High price  secured for DSR in Transitional Arrangements auction

The TA auction has cleared in round 6 with a price of £45/kW, securing c300MW of turn-down DSR capacity for 2017/18. SmartestEnergy has secured 40MW of capacity, which is around double the amount achieved in the prior auction.

We had positive price expectations going into the auction but this is far higher than predicted. We believe this is because there was significant drop out of capacity from pre-qualified levels against an unadjusted target. It does reflect the level of prices needed to encourage DSR from many sources.

The high price is good news for the contract winners and will help to build confidence for businesses to participate in DSR. With the price this high, it is a great incentive for businesses to make the initial investments to implement load-shifting, putting them in a strong position to also access other revenue streams from the wholesale and balancing markets. We look forward to speaking customers about joining our Capacity Market portfolio for this winter and other DSR opportunities we can support them with.

This was the last dedicated DSR capacity auction and going forward, as it will be captured in the main auction along with other established technologies. With such a high price now set from the TA auction, we do have concerns that DSR will struggle to compete alongside existing and peaking generators in the next auction and are concerned that a significant drop in price may mean we lose momentum.

We would like to see confirmation from National Grid that support will be provided to help DSR gather more momentum and make a significant contribution to the UK’s energy mix. It is now up to the winners of this auction to demonstrate that DSR is a viable capability and deliver on their promises. By doing so we give this emerging industry a chance to flourish as we transition to a low-carbon economy.

> Read our pre-auction comment around increasing support and long-term certainty for DSR