The UK government is making £20m available to support projects that deliver lasting reductions in electricity demand, for example through the installation of a more efficient lighting system or a pump. The aim of this pilot will test whether EDR could participate in GB’s capacity market.
There will be a competitive auction process and participants will bid in an amount of electricity demand savings they can make and a price at which they are prepared to “sell” it. This will test the Capacity Market approach, which takes bids from organisations to supply capacity. Successful bidders will receive funding in line with the level of their bid (£/kW) and the amount of savings proposed, spread across a payment at installation and on provision of evidence of that those savings have been delivered. This money will help subsidise the measure.
Bidding rules
Projects will bid into an auction and commit to delivering a certain kW saving (not kWh, which is the measure for total energy used). Successful bids secure funding, that can then be used to support the installation of more efficient electrical equipment. Projects will need to qualify and this will include submitting a project plan with estimated savings and a plan for measuring and verifying these. Applicants will bid a price, expressed in £/kW, for which they are prepared to “sell that electricity demand reduction (capacity) saving.
There will be a minimum bid size of 100kW in the auction. This may be achieved by a single project or through several projects, aggregated into a single application. There will be no limit on maximum bid size or on total subsidy awarded to any one participant (subject to the budget constraints of the funding available. Applications may include a mix of technologies and cover a number of sites or facilities.
Successful bidders will receive a grant payment – not a loan – from government for delivering the electricity demand reduction (capacity) during the peak period, with efficiency savings split between a payment at installation and a second payment on providing evidence of the delivery of savings.
Behavioural measures will not be eligible for the auction timetabled here, however, organisations that deliver behavioural EDR measures are encouraged to contact edr-project@decc.gsi.gov.uk with a view to discussing how these might contribute to EDR delivery in future.
A maximum price (not published in advance) will be set for the auction, to ensure value for money.
Payments
If an applicant is successful then the contracts are for one year. Successful bidders will receive 50% of payment on
confirmation of installation and a further payment of 50% on delivery of savings (ie, after 12 months’ operation, on receipt of evidence of the savings). Under-delivery will lead to payments being reduced.
Measuring and verifying savings (M&V)
A manual will be provided to participants on how to measure and report savings from their projects. This will build on the approach set out in international protocols (IPMVP) and include three broad approaches:
Deemed: savings are pre- calculated for a list of technologies.
Partial measurement: combination of metering and calculations or estimates of key variables.
Full measurement approaches: metering before and after.
Who and what will be eligible?
Projects will need to be based in Great Britain and deliver efficiency savings at least during times of winter peak electricity demand (4-8pm on weekdays, November-February). Projects that would not be eligible include:
Those that shift electricity demand to other
times of the day.
Measures benefitting from specified forms
of Government incentive (such as Climate
Change Agreements, Salix loans).
Savings made by switching to other energy
sources (eg onsite generation).
Applicants from all sectors – public, private and voluntary – are eligible as long as they meet the eligibility criteria for the pilot. Projects should be based in Great Britain (England, Scotland, Wales). Applicants themselves need not be GB-based.
How will the pilot be of benefit?
Organisations will receive a payment from government for delivering efficiency savings spread across a payment at installation and on delivery of savings. There will be the added benefit that it will support your investment case for improvements in energy consuming technology and you will also benefit from all the electricity cost savings.
Your organisation will also benefit from savings outside winter peak time.
What projects and measures will not be eligible?
Those that shift electricity demand to other times of the day.
Savings made by switching to another energy source (eg switching to Combined
Heat and Power).
Any measures that have been installed by successful bidders before the
signature of a grant offer letter.
Any measures that have received or will receive an incentive payment from
another government scheme.
To illustrate more specifically:
Climate Change Agreements (CCAs): Given that they benefit from a Climate Change Levy Discount, facilities with a CCA will not be allowed to bid into EDR for any of their processes or activities that are covered by their CCA. Any measures that are bid into the pilot should relate to efficiencies outside the CCA.
CRC Energy Efficiency Scheme: Organisations in the CRC are eligible to participate in the EDR pilot, but if they have facilities covered by a CCA, they will not be allowed to bid into EDR for any of their processes or activities that are covered by the CCA.
Energy Company Obligation (ECO): Energy suppliers with obligations under ECO will not be allowed to bid into EDR for measures they have to install under ECO.
Green Deal cash-back: Measures that have benefitted or will be benefitting from the Government’s Green Deal cash-back scheme will not be eligible.
Salix Loan Scheme: Measures that have received or will receive funding from the Salix Loan Scheme are not eligible.
Renewables Heat Incentive: Grid-related measures that have or will receive funding from the Renewables Heat Incentive are not eligible.
Capital Allowances: Applicants need to ensure that any EDR funding they receive is deducted from their claim for capital allowances. For example, if a company invests £1,000 and receiving £100 from the EDR pilot, only £900 will qualify for capital allowances. [This includes the First-year allowance (also known as the Enhanced Capital Allowance), the Annual Investment Allowance (AIA) and Writing-down allowance (WDA) at 8 and 18%.]
The pilot is concerned with the installation of measures to reduce demand through efficiency rather than to support additional generation so if a company wants to reduce grid electricity demand by using their waste heat to generate electricity or if a company wants to reduce grid electricity demand by installing solar panels or wind turbines on site these are unable to apply for this programme.
One of the key points to bear in mind is that the pilot will pay the difference that helps make a project viable for a business. So if reducing a five-year payback to three was acceptable, the EDR scheme would pay the difference between these two calculations. we&e
To register your interest in taking part in the pilot, or if you have questions, contact edr-project@decc.gsi.gov.uk
