Electron wants to create more alignment in the UK power sector, which it said is much needed if energy and flexibility trading is to realise its full potential.
Earlier this month Electron announced it had brought together a consortium of companies from the energy world to collaborate on the development and commercialisation of a flexibility trading platform.
Speaking to Clean Energy News, Jo-Jo Hubbard, COO and co-founder at Electron, said the company had taken a “Noah’s Ark-type approach” to identifying partners – more than one company from any one sub-sector has been recruited – in order to ensure that multiple perspectives could be incorporated into its development.
Hubbard explained that Electron had started working on a platform and built a series of collaborative trading protocols required to exchange energy or flexibility before taking them to National Grid 18 months ago. The system operator, alongside engineering giant Siemens, quickly came on board.
That support earned Electron a government grant – worth around £650,000 – in September last year to develop a proof of concept. Conversations then started with prospective consortia.
The consortium’s intent is to feed in to the creation of a coordinated energy market, one which breaks down the barriers currently separating the way in which the system operator National Grid, Distribution System Operators (DSOs) and suppliers procure or provide flexibility.
Currently National Grid has around 20 service markets of its own, with a number of DNOs either investigating or in the process of launching their own equivalents. Hubbard said the market is “massively in need of coordination” because each of those services or bids are essentially non-rival.
“The same turn-down action can help the national grid, DSO and a supplier. If you don't have that co-ordination mechanism those parties will end up bidding against each other,” she explained.
The market would seemingly agree, with last week’s Capacity Market T-4 auction results adding further weight to the view that there is now far more value in flexibility than capacity.
Hubbard said she couldn’t agree more with that sentiment, adding that working towards the inherent value in flexibility would prevent the market from paying coal plants to remain operational and, instead, return value to flexible asset owners who help balance the grid.
But some barriers preventing the market realising that long-term ambition remain in place.
“The issue is there's a chicken and egg problem of until there's a large, liquid flexible market, we're going to keep buying long-term capacity. Essentially it's the visibility of that we're trying to build up. We think by creating this market or creating access to it, we can keep growing the flexibility pool so more and more of the value and decisions migrate to the nearer term,” she said.
The consortium’s work will focus on two key elements; the actual trading platform and the asset registration that’s required to make it work. Electron aims to enable its first bilateral trade, probably in capacity, in March or April this year before determining what a locational bidding market would look like.
The promising sign is that, as far as Hubbard is concerned, energy companies already have the required tech at their disposal.
“The easy part is the tech. It's already there. The tough part is creating alignment in the market we're building, which is exactly why we built this consortium,” she said.