Octopus Energy has accused the Electricity System Operator (ESO) of putting a “handbrake” on the growth of domestic flexibility.
The retailer has taken particular umbrage with the ESO’s plans to introduce greater price competition into the Domestic Flexibility Service (DFS).
In setting out its plans for the DFS in August, the ESO said that it would remove the guaranteed acceptance price of £3/KWh for the six tests after Christmas if capacity reached between 2-3GW, with the price then being determined by auction.
However, a revised threshold of 1.25GW has since been published in a market information report earlier this month.
Octopus Energy, which had the largest domestic customer base in the DFS last year, said the lower threshold would restrict the development of the household flexibility market.
“ESO should avoid appearing to put any cap on household flexibility. Instead of putting the handbrake on by limiting the amount of capacity households can contribute, we need to double down on it, tap into this massive resource and ensure customers see the value,” said Kieron Stopforth, senior flexibility manager at Octopus Energy.
“With more heat pumps and electric cars coming online every day, household flexibility has the potential to turbocharge the energy transition, if we let it.”
Trade body for the energy supply industry Energy UK confirmed that some suppliers were “disappointed” with the lower value but said that providers do recognise that the ESO is trying to balance its objective of growing DSR volumes and while also controlling costs.
Naomi Baker, senior policy manager at Energy UK, said that as the ESO’s role is to manage costs in the short-term, more longer-term decisions to grow the domestic flexibility market must be made by the regulator Ofgem.
She said Ofgem is working on what the route might look like to grow domestic flexibility, but this will take time.
She added: “Providers do accept this but would like to be doing more of the practical learning alongside.”
Suppliers are still hoping for Ofgem to make an early decision to approve the DFS to allow them to onboard customers in time for the scheme’s launch in November.
A spokesperson for the ESO added: “Across last winter the Demand Flexibility Service successfully demonstrated the interest of consumers and businesses in playing a more active role in balancing our electricity needs and to be rewarded with savings for their action in the process.
“The Demand Flexibility Service, subject to approval from Ofgem for this winter, will provide additional tools for managing the national electricity network whilst also helping consumers in homes and businesses across Great Britain to make savings on their energy bills.”
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.