The value for aggregators is now in providing access to the Balancing Mechanism (BM), although their role in domestic flexibility is uncertain.
This was a key topic of discussion in a panel session on the role of flexibility, both large scale and at a domestic level, in energy systems across Europe during this week’s Energy Storage Virtual Summit.
Speaking as part of this session, Christopher Brown, M&A and strategy at Alexa Capital, said that moving forwards, the value for aggregators is “definitely going to be in the direction of providing Balancing Mechanism access” over access to the traditional markets, with storage providers now doing their own bidding into Firm Frequency Response (FFR).
This is particularly relevant as the BM was this year opened up to allow independent aggregators – dubbed Virtual Lead Parties (VLP) when trading in the BM – to access the mechanism without a supply license.
However, the players in this space “have definitely changed over the last six months”, Brown said, explaining how traditional infrastructure players “have dominated since 2013/14” but that since the BM has started to widen “there’s been a seat shift in the guys interested in this market”.
He pointed to companies like Habitat Energy, which recently became the second company to enter the BM as a VLP, stating that he thinks “we’ll see more of those guys in the market”.
This is despite the aggregator space “being pretty crowded now”, with Brown saying he thinks “we probably have enough aggregators”, with the question now being “how we build capacity out in the long term”.
The role of aggregators in the domestic market was also discussed, with the panelists unsure of whether an aggregator, supplier or in the case of vehicle-to-grid (V2G) a car company should be interacting with the consumer when it comes to domestic flexibility. However, James Sprinz, vice president, strategy at Energy Impact Partners, said that he felt it should be either car companies or suppliers as consumers are already familiar with both and in the case of car companies, have a level of brand loyalty.
Brown explained how he doesn’t see a way of monetising domestic flexibility as it stands, whether that’s using home batteries or V2G technology.
Currently, there are a number of different offerings for domestic flexibility, but these often hinge on consumer awareness of the benefits, as well as the benefits themselves, which as Brown alluded to are not often compelling enough for consumers to become involved in trading the flexibility of their assets.
“Is the customer really going to respond to an extra £100 a year? I think not,” Brown said.
This was echoed by the Association for Decentralised Energy’s (ADE) policy manager Rick Parfett, who suggested that a key element to enabling domestic flexibility is what the consumer sees when engaging in these sorts of schemes and how easy this is for them. He suggested packaging it up in an energy-as-a-service model, but said that at the end of the day to engage consumers “it needs to be pounds, shillings and pence”.
However, Parfett did disagree with Brown’s opinion that “there needs to be a more compelling business case” for domestic flexibility, pointing to the likes of Social Energy, which is already successfully using domestic batteries to provide frequency response services.
“I think you can build a revenue stack, the question is does it add up enough to get people to change,” he said.
He also outlined his recommendations for enabling flexibility at all scales, stating that what is really required by the flexibility industry is a “clearer plan from government” on how much flexibility is needed out to 2050.
He said that the next price controls will be “crucial” to how flexibility scales up, adding that while National Grid Electricity System Operator (ESO) is being “tremendously ambitious” in some of its goals, such as being able to operate a zero carbon system by 2025, there is a “big gap between ambition and current reality”.
He cited the shifts in energy use during the lockdown period and how the significant drops in demand and high levels of renewables – now oft cited as a glimpse at what a future energy system might look like and the associated challenges – led to National Grid ESO reducing embedded generation using its Downward Flexibility Management system.
This was introduced as a custom service for the changes resulting from the lockdown and came as the system operator also pushed through an urgent Grid Code modification that clarified its ability to cut embedded generation without warning in an emergency situation.
Parfett said that there needs to be a “better strategy for making use of renewables during low demand periods”, adding that to support flexibility there needs to be better data transparence, better IT systems and better aligning of policy costs.
Overall, there needs to be “fast, decisive action”, he said.
The Energy Storage Virtual Summit, featuring Solar & Storage Colocation, continues throughout the week. All sessions are available on demand and online networking will also continue. You can still register for the event and participate, more details on which can be found here.