The UK’s new Market Facilitator, Elexon, amended the Balancing and Settlement Code (BSC) with P415 in November 2024, giving demand-side aggregators access to wholesale electricity markets. Here’s what that means for distribution system operators (DSOs) and how that could impact flexibility procurement.
What’s changed?
In November 2024, P415 amended the Balancing and Settlement Code (BSC). This code governs how electricity supply and demand is balanced at a national level.
Demand-side aggregators (or Virtual Lead Parties (VLPs)) can now offer demand flexibility into the wholesale electricity market, alongside the Balancing Mechanism which they could already access. With this change, customers’ flexibility can now be offered into the wholesale electricity market without the involvement of the supplier.
What are the benefits of this to demand aggregators?
This opens up more choice to aggregators of distributed energy resources (DERs) in how they offer flexibility services.
Independent aggregators could already offer flexibility services on behalf of their customers into the Balancing Mechanism, DSO Flexibility Services, Demand Flexibility Service, and other services. With P415, independent aggregators can offer flexibility services into the wholesale market too.
This all means greater incentives and more options for aggregators. They can now shop around to obtain the best price for their flexibility – and for their customers.
What does this mean for DSOs in the short term?
These new rules reinforce the movement of the market towards low carbon flexibility. The shift is inevitable as the government strives to decarbonise the UK’s power system by 2035.
As competition increases, DSOs need to make sure that their flexibility services continue to be attractive for demand-side aggregators. DSOs that don’t respond to the change could see a dip in the volume offered into those services in the short to medium term, as aggregators look to other markets and services.
What does the P415 amendment mean for DSOs in the long term?
Over the long term, P415 will help to accelerate rollout of low carbon technologies. That will ultimately give DSOs a bigger potential pool of flexibility to draw from – putting control back into the hands of DSOs.
System operators therefore need to consider how they can continue to evolve their approach to flexibility services, to meet flexibility providers where they are.
This means offering inclusive and coordinated flexibility markets that can enable aggregators to maximise value across multiple markets and services.
Why will DSO flexibility services still be attractive for demand-side aggregators?
Longer-term contracts and reservation payments are common for today’s flexibility services. However, demand-side aggregators managing variable loads tend to avoid those long-term commitments, with difficulties in forecasting that far ahead.
Instead, they prefer entering next-day forecasts and offers into day-ahead markets that only pay for the flexibility that’s used. This aligns with day-ahead wholesale electricity market timings and leaves the aggregator’s options open. They aren’t locked into a flexibility service too far ahead of when that energy is needed.
DSOs must therefore continue to evolve their flexible service design. That will allow them to cater for a range of use cases, and to maintain their attractiveness for a range of provider types. This includes decisions on market timing and payment structures – as well as lowering barriers for provider participation in local markets.
Want to learn more about this change? Read more – or reach out to our team of experts.
