National Grid’s ‘Triad’ peak charging methodology has helped reduce demand peaks since the early 1990s. Will it still be effective as the market changes, asks Brendan Coyne.
Triad is how National Grid charges major energy consumers for use of the transmission system, simultaneously flattening winter peak demand.
Triad periods are defined as the three half hours of highest peak demand over winter, at least 10 days apart. Annual charges for major energy users are based on how much energy they used during those Triad periods. National Grid works out retrospectively when Triad periods occurred, so for users it is a guessing game. But reducing usage during triad periods makes a big difference to bills, and as a result a service industry has sprung up around Triad avoidance. An army of third parties sends warnings to clients when they think a Triad may be imminent.
At that point, up to 2GW of demand will switch off, according to National Grid’s estimates, meaning Triad is doing its job. But other mechanisms are being introduced to reduce peak demand, including measures in the Capacity Market, and National Grid’s new Demand Side Balancing Reserve.
Will Triad remain fit for purpose? A National Grid spokesperson said it had “no current plans to change the Triad charging methodology and we’d of course need to discuss any changes with the regulator Ofgem”. But the transmission system operator remains “keen to hear peoples’ views as the energy system becomes smarter”.
Some in the industry do think change is not far off. Jon Ferris, head of risk management Utilitywise, suggests Triad’s flaws are starting to show. Transmission costs are rising and peak demand falling, so the costs of the transmission network are being recovered from a smaller volume of consumption and “the rates have to go up to compensate”.
Meanwhile, a flattening off of peak demand throughout the winter in combination with milder winters have made Triads “much more difficult to predict… so you end up turning down [consumption] much more frequently if you want to be certain of hitting a Triad”.
Ferris believes it is becoming a “confused” mechanism. “You are trying to incentivise response when the system needs it most. But it is not really doing that because the market signals are not known until after the fact. So just hitting the three Triads when the peak demand is relatively flat means you might not get a demand reduction on relatively high demand point. But you do in others that are lower demand but more than 10 days away from a peak.
“So it does seem to be flawed and I think those flaws will become more apparent.”
He would scrap demand side response in the Capacity Mechanism and instead hope that the forthcoming electricity balancing significant code review (EBSCR) will reward flexible plant better.
But Alfa Energy bureau services team leader Samer Muratovic says his personal prediction is that Triad will stay in place, because it is proven.
He says: “I think [Triad] will remain in play until we see a substantial return on the new [programmes] coming in – the demand response [mechanisms] and those type of actions. If they prove to be useful and we see a substantial amount of money coming in through those incentives, then we might see a change in how the Triads work and how the mechanism will be tweaked to fit in with that.” Until then, it is business as usual.
Major Energy Users Council Northern Ireland manager Don McGarrigle agrees: “I don’t see anything competing with Triad at the moment – capacity, STOR, all these other things are year round activities.”
McGarrigle questions how many businesses would sign up to a capacity mechanism and take an active role, given the existence of STOR and frequency response. “There are only so many load management possibilities within a manufacturing business. You still have to get widgets out the door.”
He adds: “The prices for Triad periods are increasing now, which makes it all the more important for large users to avoid them, because there is more money there.” The MEUC, says McGarrigle, would “adamantly oppose any flattening out of the Triad charging methodology… Because if 2GW of load management prevents very inefficient plant from operating, everybody benefits.”
Stuart Lea, head of energy trading at Inenco, says any move away from Triad “goes against years of thinking and action”.
However, Lea and McGarrigle agree with Ferris that accurately forecasting a Triad period is becoming more difficult. Lea says that is annoying customers: “There are a lot of [alerts] providers and what they don’t want to do is fail to call a Triad. The response has been to de-risk it by just calling loads of them, which is not acceptable.” Moreover, the consensus is that Triads could start to fall outside of the traditional evening peak times, due to mild winters and intermittent generation, making them even harder to predict.
Mervyn Bowden, a consultant and former head of energy management at Marks & Spencer, thinks Triad may only have a couple of years before being usurped by other measures. Bowden says that unless Triad alerts are completely reliable, they are “a waste of time”. “[Some alert systems] don’t necessarily tell end users that there is going to be a Triad event today, and provide insufficient time to do anything about it.”
He thinks peak reduction has been skewed by a weak economy and the recession. But he says end-users could also be more innovative. He cites supermarkets as an example. “All the refrigeration could be put on defrost for significantly longer periods. They would save 35-40% of their load [during a Triad]. But they are very reticent because of the risk of equipment failure.”
Bowden thinks there is sufficient conventional generation as well as renewables coming online to raise questions about Triad in its current form. Others suggest it has at least a few years to run – time enough for new measures like EBSCR to take effect.
This article was originally published in New Power magazine.