The Electricity System Operator (ESO) has revealed plans to introduce greater price competition for Demand Flexibility Service tests next year.
The ESO said the minimum price consumers have hitherto received for participating in the tests will not apply to those taking place from January 2024 onwards if the expected volume of demand reduction exceeds a set threshold.
The Guaranteed Acceptance Price will remain at the same level as last winter’s rate of £3,000/MWh and will continue to apply for the next six tests that are scheduled for November and December this year.
However, this lower limit will not apply to subsequent tests if the forecast volume in each exceeds 1.25GW. The ESO said this is the minimum volume necessary to ensure that 1GW of demand reduction can be delivered during live events, given that 80-87% of procured volume was actually delivered during live events last winter.
To ensure they do not deliberately understate the figures, the ESO said the indicative forecast volumes submitted by participants will be routinely reviewed to ensure they correlate with the observed delivery rates during test events.
In its latest guidance document for the service, the ESO also confirmed its decision to remove the within-day adjustment to the baseline consumption level for domestic consumers.
As Utility Week revealed earlier this year, consumers were able to game the system by deliberately increasing their electricity usage during the adjustment period leading up to events. On internet forums, some claimed to be able earn as much as £175 per sessions by doing so.
In a set of consultation responses released by the ESO, parties were generally supportive of its plans to remove the within-day adjustment. As well as limiting the potential for gaming, some respondents said the removal would help to simplify service. One said the adjustment led to confusion among customers, many of whom made complaints when the volume of demand reduction they were calculated to have delivered failed to meet their expectations.
However, some respondents said they would prefer other changes such as an extension to the adjustment period or a nationwide adjustment to account for weather conditions on the day.
Under a “fairly moderate” scenario, the ESO expects around 1GW of capacity to be made available through the DFS. In a more optimistic outlook, the ESO thinks up to 2GW could be made available.
The moderate estimate of 1GW is triple the 350MW made available through the DFS last winter, while the ambitious 2GW target is six times as much.