Because of multiple power plant failures, a Notification of Inadequate System Margin (NISM) has been issued by National Grid (NG-UK). Even though an immediate risk of blackout has been ruled out by NG, shrinking reserve capacity could make situation deteriorate during winter months. An additional 500 MW capacity is being requested between 16:30 and 18:30 (peak demand hours) on Wednesday.

Such short term capacity could be brought by either reducing energy demand or ramping up the extra power plants. STOR (Short Term Operating Reserves) aggregators provide such short term capacity to NG on short notice, as they have agreements in place with independent power plant operators and large industrial consumers. NG has to cover the cost for availability period (£/hour/MW) and delivery payments (£/hour/MW) in the case, energy being delivered. Large commercial and industrial customers could benefit financially by reducing their energy consumption or bringing their emergency capacity through STOR aggregators. Though technology is already out there to bring demand side reduction with financial incentives in place, what should we do to make it widely acceptable?

Energy regulator OFGEM (Office of Gas and Electricity Market) should perhaps intervene to develop Demand Side Management (DSM) standards. To uncover real benefits of smart meter initiative regulators should work closely with NG, energy suppliers and customers. Real time power consumption of domestic customer is very low and much depends up on family life style. Incentivise domestic customer to participate in DSM would be challenging even after UK wide smart meter roll out and automation in place.

It is an imperative for NG to maintain adequate system margin and control energy cost at the same time. Having DSM in place, we have not to build reserve power plants. In order to gain best of both worlds, regulator (OFGEM) should play a key role in defining DSM standards for each market segment (e.g. domestic, commercial, large commercial and Industrial).