In the UK, distribution network or system operators are still governed by the requirements of price control framework RIIO-ED2 which runs until 2028. This sets out a TotEx approach to investment while encouraging the use of energy flexibility. Now, the conversation turns to the next price control iteration: ED3.
UK energy regulator Ofgem released a consultation – now closed – on its proposed framework for this next electricity distribution price control period. Here’s our comment on the continuing importance of flexibility, as we shared in our response to Ofgem’s consultation.
We at Electron appreciate the opportunity to contribute to Ofgem’s ED3 Framework Consultation. As a leading provider of digital platforms for energy flexibility markets, we are committed to supporting the evolution of the UK’s electricity distribution networks to meet net zero targets efficiently and effectively.
We commend Ofgem’s bold thinking on the critical role flexibility, particularly its role in supporting network expansion versus serving solely as an alternative to it.
Flexibility has the potential to create whole-system value that goes far beyond network upgrade deferrals alone – we believe this represents a significant opportunity for our sector.
When viewed this way, flexibility is not used to simply defer network upgrades between price control periods. Instead, it enables system operators to expand grid capacity more rapidly, connect new clean MWs faster, and prioritize the deployment of new network infrastructure where it’s needed most.
This approach will provide consumers with lower energy and system costs while underpinning the GDP growth that new connections bring to UK plc.
We also welcome the invitation this consultation provides to think more boldly about the whole-system value of flexibility and how access to this value might be facilitated. We look forward to being part of ongoing discussions as incentives are reimagined.
1. Flexibility is an important part of network expansion and not just an alternative to it
Flexibility represents the fastest, most cost-effective route to expanding network capacity.
Moreover, it is not merely an “interim measure to alleviate capacity requirements if reinforcement has a long lead time.” Running flexibility markets—particularly across a mix of time periods— enables better investment decisions and prioritization.
The option value of deferring decisions unlocks improved load and technology forecasts, along with several years of data on price-driven behavioural changes in the region (we expanded on this in our blog on the role of flexibility in an expanding network).
In this way, “flexibility first” still holds and delivers value to consumers and the wider system by ensuring the best decisions are made. RESPs alone will not suffice without supporting data; they risk creating one-off snapshots of strategic needs instead of living, dynamic datasets that represent the relative value of networks by time and location.
2. Unlocking the whole-system value of distribution-connected flexibility
Our work with network and system operators to date suggests that a major inhibitor to scaling network flexibility has been the narrow way in which its value has been attributed.
Specifically, decision-making frameworks have typically only considered the value flexibility brings to expanding the distribution network. However, as you note, distribution-connected flexibility can deliver much broader whole-system value.
Since distribution network operators (DNOs) will continue to play a role in securing options on flexibility—such as headroom and grid insurance products in advance—we suggest that DNOs be enabled and incentivized to secure more flexibility based on whole-system value.
This would ensure that local network needs are met while allowing this flexibility to be released into national balancing markets or local secondary network capacity optimization markets (e.g. BiTraDER).
This approach would also facilitate local and national coordination while simplifying market access for DERs. It would enable DERs to stack network market value with revenues from balancing and capacity markets. We welcome the opportunity to discuss this potential operating model further.
3. Missing incentives for the option value of flexibility in resource allocation and faster connections
The timely addition of network capacity must be incentivized. However, the rapid development of peak network capacity across all regions is not only undesirable but also unfeasible.
One aspect we feel was missing from the consultation is a clear view of how DNOs can be supported to build a whole-system flexibility value model more quickly. What new incentives are needed to connect new MWs faster and prioritize whole-system value?
This is particularly critical, given the recognition that this transition is a consumer-led paradigm—not just a top-down one.
We are committed to being a constructive and collaborative participant in the energy ecosystem, working alongside Ofgem and other stakeholders to achieve our shared goals. We look forward to continued engagement and are available for further discussions to elaborate on our response.
