Aberdeen Heat & Power: Pioneering district heating project uses Capacity Market revenue to support their mission of alleviating fuel poverty

Energy Partner:Aberdeen Heat & Power
Asset Type:Combined heat and power
Participation:Capacity Market
Revenue:£28,560 - £76,500 pa*

* CM revenue depends on the prices in the annual T-1 and T-4 auctions.

“The biggest challenge facing our industry, particularly in the not-for-profit sector, is that of funding for system expansion. Any additional income we can secure through demand response and other measures will help to build working capital within the business to help sustain our affordable heat price and assist with expansion of our networks to more areas.”

Ian Booth, CEO, Aberdeen Heat & Power

Aberdeen Heat & Power Ltd (AH&P) was formed as an independent not-for-profit company in 2002 to develop and operate district heating systems, with a primary aim of alleviating fuel poverty and reducing carbon footprint. Progress through the years has resulted in over 3000 homes and public buildings being supplied with affordable and controllable heat. 

Flexitricity services

The Capacity Market (CM) is the UK Government’s flagship policy for security of electricity supply. In the CM, industrial and commercial energy users, and generator owners like Aberdeen Heat & Power, can receive payments in return for offering to help the electricity system during times of stress – either by generating electricity, or reducing consumption when needed. All non-renewable sites are permitted to participate in the CM in addition to energy trading and/or ancillary services.

Receiving a Capacity Market contract is by no means a given and involves a complex application process. Many have missed out in the past or not maximised their revenue. That’s why working with the right aggregator is the key. Flexitricity has the longest sequence of CM contracts in the industry, running from 2016 to 2036. 

Flexitricity’s Capacity Market team worked closely with AH&P throughout the CM process – from ensuring their sites were ready and connected, entering the Early Auctions and T-4 auction, to metering and delivery. Flexitricity’s aim is always to make life as easy as possible for our Energy Partners whilst ensuring they retain complete control. As Ian Booth, CEO of AH&P, recounts: “Operationally, this has had no effect for us other than business as usual to maintain and maximise operations. The positive financial impact is starting to happen now and this is expected to increase in subsequent years, which is pleasing to note.” 

Customer benefits

Ian admitted that he had some initial doubts about the benefits of providing demand response services: ”At first we were not convinced that this was worth our while progressing and indeed if we would be able to qualify.” The turning point came after the visit to Flexitricity’s head office. 

As Ian notes: “The highlight for us was to visit the Edinburgh operation and understand better the type of work that is involved in this industry. After some further discussions we were convinced that we were following the correct path in engaging with Flexitricity.”

AH&P partnered with Flexitricity in 2016 and has been earning Capacity Market revenue from October 2017. Ian felt that the whole process has been easy to manage and he’s enjoyed working with Flexitricity. “They have been patient and understanding of our needs and have taken keen interest in learning about our business and how we operate. All staff that we have dealt with have been professional and understanding.” 

Next steps

Aberdeen Heat & Power is looking to expand but securing the funding is a major challenge. They’re planning on exploring a wide range of options to maximise their income, including working with Flexitricity to add more services to their revenue stack.

All performance claims made within this testimonial, both technical and financial, were true at time of writing. Claims relating to past performance of certain asset classes do not represent a guarantee of future results for assets in the same class or other asset types

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