How can we make the electricity system more flexible? There are five priority areas of focus, as Andrew Burgess, Associate Partner of Energy Systems at Ofgem, explains.
The way Britain generates and uses electricity is rapidly changing. We could save on investment if we had a more flexible electricity system. More flexibility can encourage customers to use electricity outside peak times and can help increase consumption when it’s needed. Overall the market will be more efficient and innovative, and greater flexibility will help to engage and empower energy consumers.
To get there, we need a regulatory system that supports flexibility. We’re focusing on five priority areas, as part of a wider project with the Department of Energy and Climate Change (DECC).
Encouraging business customers to provide more demand-side response
Industrial and commercial demand accounts for more than half of electricity demand at peak times. As you can see from the Power Responsive website, some large users are already benefitting financially (receiving payments or through reduced energy bills) from being more flexible in when they use electricity. However, other users are not yet taking advantage of the opportunities from voluntarily flexible electricity consumption.
In our work we want to help large users understand more about how they can provide flexibility. Some may not be aware of how they can get involved, or how the process works.
Therefore we are:
- Gathering further information on the potential and value of flexibility to industrial and commercial users.
- Raising awareness of the opportunities available while trying to better understand the concerns and needs of consumers.
As part of our information gathering, we have launched a survey of users to understand the extent to which they are currently providing demand-side response, and their experiences. We would encourage you to take the time to complete our survey, to give us a more accurate picture of the state of the market and what we can do to help.
We welcome National Grid’s Power Responsive campaign as it is also raising awareness of demand side response and identifying changes that will enable wider participation. And we continue to work closely with it to address the issues identified.
Aggregators coordinating businesses’ demand-side response
Some businesses have neither the time nor expertise to negotiate demand side response contracts. Aggregators coordinate demand side response offers from individual businesses, bridging the gap between consumers and energy companies.
There is no current regulatory definition of aggregators, setting out their role and interactions with other industry parties. So we will work with aggregators and the industry to agree expectations for what they’ll do. In investigating the role of aggregators in providing flexibility, we are contributing to the European debate on how aggregators interact with other industry participants.
The survey will include a series of questions on aggregators that will help inform our work. We want to hear from businesses and other organisations about their experience of interacting with aggregators.
The three others areas of the flexibility package
- Traditionally, Distribution Network Owners (DNOs) have transported power from the National Grid to customers. In future, they will need to manage power flows as Distribution System Operators. This is important, as there will be more renewable generators and electricity storage facilities within their networks. We will set out our expectations of DNOs and develop thinking on their future role.
- Storing electricity could go a long way towards making the most of excess renewable electricity on sunny or windy days. Stored electricity could be released when demand is higher or when the network is less constrained. At times, storage can act like consumption (taking electricity off the network), and at other times like generation (putting electricity onto the network). We need to agree how regulation, charges and industry rules should change to reflect this, and how we go about change.
- The areas above, and flexibility generally, may result in changes to the charges for using the electricity distribution network. Although this is a longer-term piece of work, we have started thinking about it already, so that we have a clear idea of the extent to which changes are needed, the advantages and disadvantages of different approaches and why.
We want to make sure we have the right building blocks in place for a more flexible system. There will be plenty of opportunities for you to discuss these with us, especially when we publish our joint Call for Evidence consultation with the DECC in spring. In the meantime, we would encourage you to complete our survey here, the results of which will be used to better target our further engagement with electricity users. If you are interested in finding out more, contact the team.