Britain is turning to a new way of making sure it doesn't run out of power, one that could turn the energy market on its head: rather than paying utilities to produce more electricity, it is paying firms that guarantee to cut industrial demand.
So-called aggregator firms secure commitments from businesses across the country to reduce power usage; supermarkets can turn down refrigerators by a few degrees for a short period without any impact, for example, while water treatment plants can turn off pumps at certain times.
The aggregators then sell the megawatt reduction they secure to power network operator National Grid (NG.L), which is increasingly favouring this "demand-side response" (DSR) method to paying big utilities to ramp up power generation. Aggregators pass on the revenue to the businesses, taking a cut.
Aggregators, like Flexitricity, Kiwi Power or Open Energi, have gained traction in the past year after National Grid launched a promotional campaign to raise awareness among businesses about the commercial benefits of DSR and reducing energy usage.
They present a threat to the revenue of big power generation firms like Centrica (CNA.L), SSE (SSE.L) and EDF Energy (EDF.PA), who are being undercut by these newcomers and losing business in Britain's 1-billion-pound electricity balancing market.
The challenge could grow rapidly in coming years; National Grid, which seeks to match supply and demand on a second-by-second basis, wants to see 30-50 percent of capacity in the electricity-balancing market coming from DSR by 2020, compared with just 4 percent now.
How the rise of aggregators plays out in Britain could offer a guide for other European countries, and will be closely watched by power companies and regulators across the continent.
Source; http://uk.reuters.com/article/uk-britain-electricity-aggregators-idUKKCN0YE0GU
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