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Flexibility as a saviour: How Centrica's Local Energy Market is forging a new future

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Centrica’s Local Energy Market (LEM) is a sprawling beast of a project. Bringing together battery storage, efficiency monitoring, solar PV, blockchain for peer-to-peer trading and combined heat and power (CHP) systems, it is no small thing.

The £19 million LEM project is being funded by Centrica and the European Regional Development Fund. Since it was first announced over two years ago, significant developments have been made, with installs of pioneering technology going in up and down Cornwall.

As a county, Cornwall has significant grid constraints and a high uptake of renewable energy, in particular solar and wind. However, much of those renewables are often switched off due to a lack of demand, the company said.

In order to overcome these constraints and allow further renewables to connect to the grid in Cornwall, it’s likely that larger investments into upgraded infrastructure will need to be made. However, as this LEM sets out to prove, flexibility could be utilised to manage demand with the peaks and troughs of the renewables saturating Cornwall’s energy market and lessen those constraints.

Analysis by the Carbon Trust and Imperial College shows that deploying flexibility technologies could save the UK as a whole £17-40 billion by 2050 through reducing expenditure in new generation, peaking plants and network reinforcement.

With talk of a decentralised, decarbonised energy system increasingly becoming action, LEMs provide a new pathway to be tested. Centrica’s trial, looking into the use of flexible demand, generation and storage across both the domestic and business sectors, could provide much-awaited answers.

Providing flexibility

The separate elements of the LEM have been going in slowly, building on top of each other until the full scale of the project is finally visible.

Battery storage and demand side response (DSR) across 100 residential homes and 60 businesses will provide flexibility to Western Power Distribution (WPD) and National Grid. However, for that flexibility to be bought and sold, a bespoke software platform has had to be built.

The platform, developed by Centrica, will allow both WPD and National Grid to place bids for flexibility, with sellers able to respond with when they are available and what services they can provide.

This information, along with technical constraints of the generators and demand sites, including ramp rates and response times as well as the headroom at each substation, is all taken into considering before the cost optimal solution to the bids and offers is delivered.

If WPD and National Grid submit conflicting bids in the same time window, WPD’s request will be filled as the priority. Any extra flexibility will then go towards National Grid’s bid.

James Atkinson, energy engineer and commercial analyst for the LEM, said: “It ensures that assets that sit in the constrained parts of the network can’t be called upon at a national level that would put the distribution network at jeopardy.”

However, Atkinson explains that if the bids are in conflicting directions, for instance if National Grid requests higher demand and WPD a lower demand “nothing will go through there".

When WPD place a bid, it will put in its maximum buy price. Sellers of flexibility won’t have any visibility of this price, and so offer it for what they can deliver it for. That system creates the market drivers which brings costs down.

Despite the LEM’s focus on renewables, during the winter months gas may play a role if there is not enough renewable generation to provide the required flexibility.

The platform is still in development, with the aim to have it finished and able to begin trials in July this year.

The project itself is being completed in dribs and drabs; the installation of sonnen batteries in 100 homes and solar PV in 46, which will be aggregated together to form a single ‘block’ of flexibility, has only just been completed despite initial plans expecting completion in January 2019.

Donna Cooper, operations manager for home energy management at Centrica, cites a late start and bad weather as the causes of the delay.

“We had to shut down for about a week or two and as you might expect, installing PV during the winter months, especially in some of the areas such as Cornwall when it’s blowing a gale, is not ideal either.”

The 10kW sonnen battery installed in the house of David and Anna Corns.
The 10kW sonnen battery installed in the house of David and Anna Corns.

Three sizes of sonnen battery have been installed; 5kW, 7.5kW and 10kW. The batteries, alongside solar for those without it prior to the trial, were provided at no cost to the homeowner. The batteries have a combined capacity of 585kWh and the residential solar PV a capacity of 169kW.

Data on energy savings, how often the batteries are operating and how often they’re online is to be collected and analysed by Centrica, although residents can also monitor the battery through sonnen’s app.

Mark Futyan, distributed power systems director at Centrica, said that there was an emphasis on making the process for householders as simple as possible.

“It’s all aggregated by a software system that does it all on the behalf of the customer so the customer doesn’t have to engage with it in any way, they just see the end result of the reduction in their bills.

“If we want to be successful in harnessing the flexibility that’s available at a truly local level we’ve got to make it automated, we’ve got to make it very simple and very standard,” he continued.

I think we’re in a bit of a deep hole and we’ve got to stop digging.

David Corns, Cornwall resident

Two residents participating in the project, David and Anna Corns, have been actively improving their energy usage since installing solar PV in 2010. They now own a second-hand electric vehicle, a biomass boiler and their newest addition, a 10kW battery provided as part of the trial.

David Corns said that he hopes trials like Cornwall’s LEM will “be rolled out more generally.”

“I think we’re in a bit of a deep hole and we’ve got to stop digging,” he added.

The redT storage system installed at The Olde House
The redT storage system installed at The Olde House

Battery storage has also been provided for many of the businesses participating in the trial. A 1MWh containerised vanadium redox flow battery system was installed at The Olde House, a working farm and holiday retreat, in late 2017.

The system was provided by redT and co-funded by Centrica. It is currently owned and operated by redT, although Centrica provides The Olde House with a time of use supply optimisation contract through British Gas. The contract allows The Olde House to import power at a low cost, store it, and either use it or export it when the price is higher.

Solar PV at The Olde House
Solar PV at The Olde House

The system is fed by The Olde House’s 250kW solar array, although it has been topped up from the grid when solar generation has been low. Before the installation of the storage, The Olde House was using only 35% of the energy it generated. RedT now says the farm is using 50%.

Centrica is also looking to take advantage of a site that’s part of Cornwall Council-owned wave power research project Wave Hub. The site is located in Hayle, one of the most constrained parts of Cornwall.

The site has approval for a battery up to 5MW in capacity, although 1MW is more likely due to import connection limitations. The aim is for it to be operational in the first few months of 2020.

It is currently unknown who the manufacturer of the battery will be, with Wave Hub still in talks with Centrica as to the commercial arrangement. However, the battery has been offered a super-red band rate by WPD at 18.9p per kWh.

Wave Hub hopes that there will be renewable generation on site within the next three years, and is looking at both floating wind and wave power, which would have the potential to link with the battery.

The role of energy efficiency

Solar-plus-storage isn’t the only flexibility technology being utilised in the LEM. Demand side response (DSR) and energy efficiency monitoring also play a role. Households and businesses are incentivised to change their time of use to lower or increase demand on the grid when needed, whilst energy efficiency helps to reduce demand on the grid.

Energy efficiency monitoring has been installed in around 42 of the 60 businesses participating in the trial. Panoramic Power, Centrica’s energy insight solution, has been installed at printing company Deltor Communications. The company is seeing an estimated 11% usage savings since the installation. A new printing press has been installed without an increase in energy bills due to improved efficiency.

The combined heat and power system at Carbis Bay Hotel and Estate
The combined heat and power system at Carbis Bay Hotel and Estate

Among technology being trialled in the LEM is combined heat and power (CHP) units. CHP systems produce electricity whilst utilising the heat that is normally wasted in conventional power generation. They can also be powered from either renewable or non-renewable sources.

Two 35kWe (CHP) units have installed at Carbis Bay Hotel and Estate, powered by the estate’s solar array, although there is a gas back up for when generation is low.

The units, designed by Centrica Business Solutions, allow for an efficiency of close to 90% and a reduction in carbon emissions of around 70 tonnes a year.

Commissioned around six weeks ago, the units should be fully running next month, with an estimated £30,000 a year savings on costs for the estate. It’s expected the units will meet between 50-70% of the estate’s total electricity demand and 70-80% of its hot water demand.

Regulatory barriers to local energy markets

The Cornwall LEM, along with several other UK trials into peer-to-peer trading and LEMs, is taking place as part of Ofgem’s regulatory sandbox. The sandbox allows innovation projects that would ordinarily be blocked by current regulation to go ahead.

If LEMs were to become commonplace across the country, regulation would have to be updated to allow projects to take place. Exeter University is currently working on a three-year research programme on how LEMs could contribute to decarbonising the energy system. The university is also conducting research into the regulation that could potentially pose barriers to peer-to-peer trading and LEMs.

BEIS doesn’t have this clear, long-term vision about what the future of electricity systems might be.

Dr Bridget Woodman, Exeter University

Rachel Bray, research fellow at Exeter University, said that Ofgem’s supplier hub model is “effectively killing off peer-to-peer.”

“That’s a fundamental barrier to peer-to-peer because with that model, everyone has to purchase their electricity from a licensed supplier and you can only have one licensed supplier at one time,” Bray said, although she added that Ofgem are “aware it needs to change.”

Dr Bridget Woodman, deputy director of the Energy Policy Group at Exeter University, said that a lack of an “overarching strategy” bringing together the multiple initiatives on the future of electricity systems being developed by Ofgem and BEIS is “fundamentally posing a barrier to developing LEM more widely.”

“The problem is there’s too much uncoordinated, unstrategic stuff going on. BEIS doesn’t have this clear, long-term vision about what the future of electricity systems might be.”

Woodman continued to state that Ofgem “seems to regulate in retrospect” due to its belief that the best way to protect consumers is “to keep doing the same thing only cheaper.”

“If you want to come up with electricity system change, which is something that fundamentally the LEM system can deliver, you need to think in the long term about what long term costs are rather than in five or eight year chunks and charging reviews,” she added.

The future of the local energy market

With trials of Centrica’s software platform to start in a few months' time, it seems the LEM project has finally found its feet. However, that’s not the end of the story for similar projects.

There are other LEMs popping up across the country, with BP announcing plans to play in Ofgem’s regulatory sandbox with a trial developing a platform with similar elements to the one seen here. Peer-to-peer has also been tested in several projects over the last few years, with Verv laying claim to the first peer-to-peer trading pilot in 2017, and most recently in an EDF Energy-backed trial.

There are tentative plans for the blockchain element of the Cornwall LEM trial to be deployed in other areas of the UK. Centrica is to use LO3 Energy’s blockchain technology to provide peer-to-peer trading. The ambition is to do 200 meter installs across the country, with 20 of those being in Cornwall.

The LEM trial is to last a year with the data feeding into the Open Networks Project. Whilst it may be the first project involving Centrica’s new platform, there’s a strong chance it won’t be its last.

Dan Nicholls, programme manager of the LEM, said Centrica built a platform that “has the capability to scale up, so not just deal with the Cornwall trial . . . but ultimately be broadened out to different geographies and have potentially hundreds of thousands of different users operating on it.”

With domestic installations complete, monitoring equipment in, and a platform almost ready to go, Centrica’s LEM looks set to revolutionise the way in which Cornwall’s energy system works, albeit on a relatively small scale for now. But if successful, its impact on the energy system across the UK has the potential to be momentous.

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