This report is brought to you by Utility Week Intelligence in association with CGI
There’s no Clean Power 2030 without flex – call it out
The latest meeting of Utility Week’s Flexibility Forum surfaced urgent calls for clarity on the role energy flexibility will play in accelerated decarbonisation of power and mounting frustration with blockers to market development.
The new Labour government has intensified an already frenetic transformation agenda for the GB energy system, knocking five years off the timeline for power system decarbonisation.
To help hit the new goal, substantial new bodies have been set up to stimulate investment in low carbon technologies and to drive delivery – GB Energy and Mission Control.
But, to date, there has been no explicit statement or plan set out for the role energy flexibility – especially distributed flexibility – will play in achieving Clean Power 2030 (CP2030). This is a void that urgently needs filling, agreed members of Utility Week’s Flexibility Forum, run in association with CGI, when they met last month.
In a session which explored the implications of CP2030 for flex market objectives, there was unanimous agreement that Chris Starks’ Mission Control should set out a clear view on the need for growth in clean generation to be matched with the growth in flexibility. And this high-level view should be rapidly backed up with a clear strategy for how that will be delivered. While there were mixed views about the merits of setting targets for the volumes of flexibility provided by different sources, it was agreed that specifying a need for diversity in the flexibility mix would also be helpful.
Said one growing flexibility service provider: “My message to Mission Control is that there is no clean power system in 2030 that is not built on flexibility. I would really love to see DESNZ and Mission Control agree some kind of joint statement…where they say that all the new generation we need in the next five and a half years will have to be balanced by equivalent volumes of flexibility…with that in place, I would sleep well at night.”
“My message to Mission Control is that there is no clean power system in 2030 that is not built on flexibility.”
Flexibility service provider director
This “essential” high level recognition of energy flexibility as critical enabler of CP2030, and a constant feature of our future energy system, should clearly define the primary objectives of flexibility too, said energy network leaders at our meeting.
To help focus the development of the right kinds of services and market interactions, there needs to be an unambiguous position on whether distributed flexibility in particular is “about deferring investment or supporting the system”, said one Distribution System Operator (DSO) director.
They continued: “My view is that flexibility’s main value is at system level – by avoiding additional capital investment in generation. By keeping the system peak lower and using excess power at traditionally low demand points we will get to a lower whole system cost – keeping energy bills lower for customers.”
However, a lingering view of distributed flexibility as a means for avoiding investment in additional distribution network capacity runs counter to development of this system value, the director argued.
“We're going to miss the boat totally unless we actually give some kind of guidance on what we're trying to use flexibility for now,” they summed up.
More positively, our group recognised that many of the building blocks for rapid development of energy flexibility markets are starting to fall into place. A focus on accelerating these should leave market participants ready to support significant growth in engagement from both I&C and residential consumers who will be able to deliver demand side flexibility in the next few years.
For example, the appointment of Elexon as Market Facilitator was universally welcomed, with widespread satisfaction at the swift steps being taken to get this essential new entity operational by late 2025/early 2026.
Other critical work – on the development of consent frameworks for participation of domestic assets in flexibility markets and standardised asset registration processes – is also approached with new urgency and determination.
To help market participants understand how and when all of these enabling building blocks will fall into place, Utility Week understand Ofgem and DESNZ are also “scrambling” to define a flexibility road map which will show how they fit together and also identify any potentially missing market enablers or uncertainties that require attention.
Picking up on this idea of missing puzzle pieces. Participants energetically expressed views on a range of niggling blockers which they feel could prevent energy flexibility playing its rightful role in the CP3030 mission. Foremost amongst these were:
1. Lack of level playing field with wind curtailment
A representative of a major energy supplier argued passionately for the need to “level the playing field” between domestic assets standing ready to provide flexibility, and curtailment payments for wind generators.
“There’s already lots of flexibility potential today. But the level playing field does not exist for domestic assets….It's hard for us to compete with wind curtailment.” They said.
“We need to think about whether we would rather pay … wind generators to turn down? Or would we rather pay customers to turn up?”
2. Inability to access the value of avoided generation investment
One energy policy leader opened up a vibrant discussion by suggesting that flexibility markets will remain constrained in GB until such a time as service providers can access the value of the capital costs of avoided investment in generation.
“The reason why flex providers aren't coming into the market is because there's not enough revenue,” they stated. “Stacking will help that…Primacy will help that, but that's going to take a bit of time. What we need is some real leadership. If [flexibility] is going to save capital, and reduce the future running costs of the system, let's see some of that pulled forward.”
This potential to unlock the value of avoided generation investment in energy flexibility markets was recognised some time ago in a study carried out by the respected academic Professor Goran Strbac, noted another Flex Forum member. They recalled Strbac identified that to achieve this, investment will be needed in distribution networks “to ensure that flexibility can be made use of at a national as well as a local level.”
Strbac’s report explains: “The system boundary for energy system optimisation is important. Investing in local flexibility reduces system cost at a national level. However, making use of distributed flexibility requires appropriate investment in distribution networks to ensure flexibility can be accessed by the wider system. Developing an energy system primarily focused on minimising investment in networks is a false economy.”
3. Sluggish progress with the Open Networks programme
To date, the main forum for driving standardisation in flexibility products, contracts and settlement and for tackling issues of primacy between local and national markets, has been Open Networks, administered by the Energy Networks Association.
Not for the first time, some attendees at the Flex Forum meeting expressed extreme frustration with the slow pace at which this programme has moved and its tendency to land on “lowest common dominator” outcomes.
“This extremely slow pace is not acceptable if we are looking for a transformative five year target. [CP2030] is huge and imminent,” stressed one senior strategist representing a flexibility aggregator.
Ownership of Open Networks will pass to Elexon when its Market Facilitator function becomes operational; and hopes are high that its experience of engaging with diverse stakeholders to deliver substantial industry change will have a positive impact.
But the Market Facilitator will not be up and running until end of 2025 at the earliest. In the interim, and while Open Networks workstreams are gradually handed over, one strategic leader asked if there might not be a role for Ofgem to intervene and “drive compliance and adoption” of new rules. The individual commented that without this, “we will be throwing away 18 months” of time that the industry can ill afford to lose.
“We’re going to miss the boat totally unless we actually give some kind of guidance on what we’re trying to use flexibility for now.”
DSO director
These issues are a selection of just the most passionately debated points to come forward during our meeting. But it was clear from the discussion that the Devil in the detail of flexibility market development will be exposed in myriad ways if pressure is applied – as market participants hope it will be – for it to underpin success with the CP2030 mission.
Other issues which were called out included the interplay between energy flexibility developments and major industry change programmes like REMA and MHHS. To manage these interdependencies and head off counterintuitive outcomes, a programmatic approach to monitoring alignment is needed. Is this in the scope of Mission Control? Our Flex Forum members were unclear.
Concluding remarks
Rich Hampshire, vice president digital utilities at CGI – Utility Week’s strategic partner for its Flexibility Forum – offers reflections on the community’s latest debate.
This Flex Forum meeting took place before ESO published its Interim Analysis for DESNZ’s request for advice on achieving clean power by 2030. The Flex Forum’s discussions aligned with that Interim Analysis. Points included the role flexibility will play in delivering the Clean Power mission, the call for Mission Control to consider the role of flexibility in its vision for investment in green generation, and how markets for flexibility will access the true value of avoided investment in generation. Combine this with avoiding costs of curtailing wind generation and increasing demand to take advantage of low-cost electricity and there’s a double-whammy benefit for consumers bills!
The now NESO’s analysis highlighted the role of flexibility in delivering the Clean Power mission by 2030, but does not yet provide the relative economics of the different pathways. NESO’s High Renewables pathway is driven by the need to power the fastest pace of decarbonised demand growth. The ability for markets to access this growing pool of flexible assets should address the liquidity issue previously highlighted by this Forum. This meeting’s discussion of avoiding unnecessary investment in generation aligns with a pathway where the fastest pace of electrification of demand combines with the highest engagement with consumer demand flexibility.
Also from the UW Flex Forum…
Demand side flexibility: The state of play
Why are recognised barriers to flexibility taking so long to break down?
Energy flexibility: What do we want?
What does success look like for GB flexibility markets?
Consent – the make or break of energy flexibility
What will convince consumers to use their homes for flexibility services?
Dos and don’ts for the market facilitator
A guide to industry expectations of the new entity
Downloadable report
Advancing Flexibility: What should we expect of the market facilitator?
Industry leaders share their expectations and concerns
About the Flexibility Forum
Utility Week’s Flexibility Forum, created in association with CGI, is a community for all stakeholders in the development of energy flexibility markets and services in GB. Through running regular events which promote discussion and learning on topical issues, and publishing insights into these meetings, it is our ambition that the Flexibility Forum will encourage consensus and understanding about how to tackle market challenges and accelerate realisation of the value energy flexibility should bring to a sustainable, affordable energy system.
We are open to enquiries for new participation in the Flexibility Forum. Please contact Jane Gray at: janegray@fav-house.com, content director Utility Week, if you would like to join future meetings.
This report is brought to you by Utility Week Intelligence in association with CGI