Green Alliance research  has shown that incentives for electricity demand reduction (negawatts) could avoid the need for eight 800MW power stations, and save £3.9 billion of construction costs which will otherwise be borne by the consumer.
The government has now announced  that a UK electricity demand pilot will go live on 29 July, but has not committed to creating a market for negawatts , and has designed a pilot with many rules and low ambition.
The research points to three examples where progressive organisations are already demonstrating the huge potential for electricity savings that could be expanded across the country: BASF and Guy’s and St Thomas’s NHS Foundation Trust have each cut their annual energy bills by over half a million pounds through current and planned schemes and Oxford Brookes University has cut theirs by over a quarter of a million pounds.
The analysis draws on the lessons of two existing US capacity markets that have successfully included energy demand reduction schemes, demonstrating that negawatts reduce consumer electricity bills and CO2 emissions. To Improve the EDR pilot and avoid setting bad precedents three of Green Alliance’s recommendations are that:
1 Unnecessary barriers to participation in the pilot are removed
The pilot proposes only to include schemes that don’t receive support from elsewhere, this is not a condition in the US markets and is likely to exclude many good schemes.
2 Ongoing support is guaranteed
The pilot will only run for two years but many schemes need a longer investment horizon. The government should guarantee ongoing support for negawatts schemes beyond the pilot through the capacity market or another instrument, giving investors the confidence of long term support.
3 A diversity of projects is chosen
The aim of the pilot is to gain a better understanding of the potential for negawatts in the capacity market. The government should ensure a good diversity of projects and actors represented in the prequalification process, and that auction criteria are not solely based on least cost, but also consider project diversity.
Author of the report, Dr Kat Watts, said:
“The government has identified negawatts as an area where significant cost savings can be made, but it is aiming too low. The EDR pilot is a useful first step in incentivising electricity demand reduction, but there needs to be a clear signal to investors that this pilot is just the start of ambitious policies to reap the rewards of negawatts”
Green Alliance is a charity and independent think tank focused on ambitious leadership for the environment. Founded in 1979 “to inject an environmental perspective into the political life of Britain” we have been inspiring and influencing change for 35 years. www.green-alliance.org.uk
 Kickstarting the negawatts market: how to make sure the electricity demand reduction pilot succeeds