The Power Responsive Annual Report
The Power Responsive Annual Report – a roundup of developments in demand side flexibility markets in GB
On behalf of the National Grid Electricity System Operator, Everoze have again this year written the Power Responsive Annual Report. The report looks back at the key flexibility policy and market updates that occurred in 2023, and looks forward to the year ahead.
Yet again it was an exciting year for flexibility, with the introduction of new procurement methods such as the Enduring Auction Capability, another strong year for the ESO’s Demand Flexibility Service, and the emergence of new initiatives such as the Open Balancing Platform.
If you haven’t had the chance to read this year’s Power Responsive Annual Report, here’s 5 key takeaways from the report summarised for you.
1) The Demand Flexibility Service continues to grow
The ESO’s Demand Flexibility Service (DFS) 2.0 launched on the 30th of October 2023 and ran until the 31st of March 2024. In the DFS 2.0, 2 Live Events and 14 Test Events occurred up to end of March 2024, building on the success of last year’s programme. 2.6 million households and businesses signed up to deliver services through 25 providers. 3.6GWh of energy demand was delivered in events up to the end of March 2024 (as shown in Figure 1 below), with businesses and households being rewarded with £11.9 million of payments.
New for 2023/24 was the introduction of within-day as well as day-ahead test notifications, to ask consumer households and businesses to change their electricity usage at shorter notice than last year. For the first 7 Test Events, all service providers delivering demand reduction received £3,000/MWh. For the subsequent 7 Test Events the procurement mechanism was altered to remove the guaranteed acceptance price of £3000/MWh to allow for a competitive bidding process. This saw prices as low as £150/MWh achieved.
2) The Enduring Auction Capability platform launches for Frequency Response Services
The ESO launched a new procurement platform for Dynamic Frequency Response services in November 2023. The Enduring Auction Capability makes stacking of services simpler for service providers and brings efficiency to the procurement process. One notable impact since its launch is the presence of negative clearing prices seen in Dynamic Containment High, Dynamic Moderation High and Dynamic Regulation High services (as shown in Figure 2 below).
Before the launch of the EAC, each Dynamic Frequency Response auction had a price floor of £0/MW/h, but with the introduction of the EAC, this was reduced to -999.99MW/h – allowing for negative clearing prices. As batteries make up the vast majority of service providers for the Dynamic Frequency Response services, negative clearing prices still may be commercially sensible for some projects. This is due to the Applicable Balancing Service Volume Data (ABSVD) mechanism which means that Primary BMU registered battery assets don’t have to pay for imbalance charges whilst delivering Dynamic Frequency Response services and can therefore effectively charge for free.
3) The Frequency Response Services clearing prices fall as procured volumes continue to grow
Contracted volumes of Dynamic Containment, Dynamic Moderation and Dynamic Regulation grew steadily throughout 2023 (see Figure 3 below). Dynamic Containment continued to be the biggest market of the dynamic services with over 2 GW per day contracted across both Dynamic Containment High and Dynamic Containment Low services. Clearing prices across all Dynamic Frequency Response services decreased and became more stable compared to 2022 (see Figure 2 above), signalling some saturation of the market. This is not surprising given the volume of grid connected storage assets that came online and the increase in contracted volumes made available by the ESO.
4) Energy Flexibility delivered by Distribution Network Operators remains stable
Through RIIO ED2 (the price control mechanism for GB Distribution Network Operators), the Distribution Network Operators are incentivised to deliver distribution-level flexibility through entities known as Distribution System Operators. Although the volumes of flexibility tendered in 2023 increased significantly compared to 2022, the volume of contracted flexibility remained similar, highlighting a constraint in service providers in the right locations with appropriate market signals.
Whether local DSO markets offer enough of a commercial pull to attract flexible assets, such as utility scale BESS projects, to the DSOs preferred locations remains uncertain, but it could represent an attractive commercial upside for assets that can offer demand flexibility in the required locations.
5) Demand Side Flexibility asset participation in the Capacity Market and Balancing Mechanism increases
The participation of Demand Side Flexibility assets such as batteries in the Capacity Market and Balancing Mechanism continued to grow in 2023. New initiatives such as the Open Balancing Platform, launched in December 2023, should facilitate increased participation through 2024 and beyond. A Small-Scale Aggregated Asset Live trial was also successfully introduced to the Balancing Mechanism in 2023 as well as a new increased 300MW capacity for aggregated assets.
However, as highlighted in a previous blog, some Capacity Market rules, such as meeting the Extended Performance Test, remain challenging for flexible assets such as batteries during service delivery.
If you have questions or would like to discuss the findings detailed in this blog please contact jamie.stewart@everoze.com
