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Northern Powerhouse European Union

Inaugural electricity demand reduction auction awards funding

The Government’s first Electricity Demand Reduction auction took place in January, providing £1.28 million to companies to deliver electricity savings but leaving most of its budget unspent.

The Government’s first Electricity Demand Reduction (EDR) auction took place in January, providing £1.28 million to companies to deliver electricity savings but leaving most of its budget unspent.

The EDR pilot allowed qualifying organisations to bid for government funding in return for delivering lasting electricity savings at peak times through energy saving schemes, such as replacing old bulbs with LEDs or improving motors and pumps.

The hope is for EDR projects to compete with electricity generation, demand side response measures (such as reducing the operation of equipment at certain times) and electricity storage technology in the Government’s Capacity Market mechanism

In anticipation of more dependence on intermittent renewable electricity generation in future, the Capacity Market provides payment to organisations in return for ensuring that electricity capacity is delivered to the grid when needed.

‘First of its kind’

Ed Davey, energy and climate secretary, said: “We want to see if reducing demand on the electricity grid can be a cost-effective solution that will work alongside building new power stations – guaranteeing our energy security, cutting emissions and lowering energy bills.

“This auction is the first of its kind in Britain. If this goes well, demand reduction could compete alongside new generation in future capacity auctions, to help keep costs to consumers as low as possible.”

Funding unspent

However, despite £10 million being made available for the first auction on 29 January, only £1.28 million has been awarded to 22 lighting projects, leaving nearly £9 million unspent.

The successful bidders, which include firms from the energy, steel, aerospace, retail and building materials industries, will deliver 5.6MW of electricity capacity during the winter peak in 2016.

No decision has yet been made on how the unspent funding will be allocated, with the Department of Energy and Climate Change (DECC) stating that lessons learned from the pilot will be used to inform future activity.