For those who have never come across DSO flexibility markets, in a nutshell, could you describe what these markets are and why they are important to UKPN?
As more and more renewables, electric vehicles and heat pumps connect to the distribution network, we face growing pinch points in the network. Historically we would have upgraded the network to handle the peak requirement, even if this peak was only for a few hours a year.
Over the past five years we have begun to harness the flexibility of customers to change their demand or generation in response to local network needs. In return we pay them a fee, which is cheaper and less disruptive than upgrading the network.
We removed more than £400m of network investment from our 2023-28 business plan on the basis that we could manage these constraints using flexibility. Without flexibility, we would have needed to spend this money to upgrade our network to accommodate additional demand. It’s a similar story for generation. Flexibility offers a route to connect renewable generation faster and more cheaply.
We see flexibility as a critical tool in enabling Net Zero at lowest cost to consumers. As we prepare to launch the UK’s first legally separate Distribution System Operator, these DSO flexibility markets are only growing in importance.
Can you talk a bit about this winter's flexibility competitions? What type of services are you seeking and is there anything that's different about this round of competitions compared to previous ones?
We are seeking flexibility across our network – from generators connected at 132kV to portfolios of domestic assets. Our earliest requirements are in Summer 2023, with the latest in Winter 2025. In terms of capacity this is the biggest requirement we’ve tendered.
With a significant pipeline of solar generation looking to connect, for the first time we’ll be seeking demand turn up as well as demand turn down. This is a great opportunity for demand or battery storage to get paid for absorbing locally generated, green electrons that would otherwise be lost.
What are the benefits of participating in DSO flexibility markets?
The most obvious benefit is the financial one. Payments in previous flexibility competitions have reached £600/MWh. If UKPN asks you to turn up generation, or down demand, you may also be able to sell that energy on the wholesale market, depending on your business model.
DSO flexibility markets are at the cutting edge of flexibility. If you’re aggregating flexible assets on behalf of your customers, participating in DSO flexibility markets can provide you an advantage over your competitors.
Lastly – there is the benefit of knowing that you are helping to connect more low carbon technologies in the local areas where you have assets. This is an increasingly powerful message for employees and customers.
What kind of assets can an FSP register?
We want to attract all forms of flexibility. It’s in our interest and the interests of our customers. As such, we’re proud to offer what we believe are the most inclusive flexibility products in the UK. Small assets can be aggregated and the minimum requirement is just 10kW per constraint area, lower than any other system operator. Metering can be provided from the site boundary or from the individual asset, opening up the types of asset and provider that can participate. We also offer a range of approaches to calculate the ‘baseline’ from which flexibility is measured.
In addition to those who can change their electricity usage or generation flexibly, we also encourage interest from energy efficiency providers who can deliver a sustained reduction in requirements.
What support can FSPs find to help with their participation?
We’ve just published an introduction and detailed participation guidance. While we’ve tried to make this as straightforward as possible, we know it can be overwhelming, particularly for new providers. We will be hosting a webinar on 13th December to talk through the key details, and we’ll run regular virtual drop-in sessions for any providers that want to discuss things one to one.
If you’re in any doubt – the team will be more than happy to talk things through with you and help you to participate.
How do you see these markets developing moving forward?
As our needs for flexibility grow, we want to continue to grow the number and scale of providers. In that context, one of the things we’re most excited about is introducing day-ahead procurement in the future. We hope this will enable many more assets to participate, particularly if they can’t reliably forecast their availability months in advance. If you’d like to know more, we’ve just published a paper spelling out our priorities for developing local flexibility markets. We’re always looking for feedback from flexibility providers, so if you have ideas please email firstname.lastname@example.org.
Any final thoughts you wish to share?
We’re excited about this flexibility competition. We’d love to see some new providers enter the market, along with existing providers offering up more assets.
(Edited November 30, 2022)