Conclusions

In its 2019 Future Insights Paper on Flexibility Platforms in electricity markets, Ofgem provided a useful frame to consider the functions, or “tasks”, required to effectively facilitate markets for flexibility. With its call for input on the Future of Distributed Flexibility the discussion has started to move from the ‘why’ and the ‘what’ to begin considering the ‘how’ and the ‘when’.

The identification of the four market failures and the potential for three of those failure to be addressed through provision of an enabling digital infrastructure, the FDI, that provides greater visibility of and access to information across system actors; addresses barriers to market access; and, improves trust; is an important step forward in delivering the vision set out in the Smart Systems and Flexibility Plan. That is, markets that reward participation of flexibility.

Ofgem’s Call for Input identifies that no single system actor has the functional and legal ability, legitimacy, or appetite to step up and take on the role of neutral flexibility market facilitator. Work needs to be done to achieve a consensus on what functions or “tasks” need to be delivered by a digital common, such as the FDI, in the customers’ interests. Typically, these need to be the tasks where the costs need to be socialised for the wider societal benefit of accelerating the creation of flexibility markets and delivering a net zero power system. Addressing barriers to competitive markets for flexibility services will enable market actors to offer innovative new products and services and give customers meaningful choices in how, and when, they consume energy. Who knows, with such an enabling digital infrastructure in place, maybe we’ll see a range of “Deliveroo-style” apps for flexibility services competing for customers’ business.

We mustn’t get locked into thinking that the role of a Neutral Market Facilitator and an FDI is limited to facilitating the markets for flexibility. Addressing the first identified failure of “imperfect information” is vitally important to system operators’ ability to keep the lights on. With the changing dynamics of the system and the projected growth in active use of demand side flexibility, system operators will need visibility of what is happening on their infrastructures if they are to be able to take operational decisions effectively.

Ultimately, the key message from this report is that the industry supports the need for a market facilitator and for a Flexibility Digital Infrastructure but we need to move at pace to define roles, responsibilities and requirements if we are to deliver a net zero power system within the targeted timeframe.