Domestic flexibility is on the verge of a widespread rollout, according to the Association for Decentralised Energy (ADE), following on from “years of trial projects and research”.
If policy, regulatory and industry changes are supportive, the ADE predicted it could achieve full commercial scale in the next two to five years.
This was according to its new report, 'Let's Talk About Flex', highlighting the progress made in demand side response (DSR) whilst identifying a number of barriers.
Currently, there are a variety of business models and customer propositions for domestic DSR, with some models involving customers being paid a certain amount – usually a fixed price - to allow for an aggregator to use their asset.
This is likely to change in the future, according to the ADE’s report, which was drawn largely from interviews with a range of industry stakeholders that are both ADE members and non-members. Business models are therefore likely to increasingly feature customer rewards based on actual usage or a ‘technology and tariff’ bundle, which allows the electricity provider to manage everything.
Most future business models will focus on trading in the wholesale market as well as retail market arbitrage, however this will require policy changes to occur.
The ADE identified a number of barriers to the uptake of domestic DSR, although it stated that a number of them were also relevant to C&I DSR.
Some of the barriers identified include the difficulty of revenue stacking, variation in process between different DNOs, the lack of access to the wholesale market for flexibility providers without partnering with a supplier and the uncertainty surrounding the value streams for flexibility, particularly in light of the Targeted Charging Review (TCR).
The limitation of data access in a number of areas was also highlighted, including the need for data from National Grid ESO to be shared in a machine-readable format as well as sharing of DNO data in a standardised format.
Other barriers include:
- The limitations of the Supplier Hub model.
- The unsuitability of the Capacity Market for smaller assets.
- Market wide half-hourly settlement is not yet fully in place.
- The lack of clarity on where flexibility will be needed as DNO flexibility tenders are often issued with “insufficient notice to providers” meaning that unless they have existing assets they cannot participate.
- The link between innovation projects and business-as-usual is sometimes lacking.
Rick Parfett, policy manager at the ADE, said that flexibility is "vital" to integrate the volume of renewables needed for net zero.
“High levels of consumer engagement and support will be crucial in delivering this vision and it is domestic DSR which allows consumers to take control of their energy usage, save money and lead the transition to a low-carbon society.
"If policy makers tackle the barriers set out in this report, the UK will be considerably closer to putting in place the smart, flexible, low carbon energy system of the future," Parfett added.