Author: Jeremy Macfarland, Customer Success Manager, Electron
DER operators and aggregators play a big part in supporting grid stability by providing flexibility services to electricity networks.
The opportunities for those flexibility services are growing, opening up more revenue streams for flexibility service providers (FSPs). Diversifying income sources and revenue streams can enhance earning potential and support the financial sustainability of these businesses.
Balancing services
At the transmission level, the electricity system operator (ESO) in the UK keeps the national energy system in balance by procuring flexibility to balance the demand and supply on the grid. These “balancing services” offer opportunities for asset owners to provide flexibility services.
The services can also be deployed at distribution level too. This enables FSPs to help network utilities or distribution system operators (DSOs) match electricity supply and demand. By participating in these balancing services, FSPs can secure even more recurring revenue.
Reserve markets
Reserve markets are essential in helping system operators manage demand peaks. When demand deviates from forecasts, FSPs in reserve markets can be compensated for adjusting their electricity production or consumption. These adjustments are typically procured a few months or weeks in advance.
The reserve markets pay FSPs to have their power available for potential use. If this power is not used, DSOs are exploring options to allow FSPs to offer it in other markets.
According to Cornwall Insights, the gross value of reserve services in Great Britain surged by 500% in 2021. This increase, partially driven by high wholesale prices, underscores the significant value available for FSPs.
Demand response programmes
Historically, balancing the grid was primarily managed on the supply side by adjusting the output of power plants. However, with the increasing intermittency of renewable energy sources such as wind and solar, it is becoming more important for the ESO and DSOs alike to incorporate demand-side response strategies.
Demand response programmes involve adjusting electricity consumption to help balance the grid. For example:
- Shifting consumption: Moving electricity usage to off-peak times when demand is lower.
- Dynamic response: Adjusting consumption in real-time based on grid needs and price signals.
Smaller assets are now finding it easier to participate in these programmes through market platforms, increasing their contribution to grid stability.
Ancillary services
Ancillary services help system operators keep the electricity system stable, maintaining the flow of electricity.
One critical service is frequency response, which helps keep the grid frequency at the required 50Hz. This fast-acting demand response is crucial for managing energy fluctuations and preventing blackouts.
For instance, if a power station fails, system operators need immediate access to flexible capacity, often through daily auctions or monthly tenders.
Energy storage
Pairing energy assets with storage solutions increases the flexibility that FSPs can offer. Energy storage allows FSPs to store excess energy when prices are low and sell it back to the grid when prices are high, unlocking greater earning potential.
Effective use of battery storage can also reduce grid congestion, helping assets avoid curtailment and enhancing the overall efficiency of the grid.
Maximising asset value through flexibility services
Balancing the grid requires a multifaceted approach to ensure sufficient capacity is available at any moment.
By understanding the flexible potential of their assets and strategically engaging in activities at both the distribution and transmission levels, FSPs can maximise the value of their assets and contribute significantly to grid stability.
