National Grid ESO has published its Power Responsive Demand Side Flexibility (DSF) annual report for 2019, highlighting the uncertainty that remains within the sector.
The report reflects on policy, regulatory and market developments over the past 12 months, as well as trends in DSF participation.
It classifies DSF as demand side response (DSR) by flexible load shifting, onsite generation, onsite energy storage, distributed generation for export and distributed energy storage for export
Three headlines have been identified by the ESO, firstly that uncertainty still remains, caused by changes to markets, charges and regulations affecting the revenue streams of DSF providers.
The largest reason for uncertainty is the changes to the network charges that providers will pay in the future as a result of the Targeted Charging Review (TCR). Additionally the suspension – and subsequent reinstatement - of the Capacity Market and the ongoing developments to Ancillary Services products and markets are also creating uncertainty.
The second headline the ESO identified is that markets are continuing to deliver opportunities for DSF providers, with their share of markets continuing to increase. This has been helped by greater volumes of power being bought by the ESO, it said, and the lowering of the minimum unit size from 50MW to 25MW in the Fast Reserve market.
To date, only five tenders of less than 50MW have been accepted, however this is an “appreciable share considering that the capacity being procured through Fast Reserve is around 300MW at any one time”.
Prices have remained broadly stable, indicating the maturity and competitiveness of the marketplaces. The ESO also pointed to the introduction of the new weekly frequency response auction in November 2019, which it said is likely to provide further opportunities for DSF providers in 2020.
Lastly, the ESO highlighted that there has been “mixed success” for DSF in the Capacity Market. Market share and cleared price remained broadly the same for the T-4 and T-3 auctions, however participation and success continue to decline in the T-1 auction, with less than 100MW being successful in 2019.
This is likely due to the price in the short-term auction collapsing and the uncertainty over the suspension and reinstatement, the ESO said.
Other aspects of the report touched on the Short Term Operating Reserve (STOR), with the realignment of STOR to the Balancing Principles Statement having had a “significant effect” on the service utilisation, procurement and utilisation pricing.
However, DSF market share in comparison to traditional providers has remained favourable, indicating that the review has affected the whole STOR market rather than DSF in particular.
Accepted availability prices have remained broadly the same across 2019, indicating the market has reached a natural price point of around £2/MW/h.
Finally the report focused on the Power Responsive programme itself, a stakeholder-led programme facilitated by National Grid ESO to stimulate increased participation in different forms of flexible technology such as demand side response (DSR), small-scale generation and storage.
The report set out the Power Responsive strategic goals for 2020/21, including:
- Inform the development of inclusive markets for flexibility.
- Promote fair and equitable flexibility market participation.
- Allow customers and DSF provider perspectives to be heard by policymakers and market actors.
- Identify and champion the removal of barriers to flexibility entry and participation.
- Support the progression of the Smart Systems and Flexibility Plan.
- Support the delivery of the ESO’s ambitions to deliver a sustainable whole energy future and achieve zero-carbon operability by 2025.
Adam Sims, Power Responsive manager, said: “Electricity system requirements are evolving, at both a transmission and distribution level, and we need additional sources of flexibility to meet these needs from an increasingly diverse range of technologies.
"National Grid ESO believes that DSR and other forms of flexible technology, such as storage, can help to provide the capacity and flexibility needed to operate the electricity system in tomorrow’s world. So, while this new reality creates challenges in operating the grid, it presents exciting opportunities for energy users."