The concept of energy flexibility was unheard of five years ago, but as innovation projects and understanding of distributed energy resources have accelerated and consumers have experienced the cost and carbon-saving benefits of changing their consumption habits, the idea has reached a new level of technical maturity and acceptance.
Confidence in the feasibility and value of energy flexibility is growing, along with the industry’s appreciation of energy flexibility’s immense potential to avoid major investment in reinforcement infrastructure, increase uptake of renewables in support of net zero targets – not to mention lower customer bills.
Large scale demonstrator projects and market experiments have not yet translated into ‘business as usual’ – there’s still much to do to stitch together local flexibility markets on a national scale. But significant progress is expected over the coming months and years as initiatives bear fruit.
All six network operators already procure flexibility and are in the process of transforming to a Distribution System Operator (DSO) model attuned to the needs of managing local supply and demand.
Final determinations for the RIIO-2 price control for electricity distribution set out a £22.2bn package of investment to operate, maintain and enhance local electricity distribution networks over the next five years. It included a new framework of outputs and incentives for DSOs to encourage them to consider flexible alternatives to develop and use their networks. Licence requirements will also force operators to communicate flexibility requirements and provide, on an annual basis, detailed information about their procurement of flexibility services.
Other major projects building foundations for flexibility include a world-first digital twin being developed by National Grid ESO and plans by Ofgem for new common digital infrastructure for market players.
Concerted action on flexibility is needed to avoid major investment in network reinforcement in future, explains Nisha Doshi, flexibility markets manager at Scottish and Southern Electricity Networks (SSEN).
“Encouraging flexibility really needs to happen over the next five years as uptake of low carbon technologies, like heat pumps and EVs, increases on the network. As a country, we aren’t physically able to dig up all the roads at the same time to allow these technologies onboard, so flexibility is vital to be able to manage it.”
SSEN’s Nisha Doshi will speak about establishing the DSO function and defining business as usual operations on the Smart stage at Utility Week Live on 16 May. Further details here.
A new model
The UK’s ongoing energy crisis has exposed the fragility of the grid and underlined the importance of energy flexibility to help build resilience through a fundamental transformation of the system.
The ability to modify generation by calling on low carbon technologies like heat pumps, electric vehicles or solar, and to change domestic and business consumption patterns, to either release power back to the grid, or store it during times of lower demand, helps support national balancing and local congestion relief. It can also help lower bills, unlock financial benefits for DER providers and underpin the national transition to net zero.
Flexibility services are playing an increasingly important role in the UK. Figures published by Energy Networks Association (ENA) show that in 2022 distribution networks tendered almost 4GW of flexibility in 12 months, a record for the fourth year running and equivalent to providing electricity to over 4 million homes.
DNOs are at various stages towards implementing new processes and functions under a DSO model, which will allow them to actively manage systems in real-time using a combination of flexible local alternatives to network reinforcement. Ofgem has defined it as encompassing network planning and development, network operation, and market development.
Details of how DSOs will be regulated, including on performance, reporting requirements and how an incentive reward or penalty will be determined based on response to last year’s consultation and implemented under RIIO-ED2.
Northern Powergrid’s DSO business unit went live last autumn and, according to Paul Glendinning, policy and markets manager, it is now actively recruiting, setting up flexibility systems and forecasting units, and has rolled out new flexibility contracts.
Northern Powergrid’s Paul Glendinning will speak about establishing the DSO function and defining business as usual operations on the Smart stage at Utility Week Live on 16 May. Further details here.
A key obstacle to making flexibility work at scale work, he says, is public understanding of the benefits of changing their consumption habits: “When the energy crisis is over, suppliers are likely to start introducing more flexible tariffs with more time slots, which will change demand on the network. We will need to monitor that to look for any constraints.”
The arrival of market wide half-hourly settlement, in October 2025, will be a game changer, he adds, giving more people the opportunity to gain extra payments and reduce their bills.
Recent media coverage of flexibility trials, such as ESO’s Demand Flexibility Service, have stimulated consumer interest. OVO is running two trials, Shift & Save and Power Move, the latter rewarding customers up to £20 a month for shifting their energy use out of peak times.
The supplier is testing different times and durations to build an understanding of what works well for customers. Amanda MacDonald, head of energy range at OVO comments: “With Shift & Save, we are varying the times and days of the week for each alert and the reward per KWh, to gain valuable insight into what is a more achievable shift for our customers.”
Ovo Energy’s Amanda MacDonald will speak about making flexibility easy for customers on the Customer stage at Utility Week Live on 16 May. Further details here.
So far, mid-week alerts from 4-6pm have seen the highest opt-in and success rates. More widespread use of smart meters and half-hourly reads that give customers detailed energy tracking data and advice will be key to simplifying customer engagement in flexibility, she adds.
“Greater uptake of smart home appliances, such as dishwashers or washing machines can also help, by allowing them to set programmes to coincide with greener periods or outside of alert times, making demand shifting more convenient,” says MacDonald.
Encouraging more low-carbon technologies onto the network and paying homes and businesses for their electricity demands transparent and user friendly market mechanisms and procurement platforms.
As distributed generation ramps up, a parallel increase in the number and types of commercial transactions and network access will require the modification and extension of systems contracting flexibility and enabling new access rights. Contracts and payments are currently managed manually, but automation is considered necessary in RIIO-ED2 to keep pace with the market.
Under its remit to facilitate the development of local flexibility markets, The Open Networks programme, run by the Energy Networks Association, is revising the existing standard agreement for procuring flexibility services and working to better align flexibility procurement processes across DNOs and ESO.
Flexibility market platforms like Piclo, NODES, and Electron are already popular, but none yet meet all the requirements of different stakeholders in the sector. SSEN is currenting working with platforms to understand how they can be used for completing procurement all the way through to settlement.
More “joint thinking” by industry is required, says Doshi, to ensure platforms meet the needs of DSOs and flexibility providers, use standard protocols (including for security) and ensure the market remains competitive and fosters innovation.
“Platforms need to clearly define rules on which markets providers can sell energy into and how,” explains Doshi. Some flexibility services still require exclusivity, preventing providers from selling to both a DSO and the ESO, which limits value, she adds: “It’s understanding how we can facilitate stacking, not just within DSOs, but between the ESO and DSO, we need clear rules on that.”
Data on demand
One factor linking all aspects of flexibility is the need for accurate and timely access to data by all actors in the next gen energy system. The Energy Digitalisation Task Force, and a recent joint response by the Department for Business, Energy and Industrial Strategy, Ofgem and Innovate UK, both highlighted the urgent need for an integrated and digitalised energy system to underpin the interoperability of the sector.
As a central coordinator across actors in the energy system, National Grid ESO is currently progressing development of a world-first digital twin, or Virtual Energy System, that will pull together ‘live’ data from across the grid an provide relevant access to anyone who needs it.
Better access to domestic energy data via this new ‘digital spine’ is a key motivation, says Carolina Tortora, head of innovation strategy at National Grid ESO: “Domestic demand is like the final frontier, when a lot of flexibility comes from domestic demand, we need to understand how much is available for us to ‘flex’, and the level of fixed versus flexible demand.”
National Grid ESO’s Carolina Tortora will speak about smart energy network breakthroughs on the Smart stage at Utility Week Live on 16 May. Further details here.
For example, householders typically need to turn their lights on in the evening, as a form of fixed demand, but they may be convinced to turn on their washing machine later or charge their car earlier, creating flexible demand.
The Virtual Energy System is expected to integrate multiple digital twins developed by different organisations, for example a generator, a transmission or a distribution network. ESO is currently engaging stakeholders to understand what data is useful for what purpose, what can be shared and who should have access, to inform the development of a governance framework. In order to encourage uptake and investment in digital twin development, it is creating specific user cases designed to prove value.
That work pending, a fully-functional digital twin could be up and running in four to five years, says Tortora: “By definition, a digital reproduction of the physical system will never be finished, but our job will be done when this takes on a life of its own and people want to connect to it because they see the benefits.”
Also set on bringing the industry into better alignment, Ofgem is proposing the development of new common digital infrastructure to coordinate energy flexibility markets and make them easy to access and use.
The Public Interest Digital Asset for flexibility markets is a long term vision and could, according to the regulator, present market information and data in a transparent, open and accessible way, and reveal historical performance and trends, a key aim being to help new entrants build their business cases. In addition, it could provide coordination and harmonising services across those markets for stacking revenues, and operational primacy rules, so they work more effectively together.
Dr Nina Klein, Senior Manager for Energy Flexibility at Ofgem tells UW: “There have been lots of discussions around standardising and aligning to support flexibility, but we’re not seeing the consistent implementation and the pace we would hope for. For many organisations it is still quite hard to really see what’s out there, for example market operators don’t have visibility of all the assets available and flexibility providers can’t easily see all the markets they can bid into, which creates a lot of inefficiencies and ultimately lost value.”
Ofgem will present on the challenges of preparing for a digital energy future and on the future of flexibility on the Smart stage at Utility Week Live on 16 May. Further details here.
Ofgem’s plan is to test the System Wide Flexibility Exchange concept with industry to gauge interest and which areas might need to be modified or emphasised. Details will be announced in March.
It’s another potentially crucial piece in the flexibility jigsaw, which as the other initiatives detailed here demonstrate, is getting closer to completion by the day.
CASE STUDY: Pilot local network lays foundations for large scale flexibility
A more detailed picture of what a local energy network of the future might look like is being investigated by Northern Powergrid through a £14.5m Ofgem-funded innovation project in partnership with consultancies TNEI and LCP Delta.
The Community DSO initiative runs until 2028 and will develop a new framework to enable Smart Local Energy Systems (SLES) across the low voltage network. SLES’ manage electricity demand and availability in hyper local areas and, according to Northern Powergrid, are considered an important tool to encourage the uptake of low carbon technologies like domestic solar, EV charging and heat pumps.
“Flexibility over the next five years, and the five years after that, under ED3, will all be about the LV network, and that’s never need done before,” says Paul Glendinning, Policy and Markets Manager at Northern Powergrid. “All the low carbon technology is going to be in people’s houses and in farms on the LV network, so how all that will work together is really important.”
Learnings from the project will be used to inform network operation strategies, and changes to regulations, it will also result in a proof of concept of a replicable local energy market framework suitable for deployment across most network areas.
“Commercial arrangements and regulations currently make it quite hard to sell the electricity you generate to your neighbour,” says Glendinning. “We’re suggesting there is a way that a community energy team, perhaps in a village, can share the costs of a wind farm or a solar farm and then also share the power. We’re going to do the data and analysis to see how much it can help.”
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