Big users of electricity in the UK often have Distribution Use of Energy (DUoS) charges in addition to their normal tariff. The DUoS charges change dependent upon the Distribution Network Operator (DNO) and vary depending on the time of day and day of the week.
For example, in the South West the Red DUoS period is from 5pm to 7pm on weekdays and, for low voltage (LV) half-hourly metered sites, will add 24p per unit of electricity used in that period to a client’s total bill – which can add up to significant amounts per year.
There are also Amber (early night and day) and Green (midnight to early morning) periods making up a 24h day – changing dependent upon the day of the week.
Argand’s data analytics team analysed our top 10 clients by annual DUoS payments. Of these top 10, we then analysed the amount of this spend that was accounted for by the most expensive charges – Red DUoS. This is shown in the chart below (figure 1.)
Figure 1: Top 10 DUoS Clients by Red tariff fees
From this, we can see that the average spend per client on Red DUoS charges is 10 – 20% of a client’s total electricity bill.
This is interesting because it is from only 2 hours of each weekday – a very specific time slot. Hence, this should be a key target for energy managers to look to reduce energy during this period.
This can be done through:
- Load shifting – rescheduling electricity hungry processes to outside of the Red period if the nature of their operation allows.
- Energy efficiency – more efficient machinery could be installed or
- Energy generation with storage – storage (e.g. batteries) could be charged by solar PV / wind / CHP and discharged during this period
Another advantage of reducing energy during this RED period is that there are Transmission Network Use of System (TNUoS) charges during the Red period which sit alongside the DUoS fees.
Whereas DUoS fees are charged by the DNO, TNUoS fees are charged by National Grid (NG) and the DNOs pass them on to their clients.
They are charged retrospectively based on the three highest half-hourly demands of the year, with a minimum of 10 days between each. These generally occur in winter between 5:30pm and 6:30pm, but it is only known at year-end, so somewhat hard to predict.
The name for these three TNUoS periods is “triads” and the average of each client’s individual demand in those three half-hourly periods is charged at up to £48/kW (using last years data.)
So, if a client undertakes a strategy of reducing Red DUoS demand (between 5 & 7pm), it will also catch the Triads and benefit from a reduction in TNUoS charges as well.
Analytics of the same clients in figure 1, but this time adding TNUoS fees provides the following % spend of their overall bill.
Figure 2: DUoS & TNUoS Fees as a Percentage of the Overall Energy Bill
You will see that now the client costs range between 20 – 40% of the annual bill for our 10 largest clients.
Any reduction in the Red period will have a big affect on a commercial organisation’s bill.
Proposed Changes to the DUoS Charges
However, it has been proposed that in 2018 the DUoS charges will change.
Red DUoS charges will reduce significantly while the Amber and Green charges will be increased.
If we take our South West example again, the DUoS fees will change as follows:
- Red: 23.3p to 9.75p /kWh => 58% reduction
- Amber: 0.343p to 1.539p /kWh => 350% increase
- Green: 0.125p to 1.347p /kWh => 978% increase
So, what will be the effect of these changes?
I must admit, that my immediate response (pre-analytics) was to see the red decrease and assume that it will have the greatest affect and that overall DUoS charges will reduce.
In fact, when we run the numbers, the opposite is true. Every one of our client’s bills will increase bar one.
The increases are significant as shown in figure 3. Essentially, although the short Red period is reduced significantly, the Amber and Green pick up the loss with gusto and ensure that their rises over the other 22 hours of the day offset and add to the whole bill.
Figure 3: Implications of DUoS Changes to Overall Bills on Top 10 Clients
The data above (see blue columns) shows that the DUoS bills are set to rise for our clients by at least 30% on the whole and with a maximum of 120%.
These increases cannot be kept to those just on half hourly billing. There is a significant probability that not only half-hourly clients but those that are not exposed to DUoS charges will see their bills increase by these amounts. What these rises will be for non half-hourly is unknown.
What can Client’s do about the Increased DUoS Charges?
The first thing is to understand the impacts on your business’s electricity bills as a result of the proposed changes. Argand can help to analyse this impact for you.
Once you have this information you can determine the best investments to mitigate the issues.
Due to the fact that DUoS charges are moving to incorporate higher fees across the whole day the classic Red period demand side response strategies may become out-dated.
Here are some ideas:
- Distributed Generation: Adding distributed generation to your site – such as solar PV and / or wind / CHP will enable you to deliver a higher return on investment given the changing DUoS tariff environment.
- Distributed storage: Adding storage to your generation will enable you to reduce demand at times when the generation is not able to produce i.e. load shifting AND enable reduced TNUoS fees which are significant.
- Heating / Cooling Dynamic Control – For loads where there is the ability to switch off for periods of time within thermal boundaries, you can significantly reduce loads and the DUoS / TNUoS charges.
- Non-essential load shedding: Utilise control to be more dynamic with loads that are non-essential – switching them off when not needed
We do think that this changing scenario will make a great investment case for distributed electrical energy generation.
Here is a brief analysis of solar PV at an example site.
Assumptions used are as follows:
Site consumption: 9.4 million kWh/y
Solar PV: 1 MWp
Generation: 900,000 kWh/y
Used on site: 667,000 kWh/y (75%)
Electricity Cost: 7p / kWh (day tariff, excluding DUoS)
DUoS Cost Changes:
- Red – 19p to 6p /kWh
- Amber – 0.117p to 1.5p /kWh
- Green – 0.046p to 1.3p /kWh
TNUoS: £48 / kW
The cost of the PV system is £910,000 and the return on investment over 20years is as follows:
Without DUoS changes: 8.5% IRR (10y payback)
With Duos changes: 9.6% IRR (9y payback)
It can be seen that the solar PV business case for this example improves with the DUoS changes and payback is reduced by a year.
Argand Solutions are working with some of the clients showcased here to help them understand their electricity costs and more importantly how to reduce them. Argand can model the optimal PV size for the client’s daytime load and show how DUoS changes improve the business case.
If you would like to discuss using the Argand LENZ energy visualisation platform and benefit from this type of analysis, please call Argand Solutions on 01803 864706 or email email@example.com