comes into force suppliers will have to cut the price of their default tariffs, including standard variable tariffs, to the level of or below the cap, forcing them to scrap excess charges. The cap will save customers who use a typical amount of gas and electricity around £76 per year on average, with customers on the most expensive tariffs saving about £120. In total, it is estimated that the price cap will save consumers in Great Britain around £1 billion. Read more here.

 

Ofgem’s Targeted Charging Review (TCR) – the end of Triad season?

4 February – Consultation conclusion

Ofgem has launched a consultation, due to conclude on 4 February 2019, into how the costs of transporting electricity to homes, public organisations, and businesses are recovered. Proposed changes could remove the incentive for Triad avoidance.

Costs for transporting electricity are currently recouped through two types of charges:

  • Forward-looking charges, which send signals to how costs will change with network usage
  • Residual charges, which recover the remainder of the costs

In order to ensure that these costs are shared fairly amongst all users of the electricity network, Ofgem are undertaking a review of the residual network charges, as well as some of the remaining Embedded Benefits, through the Targeted Charging Review (TCR). Ofgem are exploring the removal of the Embedded Benefit relating to charging suppliers for balancing services on the basis of gross demand at the relevant grid supply point. This is important as it would eliminate the incentive of Triad avoidance.

 

Brexit

29 March – Scheduled date to leave the EU

Whilst not a specific energy policy announcement, the UK’s departure from the EU is a significant event that has raised a lot of questions concerning UK energy security.

We put together a Q&A on how Brexit may impact the UK energy industry and climate change targets. Read more here.

 

Closure of the Feed-in Tariff (FiT) scheme

31 March – Scheme Closes

The Government has confirmed plans to remove the export tariff for solar power, which currently provides owners of solar PV panels revenue for excess energy that they generate. This will coincide with the closure of the Feed-in Tariff (FiT) scheme.

The FiT scheme was introduced in April 2010 in order to incentivise the development of small scale renewable generation from decentralised energy solutions such as solar photovoltaics (PV), wind, hydro, anaerobic digestion and micro Combined Heat and Power (CHP). Generators were paid a fixed rate determined by the Government, which varied by technology and scale.

The scheme will close in full to new applications from 31 March 2019, subject to the time-limited extensions and grace period.

 

Streamlined Energy and Carbon Reporting (SECR)

1 April – SECR implementation

Streamlined Energy and Carbon Reporting (SECR) is on the way, due to come in to effect from 1 April 2019. The introduction of this new carbon compliance scheme aims to reduce some of the administrative burden of overlapping schemes and improve the visibility of energy and carbon emissions when the CRC scheme ends.

EIC can help you achieve compliance. Read more about SECR in our blog, or visit our website.

 

UK Capacity Market

Early 2019

The UK Capacity Market is currently undergoing a temporary suspension, issued by the European Court of Justice (ECJ), on the back of a legal challenge that the auction was biased towards fossil fuel generators.

The ECJ’s decision means that payments made under the Capacity Market (CM) scheme will be frozen until the UK Government can obtain permission from the European Commission to continue. In addition, the UK will not be allowed to conduct any further CM auctions for energy firms to bid on new contracts.

The UK government has since iterated that it hopes to start the Capacity Market as soon as possible and intends to run a T-1 top-up auction next summer, for delivery in winter. This is dependent on the success of a formal investigation to be undertaken by the European Commission early in the New Year.

 

Spring Statement and Autumn Budget

The UK Government’s biannual financial updates are always worth looking out for.

The Spring Statement will be delivered in March and the more substantial Autumn Budget is scheduled for October. The 2018 budget had a very heavy focus on Brexit, with very little to say concerning energy policy. It is likely this will be the case for the Spring Statement and potentially going forward.

 

Energy Savings Opportunity Scheme (ESOS)

5 December – ESOS Phase 2 compliance deadline

ESOS provides a real chance to improve the energy efficiency of your business, on a continual basis, to make significant cost savings.

In Phase 1 of ESOS we identified 2,829 individual energy efficiency opportunities, equivalent to 461GWh or £43.9m of annual savings across 1,148 individual audits. Our team also helped over 300 ESOS Phase 1 clients avoid combined maximum penalties of over £48million.

With EIC you can achieve timely compliance and make the most of any recommendations identified in your ESOS report.

To find out how we can help, contact us on 01527 511 757, email esos@eic.co.uk, or visit our website.

 

Stay informed with EIC insights

Our Market Intelligence team keep a close eye on the energy markets and industry updates. For the most timely updates you can find us on Twitter and LinkedIn Follow us today.

Visit our website to find out more about EIC Market Intelligence and how we keep our clients informed at a frequency to suit them.

Will Ofgem’s Targeted Charging Review bring an end to Triads?

Ofgem has launched a consultation into how the costs of transporting electricity to homes, public organisations, and businesses are recovered. Proposed changes could remove the incentive for Triad avoidance.

Costs for transporting electricity are currently recouped through two types of charges:

  • Forward-looking charges, which send signals to how costs will change with network usage
  • Residual charges, which recover the remainder of the costs

In order to ensure that these costs are shared fairly amongst all users of the electricity network, Ofgem are undertaking a review of the residual network charges, as well as some of the remaining Embedded Benefits, through the Targeted Charging Review (TCR).

 

Proposed options for residual charges

On setting transmission and distribution residual charges, Ofgem has conducted an analysis of different approaches, leading them to two primary options that they are consulting on, the first of which is a ‘Fixed Charge’. This is highlighted as Ofgem’s preferred option, in which charges would be set for individuals in customer segments, with these segments being based on an existing industry approach.

The second option is an ‘Agreed Capacity Charge’. This would see a charge calculated directly for larger users who have a specific agreed capacity. Capacity for smaller households and businesses would be based upon assumed levels.

Ofgem’s assessment is that a reform of residual charges would result in potential net system benefits up to 2040 between £0.8bn and £3.2bn, with benefits to consumers as a whole in the range of £0.5bn to £1.6bn. In addition to this, Ofgem assess that the proposed changes would save around £2 a year for households in the longer term.

Either scenario would see a fixed rate for Transmission Network Use of System (TNUoS) charges. However, under the Agreed Capacity Charge option, as charges would be based on capacity, there would potentially be some room to reduce contribution to the residual charges.

 

Changes to Embedded Benefits

There are a some notable points within the TCR regarding Embedded Benefits; notably, Ofgem are consulting on setting the Transmission Generation Residual to zero, subject to maintaining compliance with the current cap on overall transmission charges to generators. This will remove a benefit to larger generators that receive a credit from these charges at present.

Another key point is that Ofgem are exploring the removal of the Embedded Benefit relating to charging suppliers for balancing services on the basis of gross demand at the relevant grid supply point. This is important as it would eliminate the incentive of Triad avoidance. Currently, National Grid identifies three Triads each year in order to calculate the TNUoS charges an organisation will incur. Such transmission costs can be reduced if demand is decreased when a Triad Alert is called (a warning that demand will be high that day). Find out more about what Triads are and how you can avoid them here.

For both of these points, Ofgem believes that whilst these benefits reduce costs for individual companies or consumers, they don’t reduce the total network costs that users need to fund collectively. This can lead to greater costs for other users and, if not addressed, Ofgem say this will lead to less efficient outcomes that are not in the best interests of consumers as a whole.

 

BSUoS changes

The Review outlines a proposal for Ofgem to set up a Balancing Services Use of System (BSUoS) task force. The task force would be responsible for considering how cost-reflective and effective the current charges within BSUoS are. From this, they would evaluate the potential to provide a better system in the future, looking to make it more cost-effective. This would come with the responsibility of assessing how feasible any improvements to BSUoS charges are.

Ofgem are deliberating between two reform options; a partial or a full reform of BSUoS. A partial reform would see a reduction in suppliers’ contributions to BSUoS charges, while a full reform would see the removal of BSUoS payments, and require smaller embedded generators to pay BSUoS charges.

Under the current system, suppliers are charged BSUoS based on net demand. A bill is calculated on gross demand and then any embedded generation reduces this cost to the supplier, which is recouped from consumers via a separate non-commodity cost (NCC) charge. Under the proposed full reform, embedded generators would be considered the same as transmission connected generators, leading them to be charged for BSUoS with no savings.

 

The impact to Triads

Triads are currently evaluated based on average demand during the three highest half-hourly peaks of electricity use between November and February. These periods can be forecast, allowing network users who employ Triad avoidance to reduce their electricity consumption in anticipation, for example by instead using on-site generation, Demand Side Response (DSR), or storage. Ofgem argue that whilst this reduces their own costs, the total network cost doesn’t change, meaning that those unable to employ the same avoidance methods pay a larger cost.

Under the proposals by Ofgem, charges will remain roughly the same to users where no Triad management is in place. However, it is expected that large increases will occur for those who use Triad avoidance to reduce the impact.

The new system would see single fixed charges applied based on voltage level. Ofgem believe this will result in reductions in charges for larger SMEs, whilst SMEs at the lower end of consumption will see moderate increases. Importantly, users with on-site generation will pay the same charge as those without, in contrast to the current arrangements.

The Triad period this winter will be unaffected, as will winter 2019 going by Ofgem’s timetable. However, this will have a significant impact on how businesses may seek to recover operating costs in the future. No replacement could see a lack of incentive for DSR, resulting in adverse constraints on the market.

 

Stay informed with EIC insights

Our Market Intelligence team keep a close eye on the energy markets and industry updates. For the most timely updates you can find us on Twitter and LinkedIn Follow us today.

Visit our website to find out more about EIC Market Intelligence and how we keep our clients informed at a frequency to suit them.

Triads – how low can they go?

The Triad season started on 1 November and is one of the most important areas of demand management for energy users. Triads are used by National Grid to calculate transmission charges as part of the Transmission Network Use of System (TNUoS) scheme.

What are Triads?

Triads are the three half-hour periods with the highest demand between 1 November and the end of February, identified by National Grid. However, each Triad must be separated by at least 10 clear days, meaning consecutive days of high demand won’t result in multiple Triads.

 

Why should you avoid them?

The knowledge of when Triads will occur enables many companies to manage their demand consumption. If your electricity contract allows for it, reducing your usage during an expected Triad period will result in reduced transmission charges and lower bills.

 

How low can they go?

The 2017/18 season saw the lowest level of Triad demand since records began in the early 1990s.

The maximum Triad level dropped to a record 48GW last year, having fallen more than 10GW in just eight years.

 

How low can Triads go

 

Overall energy consumption has been trending lower for the last decade, and one of the interesting outcomes from this Triad season will be whether a new record low can be achieved.

 

Efficiency is key

A large part of the reduction in peak demand has been due to major developments in energy efficiency. The use of new technology and appliances, as well as a switch from incandescent lighting, are all contributing to lower energy consumption.

The act of Triad avoidance has developed to the extent that it’s influencing when Triads occur, as more and more businesses across the UK look to demand side management as a means to cut their costs. National Grid highlighted last year that businesses reacting to warning signals – such as our Triad Alerts – had the potential to cut the country’s peak demand by as much as 2GW. This then makes it more difficult to predict Triads, as peaks for the winter get lower and flatter with each passing year, forcing us to adapt our model to ensure continued success.

 

Our successful track record

Forecasting Triads is dependent on a wide range of different factors. Our Triad Alert service monitors different influencers to predict the likelihood of any particular day being a Triad and automatically sends that information promptly to our clients. These businesses can then take informed action to avoid high energy usage during these more costly half-hour periods, while minimising disruption to their everyday activity. Our daily report can help you plan ahead with an overview of the next 14 days, alongside a long-term winter outlook.

Of course, calling an alert every weekday would generate a 100% success rate, but we recognise the negative impact this would have on businesses. Organisations could incur major damage to revenues if required to turn down their production each day for four months ‘just in case’, so we aim to provide as few alerts as possible.

In the previous Triad season we only called 9 Red Alerts and successfully predicted all three Triads with fewer alerts than any other tracked TPI or supplier. In fact, the total number of alerts called by Utilitywise has fallen 36% in the last three years. We successfully predicted all three half hour periods with our lowest ever number of alerts. Our in-house model is based on a traffic light system, with Red Alerts indicating we believe a Triad is highly likely and our clients should take immediate action.

For those that took action last year, based on our advice, demand was cut by an average of 14% compared to standard winter peak-period half-hour consumption. This resulted in significant average cost savings of over £30,000, and in some cases, rewards closer to £700,000 were observed.

 

Intelligent buildings, smarter business

By forecasting when Triads will occur, we empower our clients to take control of their consumption to reduce their energy use and lower their bills. Businesses can react to our Alerts simply by cutting demand during suspected Triad times or by load-shifting.

Load-shifting involves moving the most energy-intensive tasks of the day to a time when it’s less likely that a Triad will occur, for example early in the morning. This enables you to avoid Triads without reducing your overall daily energy use. Building controls make this easier. With our IoT-enabled Building Energy Management solution, we’re introducing the next generation of smart building controls. Our innovative solution brings together the required technologies to integrate your critical energy systems with a single, remotely-managed platform. This means you can manage your buildings in real-time.

The Triad season started on 1 November. To find out more about our Triad Alert service visit our website, call 01527 511 757 or email info@eic.co.uk.

A smarter way to avoid Triads

Each year from November to the end of February, National Grid use peak demand data to calculate how much energy users should pay in electricity transmission charges as part of the Transmission Network Use of System (TNUoS) scheme. To avoid higher costs you can undertake Triad avoidance.

What are Triads?

Triads are the three half-hour periods with the highest demand between 1 November and the end of February, identified by National Grid. Each Triad must be separated by at least 10 days. This means consecutive days of high demand won’t result in multiple Triads. Businesses that reduce their usage during these high demand points will lower their future electricity transmission costs.

You can find out if your business is affected by Triads here.

 

How will you know when to act?

Our Triad Alert Service monitors different influencers to predict the likelihood of any particular day being a Triad and automatically sends that information promptly to our clients. You can then take informed action to avoid high usage during these more costly half-hour periods, while minimising disruption to your everyday activity. Our daily report can help you plan ahead with an overview of the next 14 days alongside a long-term winter outlook.

Find out more about our Triad Alert service here.

 

We’ve got a Triad and tested track record

Predicting Triads is very challenging; falling demand and changing usage patterns mean Triads are no longer guaranteed to occur at the height of winter. Season 2017/18 included the latest Triad on record and weakest demand levels since the early 1990s.

We’ve helped hundreds of clients avoid these transmission costs by providing them with the tools needed, giving EIC an enviable track record in Triad prediction. Previously, one client saved £800,000 by acting on insight from our Triad Alert service.

Last season we hit all three Triad periods, issuing just nine red alerts, lower than any other TPI or supplier – a testament to our in-house technology, analytics, and expertise. Of course, calling an alert every weekday would generate a 100% success rate but we recognise the negative impact this would have. Businesses could incur major damage to their revenues if required to turn down production each day for a quarter of the year ‘just in case’.

By issuing fewer alerts we ensure our clients are not unnecessarily disrupted from their day-to-day activities. Those that took action in response to our alerts last season cut demand by an average of 15% compared to standard peak-period half-hour consumption.

 

Intelligent buildings, smarter business

By forecasting when Triads will occur, we empower our clients to take control of their consumption to reduce their energy use and lower their bills. Businesses can react to our Alerts simply by cutting demand during suspected Triad times or by load-shifting.

Load-shifting involves moving the most energy-intensive tasks of the day to a time when it’s less likely that a Triad will occur, for example early in the morning. This enables you to avoid Triads without reducing your overall daily energy use. Building controls make this easier. With our IoT-enabled Building Energy Management solution, we’re introducing the next generation of smart building controls. Our innovative solution brings together the required technologies to integrate your critical energy systems with a single, remotely-managed platform. This means you can manage your buildings in real-time.

The Triad season begins on 1 November. To find out more about our Triad Alert service click here call 01527 511 757 or email info@eic.co.uk.