Edinburgh-based Flexitricity was this month acquired by Quinbrook in a transaction coming in at CHF18 million (£15.2 million). The company, having already established a virtual power plant that now consists of over 500MW, became the first Virtual Lead Party (VLP) to trade in the UK’s Balancing Mechanism (BM) in April.
Now, with other VLPs entering the BM and new measures designed to open it up further, Current± caught up with Dr Alastair Martin, chief strategy officer at Flexitricity, to discuss the ease of accessing the mechanism as well as Flextricity’s future plans following its acquisition.
Having been recently acquired by Quinbrook, are you anticipating any changes?
We do expect to be developing further, a lot of it is what you would expect us to do, so things like increasing our capability to identify the opportunities for flexibility to monetize in the existing market. I think we’re already the broadest in the business in terms of the reach of what we can do and flexibility management, but I think there’s scope for that to go broader still as the market develops, and that fits in with Quinbrook.
It gives us the right framework to develop the flexibility, the flexible management, and all the aspects of the smart grid that we’ve been working towards. They line up well with what Quinbrook wants to do and where the market needs to go.
You’ve already achieved a few milestones this year, including becoming the first VLP to trade in the BM. What is that process like?
In one sense it’s going very well; all of the operational wrinkles that we thought were going to be difficult in terms of handling the processes and interacting with the Balancing and Settlement Code’s activities have gone well.
I think that where the VLP process has been a challenge is in the upfront side of it. It’s not that much easier to become a VLP than to become a supplier in terms of the appraisals and assessments and so forth. It is easier, but not orders of magnitude easier, and then you’re still up against the delays associated with the registration of secondary Balancing Mechanism units.
One of the reasons why the process of becoming a VLP is relatively hard is the same as the reason why becoming a supplier is quite hard in that your processes need to align with everything else in the balancing mechanism, otherwise, you potentially risk the integrity of BSC systems, and that’s not allowed for very obvious reasons. The whole industry has to work and therefore the administrative hurdles that are put in front of new entrants, you could argue to simplify some of them but you can’t take away the requirement to achieve that integrity and demonstrate that integrity.
So there are still barriers whenever one wants to add new balancing mechanism units or when joining for the first time, but operationally, once in, it seems to work pretty well.
What are some of the other challenges you’re facing?
System operator IT is always the thing that we chafe against, all the way from the capacity market right the way through to the Balancing Mechanism. Everybody in the industry finds it difficult to interact with, with grid IT systems in development stages. It just takes quite a long time. Now, we understand that that’s partly to do with the history and partly to do with the fundamental complexity of what they do. But I don’t think there’s anybody in the industry, including within National Grid, who doesn’t want that process to speed up and become easier to deal with.
How different is it to trade in the BM compared to the other flexibility markets?
The operational side of trading in the BM is absolutely different to trading in the capacity market, and that’s really just in the nature of the service that’s being offered. You can work in the capacity market with a lot of admin but less in the way of operational commitment. So we’re on 24 hours.
Most of our competitors in our sector within the capacity market do not operate 24 hours, so clearly there are their business models that don’t rely on that. On the other hand, if you’re if you’re in the BM, you’re going to be extremely busy. You’re going to be directly engaged with the BM right around the clock; it sort of goes with the territory.
