In April, the Energy Networks Association (ENA) released Version 1.3 of its Contract Evolution Paper, which examines the need and pathway to the formation and adoption of a common agreement for use within flexibility services.
With the UK’s energy network becoming increasingly decarbonised and diversified, the need for flexibility is growing, with the ENA expecting around 3GW of flexibility services to be tendered during 2021.
This year, the association’s Product Team is looking to develop a new version of the common agreement, bringing together the ESO’s ‘Framework’ based contractual process and the network operators' tender based flexibility procurement.
Current± caught up with Alex Howison, part of ENA’s Open Networks flexibility services product team and Flexible Solutions manager at Scottish and Southern Electricity Networks about the challenges of bringing in a common agreement, the framework approach and the need for greater flexibility to enable decarbonisation.
Could you tell me about the growing need for a common agreement for use within flexibility services?
Over the last few years the UK has seen major growth in the amount of flexibility services being secured by Distribution Network Operators (DNOs) to manage constraints on the networks. Pre-2019, and the formation of the Common Agreement, each DNO utilised separate contracts, and the ESO used another suite of contracts for the Transmission based services; meaning a provider with assets across the country could engage with seven different sets of requirements, terms and clauses.
As more services became available and more providers entered into this evolving market, the need for alignment and accessibility in the enabling service contracts became critical to support the growth within this market.
And as part of the UK’s commitment to net zero, the whole of the energy industry is behind making it easier and more accessible to work with network operators.
In what ways are the procurement/contract processes for flexibility services misaligned across the ESO and DNOs currently?
The key difference is that ESO services are procured generally through auction style, framework agreements which have evolved over the far longer period than the ESO has offered services. Distribution based services are still comparatively new, utilising more traditional bi-lateral based contracts.
However, Version 2 of the Common Agreement – which is due next quarter – will bring these two approaches closer together in the ESO/DNO Common contract, and as Distribution flexibility service markets become more fluid the procurement processes will also align further, with the DNOs benefitting from the experience and learning the ESO has gathered over the years.
What are the benefits of the Framework approach?
Having a GB-wide core agreement and standard decision-making process across the country will help take the transition to the smart grid to the next level and marks another step forward in bringing consistency across the industry.
Developing this common approach through the project has allowed us to bring together expertise from across the country, and through extensive input from the industry and potential users, to make sure everyone can realise the benefits.
A common contract for flexibility represents a real milestone in our transition as it’s important we move towards having a ‘whole industry’ standard agreement, and the progress we’ve made this year is another step towards this being finalised.
What are the core priorities for ENA’s work within this?
ENA is committed to supporting the growing DNO flexibility service market. Flexibility is critical for enabling the UK to reach net zero and is vital to help customers get the most from new technologies – while helping networks to manage their systems better and plan investment.
A common and transparent approach is something the Open Networks project aims for across all its areas - so continuing to drive alignment and standardisation to offer more transparency and unlock liquidity in local markets for flexibility is a priority - and will ultimately push down energy bills in the long term.
What are the technical challenges of combining multiple DNOs and ESO systems into a unified framework?
While there are significant challenges in aligning systems, processes, skills and legal approaches to deliver an aligned procurement and contracting approach, much of this is already underway thanks to the Open Networks project and the DSO transition across the DNOs.
Key issues such as whole system operation, service conflict and data visibility all enable this alignment and are all the subject of industry working groups (in addition to our project team), some of which may require longer to resolve.
There are a number of industry initiatives that are developing on the ground solutions to help onboard flexibility services, these include Dynamic Purchasing Systems (DPS) and the Flexible Power portal. These solutions have a key role to play to help us deliver against the short term need and from a longer-term perspective, understanding the range of available options and the need to integrate and align. Open Networks has a key role to play in helping to bring these learnings together to help ultimately align towards a standard approach.
How does such an approach impact legal protections around individual companies systems and processes?
This has been both a key focus and core challenge within the development of the Common Agreement. All seven network operators have varying legal rigor and risk appreciation, however there is also widespread understanding that providers will also have varying appreciation, experience and support in contract experience.
As such, simplicity, accessibility and scalability have been achieved through collaborative development across the network operators, and with specific focus on feedback from stakeholders and providers, without reducing the protections of individual organisations or operators.
In addition, both network incumbent and external legal experts have reviewed, revised and approved the clauses within the contract which ensures no undue risk is placed against either participant.
How important is the delivery of such a Framework for flexibility services for the decarbonisation of the electricity system in Britain?
Reaching net zero carbon emissions remains our top priority, and with the publication and adoption of this framework we believe the transparency and consistency will result in more liquidity in flexibility markets.
The electricity networks have developed world-leading flexibility markets as there is no net zero without smart, flexible systems.
Through the Open Networks project, electricity networks are laying the foundations for the UK’s decentralised, digitalised, net zero emissions future.