Flexibility has become a buzzword in power, where it refers specifically to the transformation of the power system via storage, demand-side response and interconnection. Yet it is equally applicable in gas, where the adaptability of the UK’s gas infrastructure to new, greener uses is giving it a renewed impetus; and in water, where traditional, vertically integrated companies are beginning the process of disaggregation that took place in energy two decades ago.
A number of new markets are emerging across utilities, including:
- Storage. The storage of power is increasingly seen as the silver bullet that will enable the transformation of the power system. Owning and operating storage is one of a number of new markets emerging at the edge of the power grid – and the ability of traditional utilities to play in this space is yet to be determined.
- Demand-side response. The identification, aggregation and selling of capacity secured via demand-side response is a nascent but growing business. As with storage, it is not yet clear what role energy networks can or will play in this new market.
- Non-domestic water retail. The non-domestic water market opened to competition on 1 April, necessitating fundamental structural change among water companies, which have had to split their retail and wholesale operations for the first time. Many water companies have separated out their non-domestic retail businesses altogether, putting them outside the licensed business, and a number have sold them off.
- Water wholesale. The water regulator, Ofwat, has made it clear that market forces will be introduced in key parts of the wholesale water business to drive efficiency and innovation. These include sludge, which will operate under a separate price control from the next price review, PR19, and the competitive procurement of major capital projects.
In response, utilities are developing a range of new business models. In water, companies have been obliged to separate their retail and wholesale arms, and further change to business models is likely to follow the changes to the wholesale market. In energy, networks are beginning to come up against the restrictions of their licences, and are responding by both developing activities outside the licence and seeking reform of the licence and clarity over their potential role in markets such as storage.
All this and more was on the agenda at Utility Week Live 2017, the UK’s leading utility conference and exhibition, held at the NEC Birmingham in May. The following pages contains some of the best of the in-depth presentations and discussions there.