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Technology no longer a barrier to ‘fully functional, local flexibility markets’: A look at the Cornwall LEM

Image: Centrica.

The Cornwall Local Energy Market (LEM), one of Britain’s biggest flexibility trials, came to a close at the end of 2020. The £16.7 million project run by energy giant Centrica saw 310MWh of power traded using a purpose built flexibility platform.

It included 200 homes and businesses, which provided numerous flexibility services including 100 homes fitted with solar and battery storage that aggregated together as a virtual power plant (VPP). This was then used to provide flexibility to both National Grid ESO and Western Power Distribution (WPD), with both able to simultaneously procure flexibility from the platform in what is thought to be a world first at the time.

Beyond residential participants, the trial also included 5MW of low carbon technology including solar, combined heat and power, batteries and wind – the last two of which were substantially beefed up during the last year of the project. These were installed at 87 businesses, with another 26 provided with training and energy surveys to reduce energy costs.

Current± recently caught up with Dan Nicholls, programme manager of the Cornwall LEM, to discuss what the key lessons were now the project has come to an end.

“The takeaway really is that technology is no longer a barrier to fully functional, local flexibility markets,” he explained. “I would say that's what our program and our trials have demonstrated. More specifically, really, what we have shown is that local flexibility procurement can be highly automated. It can be coordinated with the ESO.”

A step away from Active Network Management

One of the elements brought by Distribution Network Operators (DNOs) was the Active Network Management framework, wherein to tackle network constraints generators are issued a maximum amount of capacity in the area based on applications they make.

“It was designed to enable more generation to connect to the network in areas where it is constrained,” explained Nicholls. “But the challenge is that under these agreements, the DNO could disconnect the generator without compensation as they were non-firm connections, whenever it believes there's a there's a headroom constraint issue on that part of the network.”

Thus what was initially designed as a progressive initiative has become a barrier to decarbonisation, as it undermines the business case of the generators, inhibiting their ability to take part in ancillary services, he continued.

Additionally, there are challenges around Last In, First Out (LIFO) hierarchy, wherein the oldest connection is prioritised, effectively penalising the last to connect. Therefore, one of the lessons learnt from the LEM is the need to move away from Active Network Management in favour of a flexible model that offers firm connections.

Off-grid or on: the residential impact of low-carbon technology

Attracting participants to the trial was a mixed bag, said Nicholls, as the prices for flexibility paid by DNOs standardly did not necessarily incentivise participation for some businesses. But many SMEs in particular, who were less likely to have explored the role they can play in flexibility previously, were eager to be involved.

From a domestic side, the project saw 100 households take part, all of whom received a battery installation as part of the trial. This group saw particularly large interest, with more applying to take part than the scheme could actually accommodate.

“They were all interested in understanding what the energy system of the future looked like, and a lot of them were interested whether or not they can take their homes off grid,” said Nicholls. “Maybe not disconnect them, but become more self-sufficient.”

Nicholls suggested that current technology – in particular battery storage – actually can offer more value to a household when connected to the grid than islanded. As part of the wider system there are revenue stream benefits but also carbon emissions savings, meaning that there is “ a conversation to be had about the role of batteries and smart homes in general” with the public.

Evolving flexibility demand

Running over three years, the landscape in which the trial was operating changed and developed. While this included some technological changes in the flexibility market, explained Nicholls, with aspects like VPPs playing into the aggregator sector nationally, there has also been a different demand and focus on flexibility.

Now, all of the DNOs are tendering for flexibility in a way that wasn’t happening in 2016, highlighting the need for it. Centrica altered and tailored the LEM design over the course of the trial in order to reflect what seemed practical and likely within the regulatory framework in the UK.

Ultimately, the trial included 381 bids from network and system operator buyers, 107 offers from flexibility service providers and 89 contracts made. As part of this, 210MWh of reserve was contracted and 99MWh of utilisation contracted.

Moving beyond the LEM and into a flexibility market

In terms of next steps, the project highlighted a number of areas that will require further development going forwards. Centrica has argued there should be a flexibility market added to the energy system by 2023 to fit with the RIIO-2 timeline, for example.

Additionally, we need to see a “flexibility first” attitude, argued Nicholls, whereby ways to use flexibility sources such as VPPs and flexible generation are considered before network upgrades.

This attitude change is particularly important as there hasn’t been enough of a focus on flexibility previously, continued Nicholls. With the increases in renewable generation targets – in particular 40GW of wind by 2030 – and the rollout of EVs, the need for flexibility is going to grow dramatically over the next year and therefore the systems must be put in place now.

“We really need flexibility and flexibility markets that help deliver those ambitions, and in fact Centrica published an estimation that suggested 25GWh of flexibility will be required to support that 40GW target of offshore wind," he stated.


Editorial

Molly Lempriere Deputy Editor, Current±

Molly Lempriere is deputy editor at Solar Media, responsible for its UK-facing publications Solar Power Portal and Current±.

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