Flexibility markets help system operators or utilities to procure flexibility services, and overcome the day-to-day challenges they may encounter on the way. However, those system operators or network utilities rely on having the right volume of flexibility available to buy at any given time. That means ensuring flexibility service providers (FSPs) are ready to offer into the market.
Making sure enough FSPs are ready to call on is a challenge in itself – and one that flexibility platforms can help solve. Here’s an overview of the high-level factors stopping flex providers from participating in markets currently, and how flex platforms can help break down those barriers.
Barriers to entry for flexibility service providers
1. High effort vs. Low reward
The perceived complex nature of offering flex services into markets is the first barrier to entry for FSPs. Flex providers need to install and learn how to use different software – or need to use development resources to link with APIs – to access each market.
The industry is also rapidly evolving. There’s a lack of confidence around investing in those systems when they may change. FSPs may therefore opt for manual processes, which then limit scalability.
If those FSPs want to access multiple markets, technical processes may be different for each. That means every market they want to access could have a different onboarding process too, aggravating the frustrations above.
Once those difficulties are overcome, providers may be faced with low returns. This is attributed to the typically low prices paid for flexibility services – as the full value of local flexibility has not yet been realised – and the lack of revenue stacking opportunities and clarity on stacking services.
2. Lack of choice
Traditional ways of managing power flexibility through individual programmes – where procurement requirements are locked in – can also limit the providers’ options on where or when they respond to requests.
For example, if they enter into a long-term contract in a flex market, they could be locked out of other revenue streams.
In UKPN consultation, “A step change in local flexibility”, day-ahead procurement was the most popular option for FSPs. This aligns with decision-making timelines for the wholesale market and ancillary service. However, some FSPs still wanted long-term options available, to complement the short term.
Similarly, some FSPs pointed to the need for new products, such as around generation turn-down, demand turn-up, and reactive power services for voltage support. This would give FSPs more options to respond to the highest price signals. However, if their options are closed, they may choose not to enter the market.
How flex platforms lower those barriers to entry
The features of flexibility market platforms that prove beneficial to system operators can similarly help lower those barriers to entry for flexibility service providers.
1. Standardisation of data flows to make onboarding easier for FSPs
The entire flexibility landscape is evolving, with processes becoming more standardised.
This allows flexibility market platforms to integrate and use APIs more effectively. Through this standardisation of processes, FSPs will be able to register assets using common questions and data requests.
With the right standardisation, FSPs will only need to register an asset once. That registration would then apply across multiple platforms and markets.
In a practical sense, that means that onboarding is getting easier for flex providers. Everything is based on the same digital infrastructure.
2. Revenue stacking opportunities to help flex providers maximise value across markets
A market platforms’ ability to sync up different markets also allows for revenue stacking, to make the best use of all the possible revenue streams.
Electron’s platform, ElectronConnect, was created with this multi-market framework in mind. System operators and their FSPs can use it to access different market designs simultaneously to allow revenue stacking.
3. More choice and agency for flex service providers
Data insights combined with multiple market access can also help providers recognise when an event is happening and identify patterns in how their assets have performed over time too. That creates more choice and gives them agency in how they participate.
This then loops back to how using flex platforms to access flex markets benefits FSPs when processes and systems are standardised. This will ultimately encourage more participation from FSPs. That means more flexibility available for system operators or network utilities to buy – bringing the industry a step closer to a fully optimised, Net Zero grid.
Want to learn more about Electron’s flexibility market platform, ElectronConnect? Get in touch.
