Domestic Demand Side Response (DSR) is an important element of future energy systems. Our past work estimates that 20-30 GW of domestic DSR will be needed by 2035, rising to over 40 GW by 2050.
Not only is this flexibility necessary to support the roll out of heat pumps and EVs, but delivering flexibility on the demand side, rather than centrally, can deliver whole system cost savings of up to £2.5bn every year.
However, DSR requires customers to move from passive billpayers to active participants in the energy system. The way in which DSR offerings are structured, and the way in which customers are engaged, is therefore critical to the successful uptake of demand side flexibility – and to unlocking its benefits.
This summer, Ofgem released a call for input on what is needed to engage domestic consumers in energy flexibility. In Regen’s response, we highlight the need to:
Conduct early, participatory, and thoughtful engagement with consumers. This includes listening to what people care about, communicating using clear and simple language, and tailoring engagement approaches for different groups.
Design products to support diverse motivations. These may vary by customer archetype as well as the features of the DSR offering. Financial benefit is important, but other factors that align with people’s wider values and norms may be more powerful. This could include being a good citizen, acting in line with their peers, supporting their community, or helping address societal or environmental issues.
Address barriers to participation. These include issues such as (1) a lack of trust in the energy industry and DSR technologies, (2) a lack of interoperability between platforms and providers, (3) insufficient value propositions, (4) missing hardware, and (5) perceptions of unfair DSR solutions.
Support consumers across their different DSR journeys. Past research on smart home adoption has shown that different support is required across different elements of the customer journey.
Empower local and community actors, who have a key role to play as the interface between the energy sector and consumers. They are widely recognised as being more trusted than energy suppliers. They also know their communities better, including how to engage with different – and sometimes hard to reach – segments.
Embed fairness in DSR design. While not everyone may want to or be able to participate, it is important that those people who will be impacted by the changes that DSR brings have the opportunity to voice concerns. Additionally, some people may be structurally excluded from fully participating, and should not be penalised for this.
Government, Ofgem, DNOs and local stakeholders all have important roles to play, and must work together to ensure alignment of priorities throughout any process of reform.
Regen’s recommendations
Government should:
- Deliver a widespread roll out of smart meters, which are critical to underpin DSR
- Support high levels and equitable uptake of low carbon technologies through more inclusive policy design
- Adequately resource local authorities and community organisations to provide non-financial support to consumers along the entire DSR journey
- Recognise and resource community organisations, the third sector and local authorities to act as the energy system’s ‘social conscience’ and ensure equitable participation.
Ofgem should:
- Ensure the development of market structures that value flexibility, for example, by valuing avoided carbon, as well as avoided reinforcement
- Incentivise the growth of local flexibility markets, support interoperability across flexibility assets, and place obligations on DNOs to enable DSR
- Evolve consumer protection with stronger and more targeted cybersecurity strategies
- Ensure learnings from existing projects are shared widely.
DNOs should:
- Enable flexibility and ensure there is adequate capacity to support the uptake of low carbon technologies that underpin DSR
- Coordinate with local authorities around future system planning
- Provide open data to support and drive innovation.
You can read our full response to Ofgem’s call for input here. To find out more about Regen’s work on DSR, please get in touch with our Head of Demand and Flexibility, Rebecca Ford, at rford@regen.co.uk.