Demand-side repsonse aggregators should not be allowed to have unfettered access to wholesale and balancing markets, Smartest Energy has told Utility Week.
Policy-makers should consider introducing a special licence for aggregators which is less burdensome than a full supply licence but still places them under many of the same obligations, said the company’s vice president for asset optimisation Robert Owens.
Owens said he has seen lots of discussion of aggregators taking part in wholesale and balancing markets without facing the same responsibilities as licensed suppliers which are currently the only ones able to do so.
However, he warned that allowing aggregators to participate in these markets without any kind of licence could open up the possibility of disputes and leave consumers unprotected.
“You’ve potentially got the risk of a customer having arrangements with two parties for their energy – one doing their general procurement and one managing their flexibility – with no necessary guarantee that their contracts will be automatically compatible with each other, and a risk that the customer gets stuck in between.”
“The question is whether you should be facilitating access to energy markets for non-licensed parties, and our view is that one way or the other you need to have a review of those licensing regimes to make sure that you are building in the same sort of protections as you would do for existing participants.”
Owens said one of the key issues which would need to be resolved is the defining the difference between a procurement action and a flexibility action.
“It’s quite difficult to differentiate between the two,” he cautioned. “In extreme, you could have a situation where – if you don’t get those definitions correct and the licensing correct – you could have third parties effectively able to make energy procurement decisions without being bound by the obligations you’d have with a supply licence.”
“When everybody’s doing everything,” he added, “that’s much more of a blurred line”.
As a licensed supplier as well as a demand-side response (DSR) aggregator, Smartest Energy is already able to sell its DSR services into the wholesale and balancing markets.
Owens said he can understand why other aggregators might not be keen to follow their lead: “It may be that having to build up a whole supply portfolio would be quite a burden on them.” He suggested that a “different sort of licence” may be the answer to the conundrum.
He made the comments after Flexitricity co-founder and chief strategy officer Alastair Martin called for aggregators to be given independent access to wholesale and balancing markets on the basis that vertically integrated suppliers are effectively acting as gatekeepers and shutting them out.
Owens agreed that this may be an issue and conceded that its “never comfortable to be in a situation where you’re having to negotiate with your competitors for access for a customer you both want to deal with.”
However, he added: “I don’t believe it’s entirely the case that DSR hasn’t come on just because of the actions of the vertically integrated suppliers.”
He said there are other issues which aggregators need to resolve, including proving the reliability of DSR which has been far from flawless so far.