At Electron’s Flex at Scale 2024 event, a panel of system operator representatives debated how to attribute more value to flexibility markets – in aid of driving more volume into those markets. Here are five of the key actions outlined.
The panel included: Melanie Bryce, Head of Network & Market Development at Scottish and Southern Electricity Networks; Lois Clark, Flexibility Market Development Manager at National Grid ESO, and Alex Howard, Head of Flexibility Markets at UK Power Networks. Chris Broadhurst, Electron’s CCO, moderated the panel.
Read how value and volume work together to drive flexibility at scale
1. Define what value is and what it means for different market actors
The panel discussion kicked off with a seemingly simple question: what is the value of flexibility? In reality, this isn’t straightforward. Who it is valuable to and how that value is realised can vary significantly.
During the panel, Lois broke down what value could mean to each stakeholder: “The value to networks is being able to balance them in an efficient and economical way. The value to customers comes through in terms of cheaper bills and being able to be involved within the transition, and then the value to providers is from a real, pounds-in-pockets perspective.”
Yet, the very nature of what can be considered “valuable” is evolving. “The narrative has shifted somewhat over the last few years to recognise that flexibility has a role, not just in cost, but in the speed of the transition,” said Alex.
“It can unblock some of the challenges that people have connecting to the network and waiting for infrastructure upgrades to happen.”
2. Take a whole-system approach to flexibility
A challenge to realising the full value of flexibility is removing friction from the process. This can be between system operators and Flexibility Service Providers (FSPs) who are frustrated by legacy systems and processes. Yet it can also mean the tension that can sometimes exist between Distribution System Operator (DSO) and Distribution Network Operator (DNO) teams.
This is where taking a whole-system view comes into play. “Although we need separation to provide accountability and transparency, to be truly ‘whole system’, we still need to identify the interdependencies between networks, markets, providers, and pieces of information to work together,” said Lois.
“We’re all working towards the same end goal, which is making sure people have access to the system when they need it, for a reasonable cost,” said Melanie.
3. Coordinate on data rules
A consistent theme throughout the panel was the critical role that data plays in the operational scalability of flexibility. This becomes even more important as the frequency of flexibility procurement moves closer to real time.
“To scale, you have to be a lot clearer on exactly what the rules are and how you’re going to handle things,” said Alex.
UKPN was the first DSO to launch Day-Ahead flexibility markets in the UK earlier this year. The DSO is therefore experiencing first hand the need for data in scaling its operations.
“In December last year, we began to scale [day-ahead markets] up to more zones, more providers, yet we underestimated some of the challenges and the human bottlenecks,” he said.
“When you run two tenders a year, you can get away with some manual, case-by-case rules. To scale, you have to be a lot clearer on exactly what the rules are and how you’re going to handle things. […] Knitting all of the steps together is a work in progress.”
Driving more automation and integration using data takes time, so Alex also shared some “low hanging fruit” that can make a more immediate impact to scalability. For example, “aligning timings of market so we can sequence markets better”.
Rules around how markets interact will also be the key to unlocking revenue stacking. Creating that clarity is a clear opportunity to drive more value in markets.
4. Balance implicit vs. explicit flexibility
The balance between implicit and explicit flexibility – consumers changing behaviour based on passive tariffs, versus dispatchable flexibility services that are actively contracted for – was also debated. The conclusion? There is space for both.
“There will be a role for implicit flexibility, but there will be a residual role for the flexibility that we can have today in some shape or form,” said Alex.
“This is a great area for innovation, to make sure that, as the review of electricity market arrangements (REMA) and the network charges get worked out, we’re learning as an industry.”
For the ESO – Great Britain’s electricity system operator – coordinating the two types of flexibility is important to help encourage investment across the board.
“One of the key elements for the ESO is how those market arrangements will work strategically with network planning. The two need to go hand in hand to make sure that the market is getting the right signals at the right time for those different types of investment,” said Lois.
5. Lower consumer costs through competition and innovation
Competition and innovation are crucial to accelerating progress and lowering costs for consumers. The challenge is making sure that they focus on the right places. The panel explored different ways competition and innovation can drive progress.
Greater competition in the market is a result of there being greater value to compete over. Unlocking this positive feedback loop will help drive exponential growth. “For competition to really take off, you need a lot of different people participating in each market to try and drive the price down,” said Melanie.
The panel also touched on the importance of simplification. Competition is good, but it needs to drive down complexity, not create it.
At Scottish and Southern Electricity Networks, simplicity is the key, shared Melanie. That means “making our systems, processes, and platforms as simple as possible for flexibility service providers to use and making them concurrent, so that people can see different markets across different platforms.”
Interoperability and co-ordination was a common theme, and central to the whole-system approach. “Competition is good within the market,” said Lois. “We encourage it to drive innovation, but it needs to be coherent and coordinated, so that it doesn’t confuse market participants.”
