Demand Flexibility Service – New Revenue Opportunity this Winter for Energy Users

By Andrew Langlands, Head of Commercial at Flexitricity

Big Zero Report 2022

Winter is coming, when Great Britain’s electricity demand is at its highest.  This year, there’s an energy crisis on top, and National Grid ESO is taking extra measures, creating an opportunity for businesses to earn revenue to offset some of those higher energy costs.  This is particularly for sites which haven’t previously considered participating in demand flexibility.

Image: Andrew Langlands, Head of Commercial at Flexitricity

National Grid ESO’s new ‘Demand Flexibility Service’, or DFS, will pay businesses to reduce electricity consumption over high-stress periods, such as the evening peak, and the morning pick-up when electricity consumption rises quickly.  Anyone with a process which consumes electricity and can be turned down or shut off for an hour or two could be eligible.  In DFS, National Grid ESO will run a flexibility auction every afternoon, and buy the demand reduction at the times and quantities it needs for the following day.

Every time there’s an event, participating customers need to provide half-hourly electricity consumption (or generation) data for the day concerned, and for a number of days in the recent past.  Most businesses can get this data from their electricity supplier or energy broker.  National Grid ESO will compare sites’ consumption on the day in question to how much energy they usually consume, by comparing to recent similar days.  The difference is considered to be the delivered energy, and that’s what National Grid ESO will pay for.  If a site can’t deliver on a particular day, it won’t get a payment, but on the other hand, there is no penalty.

It’s never easy to be certain how much money sites will earn in a service like this, because no-one knows how many difficult days there will be this winter.  To help deal with that, National Grid ESO is promising to use the service at least 12 times for sites which are available for the whole winter.  There will be a price threshold, so that capacity priced within that threshold will get all of those events.  Participants can set prices higher than the threshold if they wish to.

Generators that reduce a site’s import power consumption are also eligible for this service, provided they comply with emissions legislations.  In general, this means that standby generators can only participate if they have NOx reduction equipment in place.

There is one catch: the Demand Flexibility Service is only for capacity that National Grid ESO can’t access any other way.  This rules out sites participating in the Capacity Market, or balancing services like Short Term Operating Reserve.

Flexitricity is ready to provide market access to winter DFS, using optimised pricing to provide the best return for business energy users.  When National Grid buys demand reduction in the auction, we will notify our customers of the time periods in the following day during which they should reduce electricity demand (for example, reduce load between 16:00 and 19:00 tomorrow).  After each event, we will gather half hourly consumption or generation data from our customers, and calculate both the baseline consumption and the load drop delivered for the service.  We will collect payment from National Grid ESO and share it with participating businesses in accordance with the contribution of each.

The energy crisis will create a challenging winter for businesses and for National Grid ESO. This winter’s Demand Flexibility Service creates an opportunity for the two to work together to help with one another’s challenges.

If you would like to hear more about this service, please contact [email protected].

This is a promoted article.

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