In the fourth blog of our series on the development of the local flexibility market, we look at how the high-level process of procuring and enacting local flexibility might work in practice, drawing on the experiences of Open Utility who will be launching their Piclo Flex online marketplace in June.
See our first blog that looks at the live local flexibility trial projects here
See our second blog discussing the benefits for DSOs here
See our third blog discussing the role of the local flexibility market here
A key role of a local flexibility market platform will be to make buying and selling local flexibility easier and faster by performing the ‘mechanics’ of a flexibility transaction, from publicising the needs for local flexible capacity, facilitating contractual procurement, through to its operation and financial settlement.
Before coming to the market DNOs will have undertaken extensive planning to identify where they might have challenges on their networks. Where the network is constrained DNOs will be considering flexibility solutions as an alternative to traditional reinforcement.
The ‘signposting’ of the system needs is then the first stage of a call to the market for flexibility. WPD, for example, are currently consulting on their approach to improve the transparency of their network operation so that it is easier to understand.
DNOs will hope that by the time they tender, the market will have a good understanding of the system needs and be ready to respond. One of the benefits of a dynamic trading platform will be to streamline this process of matching the DNO’s identified needs to several concurrent providers. At this stage potential providers of flexibility can expect to see the technical requirements that have already been seen from DNO Expressions of Interest (EOI) – see UKPN and ENW examples – as well as information around pricing, timing and terms.
The approach taken by National Grid in their balancing services is to provide a standard contract for successful bidders. There is also a stringent testing regime[1] to ensure flexibility providers can deliver against the technical requirements they have specified. There are obviously risks that smaller providers will struggle with either contractual or technical requirements at this stage.
The actual process of calling on flexibility at a local level has not yet occurred outside a few trials. The market will be looking for a simple process to test, dispatch and validate the actions of flexibility service providers, which will come through a variety of technologies and sizes.
Looking at the early calls from DNOs it is clear is that flexibility market platforms will need to be adaptable, accommodating multiple parties each with their own approaches. For example, ENW’s current EOI is proposing a more open approach around payments for services[2], not dictating availability and utilisationrates, but instead seeking feedback from responders as to their proposed payment structure. The role of the platform will, therefore, vary depending on the DNO, their approach to the market and their needs.
We will explore the details of local flexibility at our Smart Energy Marketplace event on the 19th June in Exeter.
The fifth and final blog in our series will look to address potentially the most important question of all – what might local flexibility mean for me?
[1] National Grid require a 5-stage testing process as part of participating in Firm Frequency Response (FFR) for example, see Firm Frequency Response Interactive Guidance (December 2017)
[2] Discussion from ENW during Q&A session, around assessing any payment structures proposed, as part of ENW’s flexible services webinar (April 2018)