Demand Flexibility Service adjusted to prevent gaming

The Electricity System Operator (ESO) has proposed several rule changes to prevent households from gaming its Demand Flexibility Service (DFS) when it returns this winter.

The service was hastily introduced last autumn to help balance the power grid amid concerns over the security of fuel supplies for gas generators.

As it came to an end in March this year, Utility Week uncovered numerous instances of posters on internet forums claiming to have earned large sums of money by gaming the service. They were able to do this by deliberately inflating their consumption in the hours leading up to events.

Participants’ baseline demand was determined by first calculating their average usage during the same period on the previous 10 weekdays, excluding days on which there was another event. An in-day adjustment was then applied to this volume based on their consumption during the three hours before the beginning of an event.

By raising their consumption during this in-day adjustment period, customers found they could increase the payments they received from just a few pounds per session to tens or even hundreds.

One Reddit poster claimed to be able to generate a profit of £175 per session, spending £45 on electricity but receiving £220 of flexibility payments. Another prominent poster on Octopus Energy’s forums coined the term “Power Rinse” to describe the method, whilst providing guidance to others on how to maximise their earnings.

Senior figures at National Grid ESO recently revealed at Utility Week Live that the DFS will be returning this winter. This was confirmed in a consultation on the future of the service released on Thursday (14 June) alongside its early view of the Winter Outlook for 2023/24.

To prevent gaming by households, the ESO has proposed to remove the in-day adjustment period but said an alternative option would be to extend the period to as many as 12 hours. The ESO said it also considered moving the adjustment period to before event notifications but discounted this option on the grounds that this would require the notice to be issued to close to delivery.

Furthermore, the ESO has proposed to introduce new rules requiring participating suppliers to “act in a good faith manner” to ensure customers are not “artificially inflating” their usage to increase their baseline consumption. They would also require suppliers to have appropriate policies and procedures in place to “identify and promptly notify” the ESO of attempts to do so.

The ESO identified the potential for customers not on half-hourly tariffs to game the service by increasing their consumption during the same period as events on the previous ten weekdays. However, the body did not propose any specific measures to prevent this happening.

The internet posters reported on by Utility Week also considered this “Plan B” for gaming the service after anticipating the removal of the in-day adjustment, but concluded that this would be extremely difficult and would generate much lower profits, if any.

Asset metering and within-day procurement

The ESO has also proposed to allow asset meters to participate in the service but only if they meet a series of conditions.

The body identified the potential for providers to game the service by transferring load from an asset meter participating in the service to one that is not. It said all of the asset meters controlled by a provider behind the associated boundary meter must also participate in the service. Demand reductions should be calculated based on the net delivery of all of these asset meters.

Furthermore, the ESO said the associated boundary meter cannot participate at the same time and the asset meters must meet at least the same standard as a boundary meter.

The ESO has additionally proposed to introduce two alternative timeframes for procurement. In the first iteration of the service, this all took place the day ahead of the event, with its requirements being published by 14.30, providers submitting bids by 15.30 and the results being published by 16.30.

The body proposed two within-day options, one in the morning and one in the afternoon. Under the morning schedule, requirements would be published by 9:00, bids would be submitted by 10:00 and results would be released by 11:00. Under the afternoon schedule, requirements would be published by 12:00, bids would be submitted by 13:00 and results would be released by 14:00.

The ESO said these alternative schedules will enable it to understand the impact that different lead times have on the availability of flexibility. It said closer-to-real time procurement will also give the ESO more certainty over its requirements.

Final results

The ESO said 1.6 million customers took part in the service through 31 providers. They provided around 350MW of flexibility capacity.

It spent £11.1 million in total – £8 million in test events and £3.1 million in live events. More than 2.6GWh of demand reduction was delivered across the 20 test events, whilst 680MWh was delivered in the two live events.

The average price paid during live events was £4,559/MWh, compared to £3,000/MWh during test events. The latter equates to the lower limit set by the Guaranteed Acceptance Price.

The highest accepted bid during live events was £6,500/MWh. The demand reduction was around 20% higher during the live events.

The ESO said the greatest demand reductions were seen in Southern England, the East of England and the East Midlands. London and North Scotland were among the areas with the lowest.