National Grid Electricity System Operator (ESO) has been given the green light to run a demand flexibility service from this month until the end of March 2023.
Ofgem’s has now approved the scheme, which will see businesses and individuals paid to reduce their electricity use or at least shift it from peak hours, following a signal from the ESO.
The ESO estimates a typical household could save approximately £100 by participating in the scheme, with industrial and commercial customers potentially getting back multiples of this.
The first “demonstration events” are set to be held in the coming days with those providers that have said they are immediately able to participate. This will include a guaranteed acceptance price of £3 per kilowatt hour (KWh) – up from the original level of 52pKWh proposed in September after a backlash from suppliers. This is the floor at which the ESO will accept bids during these pilots.
There will be 12 of the demonstration events throughout the winter – two for each provider in the first month they participate, followed by two tests a month for the duration of the service. These will take place over a one hour period usually around the evening peak (4-7pm)
The service is open to half-hourly metered assets in unit sizes of between 1MW and 100MW that are able to respond for a minimum of 30 minutes. Assets that are dispatchable in the Balancing Mechanism, participate in ancillary or DNO flexibility services or have a Capacity Market contract will not be eligible to participate.
For a wider rollout of the service, the ESO has said there will be no minimum price for tenders, with a pay-as-bid basis. The ESO will accept bids from lowest price to highest until it meets its requirement.
The ESO also stressed that it is up to participating suppliers to decide how much and in what way to pay domestic customers for taking part.
Fintan Slye, executive director of the ESO, said: “We are delighted that Ofgem have approved the use of our Demand Flexibility Service this winter. It will help mitigate the potential risks that the ESO has outlined in its Winter Outlook and will allow consumers to see a financial return for reducing their electricity use at peak times.
“As a responsible operator of the electricity system we have developed this innovative Demand Flexibility Service to compliment the robust set of tools we already use to balance the electricity system every day.”