Increased awareness towards energy efficiency and local renewable energy production have contributed towards a reduction in overall demand and total electricity consumption in the UK, as indicated (fig. 1a).
Fig.1Total electricity consumption in the UK, (Source: National Grid UK, SSE annual reports)
Energy production was decreased by SSE in an endeavour to equalise supply and demand. Even though energy demand increased during 2011-12 (fig. 1b), SSE’s output was decreased due to losing customers following an 18% price rise.
Demand side management and interconnectors
Recently, many firms have emerged offering demand side management. They offer a reduction of electricity consumption during peak periods to large industrial and commercial customers. This emerging trend has further contributed to the reduction of peak electricity prices.
Growing Power Grid Interconnectors with France and Northern Ireland could further reduce peak power demand of the big six.
Smart metering and energy storage
Smart metering and home automation technologies allow energy firms to monitor and control consumption in real time during peak hours and with successful implementation constituting a genuine threat to energy firms’ revenue and profit margins. Energy storage is another emerging technology enabling the storage of cheap energy during off-peak hours delivered at higher prices during peak hours.
Fuel cells and roof top solar
Fuel cells and roof top solar technologies have further reduced dependency on large scale energy production. The economy of scale due to mass production in china will facilitate further integration of these technologies in energy value chain.
National grid (UK). [Online]. Available at: http://www2.nationalgrid.com/UK/Industry-information/Electricity-transmission-operational-data/Data-explorer/ [Accessed on 07 May 2015]
Vahey S., 2015b – Working paper, Basic Macro Models (Aggregate demand/aggregate supply), Warwick Business School, unpublished.