Energy flexibility markets in the UK are thriving in 2024. From the Open Networks project helping ease access to flex marketplaces to the announcement of who will take on the market facilitator role, this range of activity and investment reflects the growing importance of flexibility to the energy transition.
Here are just some of the UK’s flexibility market updates from 2024:
- Flexibility is becoming mainstream, with a new record set in flex procurement
- Elexon will be the new market facilitator to support the continued development of flexibility markets
- Operational standardisation is the mantra of the Open Networks programme for 2024
- Consultations are underway for RIIO-3 price controls
- Five out of six distribution system operators in Britain are tendering for flex market platforms
- The Labour government has signalled strong clean energy intentions
- Trials for a first-of-its-kind, asset-to-asset flex market trading project to launch
1. Flexibility is becoming mainstream, with a new record set in flex procurement
Britain has broken records with the largest flexibility market in the world, according to Energy Networks Association data. The region grew its flexible capacity tendered from 4.6GW in 2022 to 6.4GW in 2023 – with low carbon tech making up 75% of the contracted flexibility.
Alongside this, flexibility is becoming a more recognisable, day-to-day service for the end consumer of electricity.
The Demand Flexibility Service was launched in Britain in 2022. The service rewards consumers and industrial and commercial users to turn down or “flex” their electricity demand at peak times.
Last year, it delivered 3.7GWh of electricity across more than 2.6 million participants.
Now, rather than only operating over the winter, DFS will become a year-round, commercial service. That will help the ESO balance its demand and supply at any time, while offering new revenue opportunities to flexibility service providers (FSPs).
2. Elexon will be the new market facilitator to support the continued development of flexibility markets
Ofgem has announced that Elexon will take on the responsibility of market facilitator delivery body.
The ESO has also assumed the role of National Energy System Operator (NESO), which will operate at the national level, and the two entities will work together closely.
The market facilitator will aim to reduce friction between market arrangements at transmission and distribution level and develop local flexibility markets in the UK, while the NESO will “provide strategic direction on maximising distributed flexibility.”
This coordination and whole-system oversight is a big part of unlocking flexibility scale. The market facilitator role will start operations by the end of 2025 or early 2026.
3. Operational standardisation is the mantra of the Open Networks programme for 2024
From aligned flex products to a common settlement process and dispatch API specifications, the Open Networks project, run by the Energy Networks Association, highlights standardisation across the board by April 2024.
This standardisation aims to achieve a better user experience across the country, while making connecting to the networks easier for everyone.
Alongside this, work will continue around developing the Primacy rules. These will limit conflict across flex markets and harmonise data sharing between DNOs and the ES.
This approach recognises that what we standardise needs to be carefully selected. The DSO flexibility products have already started to transition towards a more adaptable form of standardisation, for example.
This change recognises that each system operator has very individual requirements according to their local circumstances. The standardisation of systems integrations and messages between participants will therefore benefit this evolving nature of the flexibility ecosystem.
All of this planned activity and standardisation at specific points in the network will increase efficiencies across the network – while allowing DNOs the freedom to continue choosing the right vendors and solutions for each location.
You can read an update on this ongoing standardisation on the ENA’s site.
4. Consultations are underway for RIIO-3 price controls
RIIO-3 is on the horizon. This will be a set of price controls to guide the investment of system operators in Britain from 2026 to 2031.
RIIO-2 iteration was a launch pad for flexibility markets in Great Britain, creating the right conditions for flexible energy systems to flourish, by incentivising a “Totex” approach to investment, rather than “Capex”.
In other words, system operators benefit from considering the most optimal use of existing networks as well as investing in upgrades to the physical infrastructure.
Ofgem has suggested that it will not drastically change its approach from the current RIIO-2 period, to ensure some stability. However, some of its updates will include:
- Improving the approach to data and digitalisation, including the data sharing infrastructure
- Creating the right conditions for further innovation
- highlighting the importance of “investability” alongside “financability”, to “better understand whether the allowed return on equity meets the needs of the energy network sectors”
Read more about Ofgem’s price control policy proposals for RIIO-3
5. Five out of six distribution system operators in Britain are tendering for flex market platforms
Out of the six distribution system operators in Britain, three have tendered and chosen market platforms for their 2024 flexibility tenders (Electricity North West, Scottish and Southern Electricity Networks, and National Grid Distribution Systems), and two plan to retender by the end of the year (Northern Powergrid and SP Energy Networks).
This echoes those record-breaking numbers defined in section one – with Scottish and Southern Electricity Networks alone reporting 700MW contracted in 23/24.
Tendering for flex market platforms also reflects the commitment system operators make to introduce flexibility into electricity systems under RIIO-2 price controls in the UK.
6. The Labour government has signalled strong clean energy intentions
The new Labour government has already acted in support of a transition to clean energy, lifting the ban on onshore wind – with a new Onshore Wind Industry Taskforce created -and introducing the Great British Energy Bill to Parliament.
Great British Energy is a publicly-owned company to grow clean energy generated in Britain. The company will team up with the Crown Estate and work with private investors to deliver clean energy projects backed by £8.3 billion funding.
This will cover investment in pre-existing technologies, such as solar, wind, and nuclear. It will also invest in emerging technologies, such as floating offshore wind, carbon capture, tidal power, and hydrogen, and aims to scale up municipal and community energy.
Industry experts highlight that speed is of the essence, to meet targets of a decarbonised energy system by 2030.
Low carbon, distributed flexibility is ready and waiting to help support Labour’s plans to make Britain a clean energy superpower, as we outline in our blog.
7. Trials for a first-of-its-kind, asset-to-asset flex market trading project to launch
The first trial BiTraDER market will start in the Electricity North West licence area in 2024. BiTraDER is an integrative asset-to-asset market design, which allows connected flexibility service providers to trade their curtailment obligation bilaterally.
Electron’s involvement in the project aims to create a new standard for flex market trading. That means a high level of integration between market platforms and services, so two-way data flows can drive grid optimisation.
This further feeds into the open ecosystem concept mentioned above, helping system operators access the right digital solutions at each step in their workflow.
Read more about BiTraDER in our blog.
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