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U.K. Plans Payment for ‘Negawatt’ to Curb Power Use

U.K. Plans Payment for ‘Negawatt’ to Curb Power Use

The U.K. will propose paying big power consumers to use less during peak demand periods as part of a plan to overhaul the electricity market due to be drafted by Christmas, Minister of State for Energy Charles Hendry said.

The government may pay major users for each “negawatt” of capacity they switch off, Hendry said in an interview in London yesterday. The proposals, which may form a draft bill for submission to parliament in spring, may also include so-called capacity payments for generators who supply the grid.

The payments both for keeping the grid supplied and switching off when use is high are meant to balance supply and demand as Britain seeks to attract investors and meet targets for reducing carbon emissions. The rules are part of measures that may bring about the biggest change in the market in 30 years, Hendry told delegates at an event hosted by the Major Energy Users Council.

“We’re looking at capacity payment to take demand out of the system,” Hendry said in the interview at the event. “What is the best way to manage demand? Either provide physical supply or shave demand.”

U.K. utilities need to spend 200 billion pounds this decade to upgrade infrastructure and replace stations to meet climate-change targets, according to U.K. regulator Ofgem. Electricity costs are set to rise as about a third of Britain’s power plants shut and are replaced by more costly nuclear and renewable generation.

“There has never been a better time for demand side participation to contribute to our energy policy goals” said Graham Meeks, director of the Combined Heat & Power Association, whose members include E.ON U.K., RWE npower, and British Sugar. “With the enormous cost of new generating capacity, the value of energy savings and flexible action by energy consumers is considerable.”

(Updates with comment from industry group in sixth paragraph.)