Hearing the challenges and opportunities facing utilities, regulators, and providers in the US energy flexibility landscape can offer some great insights into the direction of the industry. My time at GridTECH Connect gave me the chance to learn from the experts. So, here’s a breakdown of some of my key takeaways from the event.
1. Regulators are starting to accept the important role that market design has to play in the energy transition
First up, regulation. Regulators in the US are starting to acknowledge that without the right price signals, by time and location, there’s a risk that electricity will be priced out of the energy transition. Market design therefore has a key role to play.
2. Incentives will help make better use of the existing network, alongside building out the physical infrastructure
There’s consensus across regulators and utilities that we need to see stronger incentives. This will encourage better use of the existing network, rather than relying solely on building more.
Some progress has been made. Performance Based Regulation (PBR) and a live discussion around a move to include OpEX savings alongside CapEX, for example.
This is something that’s already working well in the UK and Europe. The recent IEA report highlights how a focus on better whole system outcomes – not just capital investment – consistently results in lower cost and more reliable grids.
3. Those incentives will help lower barriers to entry for US energy flex markets
The right incentives will help create a new ecosystem of connected business models and value propositions for energy flexibility in the US.
This open ecosystem is key to lowering barriers to entry by creating frictionless customer experiences. With this ecosystem in place, third parties and services will be able to more easily connect, making better use of the existing power network.
4. Non-Wires Alternatives need to find new ways to access more energy flexibility
Demand side flexibility is a huge opportunity for Non-Wires Alternatives (NWAs) – and not just for commercial providers. Anyone can play a part in this market structure: from commercial scale batteries all the way down to consumer level devices in the home.
However, network utilities are starting to feel that existing demand response programs are becoming saturated. They therefore need to start tapping into customers and resources that they haven’t engaged before, to access higher volumes of flexibility.
This means creating more compelling, and easier to engage with value propositions for end consumers. To do that, we need to lower barriers to entry and improve the user experience. Both start with a technology-first approach.
Market platforms like ElectronConnect can help. They can act as a neutral and asset-agnostic facilitator to streamline the interface between DERs, aggregators, VPP’s and utilities.
5. Integration and automation is essential to unlocking value for local energy flexibility in the US
It’s also becoming resource intensive for providers and utilities to operate these types of programs. To tap into the full value of local flexibility, operational systems like Distributed Energy Resource Management Systems (DERMS), Advanced Distribution Management System (ADMS), and market platforms need tighter integration and automation.
A more local, dynamic market coupled with Virtual Power Plants (VPPs) and DERMS could unlock significant value for utilities and their customers at the lowest level of the network. This value could well be greater than existing NWA today.
6. Standardisation will help flex providers engage with flex markets
For flexibility providers, manual or low-tech interfaces with utilities cause challenges, and can be operationally prohibitive at scale. Standardisation will help avoid duplication of effort and streamline engagement.
Providers are also calling for more inclusive markets that are better tailored to their technology type. For example, six-hour continuous dispatch from a single asset does not work for batteries. This leaves a huge amount of value from low carbon technologies untapped.
7. Regulators and utilities recognise the need for third parties in the flex value chain
Third-party platforms and service providers are starting to take over whole parts of the flexibility value chain.
Regulators and utilities are embracing this change. Third parties can innovate faster and will engage consumers and providers better than the utility networks operating alone. This therefore can help create more value, faster, for everyone in the value chain.
