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'Flexibility First': Industry calls for networks to procure flexibility over network upgrades

Grid

A range of potential flexibility providers, backed by leading energy trade associations, have called on the government to ensure that the next price controls regime incentivises network companies to procure flexibility rather than carry out reinforcements.

Over 20 signatories, led by supplier OVO Energy, have written to energy and clean growth minister Claire Perry, calling for the Department of Business, Energy and Industrial Strategy (BEIS) to take a more active role in work with Ofgem.

The letter argues that the current incentives structures for electricity network companies “are not aligned to achieving a smart and flexible energy system”, offering resistance to “a core part” of the government’s various strategies for the energy sector.

“They currently fail to prioritise the use of flexibility services from low-carbon sources such as battery storage or demand-side response over costly investment in new network infrastructure. Under the current incentivisation mechanism, the technologies highlighted as part of the government’s Smart Systems and Flexibility plan will not be propagated,” the letter states.

It goes on to argue that Ofgem’s forthcoming price controls regime, RIIO-2, offers “an incredible opportunity to transform the incentives to drive network operators to prioritise flexibility”.

The signatories argue that a ‘flexibility first’ approach should be instigated that would see network companies procure flexibility services to tackle network constraints rather than building new infrastructure.

This would target ‘whole-system’ outcomes to achieve carbon reduction at lowest cost to consumers while rewarding better use of the existing grid system.

They would also want to see the cost and availability of new connections for renewable generators become “important output categories” for network companies, while ensuring they are unable to own and operate distributed energy resources, not just energy storage.

The letter concludes: “We, the signatories of this letter, urge you and your Department to work with Ofgem to ensure that the design of RIIO-2 incorporates this Flexibility First approach and would welcome an update on action the Government is taking to ensure flexibility services are prioritised.”

Toby Ferenczi, director of strategy at OVO, said: “By implementing a flexibility first approach, Ofgem and the government can play a major role in helping the transition to a smart, flexible energy system that will not only enable deep decarbonisation of our society, but also represents significantly better value overall for consumers.”

Many of the signatories would stand to benefit from a government backed drive towards flexibility, with many already offering flexible capacity across a range of emerging initiatives. For example, OVO Energy, Moixa and Powervault have all signed up to sell flexibility via the Piclo Flex platform to network companies.

But the majority of distribution network operators are already considering flexibility before costly network upgrades, with Northern Powergrid’s policy and markets director Patrick Erwin having previously stated the company would be pursuing flexibility procurement until such time that a network upgrade is the cheaper option.

Such strategies are rife among network companies, with the likes of Western Power Distribution working with Centrica to develop a regional virtual energy market in Cornwall to procure flexibility from homes, businesses and generators rather than carry out costly upgrades.

Such approaches have been carried out within Ofgem price controls that are designed to encourage network companies to put stakeholders at the heart of decision-making, investing efficiently to ensure safe and reliable operation while reducing network costs and contributing to the low carbon transition.

In a statement released to Current±, the Energy Networks Association explained that much of the work is already underway to realise the potential outlined in today’s open letter.

“We welcome the recognition this letter gives to the important and exciting role that energy networks have to play in delivering a smarter, cleaner energy system. Flexibility services are key to unlocking a whole range of benefits for households and businesses, and energy networks are already delivering them across the country, having publicly committed to rapidly increase their use in the current RIIO-1 price control period.”

Referencing the Open Networks Project, an industry wide initiative to facilitate the ongoing transition of network companies to active market facilitators of new technologies, business models and whole system solutions, the ENA added that it’s work is already delivering on the calls of today’s letter.

“The Open Networks project is a world-leading example of network innovation and through it networks are driving consistency across the UK in their use of those services, redefining the way they work so they can deliver all the things that the letter sets out.

“We look forward to continuing to work closely with OVO Energy, Solar Trade Association and other industry partners to do that.”

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