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Who is best placed to manage electricity system flexibility?

Blog post   •   Feb 18, 2020 11:29 GMT

This article is written by our Executive Director, Graham Ault, and originally appeared on Clean Energy Pipeline

As the energy system develops along the trajectories of decarbonisation, decentralisation and digitalization, the level of variability and the accompanying need for flexible operation is both obvious and fast changing. The scope of flexibility services and the number of providers and recipients is growing. For example, Distribution Network Operators (DNOs) are procuring 100’s MW of flexibility from distributed energy resources (DER) to offset network loading peaks next winter, while implementing their first uses of these services this winter. At the same time, the flexibility (ancillary and balancing) services procured by National Grid Electricity System Operator (NGESO) are changing, with prices evolving and thresholds for participating gradually lowering to smaller energy assets and flex providers. It is essential that clean energy investors and operators know the market, anticipate its direction and take action to maximise the opportunity.

The established flexibility product markets such as frequency response, capacity and operating reserve (all for NGESO as the recipient) have extended to include imbalance management (for wholesale market generation and supply participants), self-management behind-the-meter for on-site renewables capture and import tariff reduction and the emerging DNO flex services noted above. Typical values for a stack of flexibility is £10,000-£100,000/MW/year depending on customer and asset type. The lower value range is typical for inflexible, stand-alone renewables, back-up generation and time-constrained load shifting assets. Notable recent changes can be found in the extension of commercial aggregation in overall scale but also in scope, now addressing multiple flexibility services rather than targeting only a few premium services. Reach has also extended with more behind-the-meter, smaller scale assets that now include residential flexibility.

The roles and responsibilities for coordinating system flexibility currently seem fragmented for many providers, recipients and a range of aggregating intermediaries. Ongoing, sector-wide initiatives (e.g. Power Responsive and Open Networks programmes as well as market and tariff reforms governed by Ofgem and wider European market changes) seek to clarify, coordinate and generally improve market access, opportunity and system outcomes from flexibility. These will continue to change the landscape of opportunities, value, roles and responsibilities for the foreseeable future, in parallel with the opening of new opportunities (e.g. DNO flexibility, Local Energy Systems/Markets – LES/LEM).

There is an important and growing role for the platforms and systems that will coordinate flexibility for providers, recipients and intermediaries. Individual flexibility products can be managed directly with the recipient or market organising entities (e.g. to NGESO and the new ancillary service platform).

To take advantage of the multiple opportunities available then both flexibility market and dispatch / control platform capabilities are required. Such platforms coordinate, optimise and integrate to flexibility recipient systems and provide the capabilities to operate and monetise flexibility with less hands-on activity on a day-to-day basis. Gaining a better understanding of the options (each with possibilities and constraints), integration requirements and possible partners to access the breadth of flexibility markets and value streams is strategically important for clean energy investors, developers and operators. We see coordination and optimisation of the available value stack for each type or group of assets and providers as a crucial function.

It is, therefore, recommended that energy producers and users of all types become more proactive in managing flexibility as an essential component of their energy assets and estates. That may currently be difficult or impractical for some, but this is an essential and growing aspect of the smarter, cleaner, more flexible energy system as well as for asset owners in maximising returns on investments. Owners, operators and investors of flexible energy assets need to fully address the reality of this emerging situation with its many opportunities and challenges. There are new value streams to be tapped (financial as well as climate and other objectives) but flexibility needs to be better factored into current investment and operational decisions while maintaining an eye on the expected changes.

This is a growing and important area for the decarbonising energy system based with measures required to accommodate variable renewable energy sources. Under current consumer, generator, grid, system and market characteristics, the prospect for all-encompassing flexibility coordination to stack, coordinate and optimise flexibility and value to providers seems a distant prospect. However, a balance can be struck between more open and complementary flexibility product specifications and the critical need for flexibility in a secure and economic system by the use of new platforms and tools to manage energy assets and their integration to the system and multiple markets. The domain of aggregator platforms, market interfaces and trading platforms, Virtual Power Plants (VPP), smart network management and Distributed Energy Resource Management Systems (DERMS) is creating the tools required to coordinate, optimise and monetise the multiple roles of flexibility in the system.