ENA Flexibility Commitments
There’s a revolution taking place…
Times are changing for the country’s electricity distribution networks. The transition to a low carbon economy is the biggest change we have faced in our history.
The networks were designed for a one-way power flow: from centralised power stations, through the transmission network and then into the local distribution networks to the point where it arrives at customers’ meters. But the increasing electrification of heat, the introduction of electric vehicles and the change in the way we generate electricity from fossil fuels to renewables are both increasing demand and changing the power flows on our network.
We’re no longer dealing with one-way power flows: that means we have to find new ways of balancing the load on the networks to ensure customers have the power they need when they want it.
Flexibility is one of the solutions to the changing use of the power networks. Fundamentally, flexibility is about reducing loads on the network by using customers’ ability to change their usage patterns by either switching on generators or reducing consumption. Managing peak load through flexibility helps reduce costs to all customers because it means we don’t have to invest in a permanent upgrade to meet a temporary spike in demand.
It’s a revolution – and WPD staff are using our experience to embrace the challenges it brings. We’re also working with other distribution networks and National Grid, which operates the transmission network, to meet the industry-wide flexibility commitments announced by the Energy Networks Association.
ENA Flexibility Commitments
As a distribution company, we don’t have interests in UK generation or supply. As a result, our management of the electricity network has been neutral for 20 years. Therefore, championing a level playing field for flexibility participants is a natural extension of our current role.
The distribution flexibility market is currently in its infancy. We launched Flexible Power as a trial in 2017 and it became business-as-usual in early 2018. There are regular procurement cycles, webinars and customer research to ensure that we do our best to meet customers’ needs. We also participate in the Cornwall Local Energy Market and Piclo Flexibility Marketplace.
Our flexibility contracts are awarded on a yearly basis and naturally form rolling contracts following that initial period. Participants are able to maintain full control of their assets
Early Flexible Power procurements have been settled on a fixed price, which has helped provide stability for nurturing early markets. However, this may not be the best value in a more mature competitive market. We have created a pricing strategy that we see as having three distinct phases in creating a level playing field:
Phase 1 Fixed
- Where the flexibility procurement process finds there is not a sufficient amount of flexibility to provide a competitive market, then we will continue to use a fixed price in the Constraint Managed Zone (CMZ).
- This will be set at £300/MWh for the flexibility contract.
Phase 2 Pay-As-Clear
Where there is sufficient competition within flexibility, the procurement process will derive a clearing price for the CMZ to be used in the contract.
This will be based on the highest price submitted by the group of lowest priced participants that can meet the full amount of system needs, including redundancy
Phase 3 Full Market
As the liquidity in distribution flexibility markets improves and our visibility, procurement, dispatch and settlement systems mature, we will shorten the length of the window for which the contract price applies to.
This will be a progression towards close to real-time market operation.
Please visit our Flexible Power website to find out more.
When developing our Flexible Power Service we were always clear that it had to be as easy as possible for participants to use. For that reason we’ve designed non-exclusive contracts that enable revenue stacking with other services, including the national balancing services market, and scalable arrangements for multiple sites.
Feedback from participants resulted in a few changes. To aid visibility we provide example documents and presentations to show exactly how participants receive information.
We have also created both short and long-term forecasting. Short-term forecasting provides registered participants with a forecast for every day of the upcoming month. This shows the MWhs we predict we will need, the time it’s needed and how much we will pay for it.
Forecasting is something the industry has always used but the changes in electricity generation, power flows and usage mean we require far more detail than ever before. We’re currently working on an innovation project called the Electricity Flexibility & Forecasting System (EFFS) that will create short-term demand and generation forecasting for the day ahead to six-month ahead time range.
For long-term forecasting we have developed a suite of signposting information. This provides a five-year indication of potential system needs across four industry-aligned future energy scenarios. Signposting helps potential providers understand market potential.
Distribution Future Energy Scenarios
Since 2016 we have also produced Distribution Future Energy Scenarios (DFES). These are produced for all four licence areas in a two-year cycle and outline the credible futures for the growth of demand, generation and storage. As well as being a key input into our continual assessment of the network they also incorporate flexibility service provision.
The analysis undertaken for each technology in the DFES involves the following stages.
Stage 1 Baseline
Stage 2 Pipeline
Stage 3 Resource
Stage 4 Scenarios
Technology baselines are calculated from WPD’s network connection database. This information is then reconciled with other market intelligence and external databases. In addition, further desktop research is undertaken to address inconsistencies
For technologies with significant lead times WPD’s network connection agreement database is reconciled with the BEIS planning database and market research is undertaken. This allows an assessment of which commercial projects in the pipeline may go ahead and in what timescale
Assessment Locational data from a wide range of data sources and GIS analysis is used to understand the geographical distribution, local attributes, constraints and potential for technologies to develop within the licence area and each ESA.
The National Grid FES scenarios are interpreted for specific local resources, constraints and market conditions. This includes the findings from a local consultation event and interviews from developers, investors and other stakeholders.
Flexibility services are not the only ways in which we are improving accessibility to our network. We’ve been developing new analytical tools that will enable customers to connect to the distribution network as quickly as possible.
New Analytical Tools
Instead of just looking at one-directional power flows over limited parts of the network, we’re now able to consider more energy flows over a longer time period. This answers questions such as: “When is network capacity required?”, “How much capacity is required?”, “Where can non-build solutions be used?” and “Can more generation be connected in a given area?”
We’re then able to offer customers a choice between waiting for traditional reinforcement or accepting a curtailed connection, These give the customer a connection but only guarantee a certain capacity. Anything over that is constrained and not available during abnormal network operating conditions. Often these conditions are temporary as traditional reinforcement is scheduled or the supply is required as a back-up so is unlikely to be affected by the constraint. We’ve been offering these alternative connections since 2017, with the first going live in 2018.
Since launching Flexible Power as a trial in 2017 we have been gathering user feedback to refine our processes to ensure procurement requirements are as simple and transparent as possible.
One piece of feedback was a request to give a better idea of where future flexibility might be needed rather than waiting for a specific requirement. As a result, the team spent some time developing a signposting map. Even though there are no absolute guarantees about where flexibility will be required, potential suppliers feel having a better idea of probability helps with their planning.
In the first quarter of 2019, again informed by customer feedback, the team released a suite of new documents to make the procurement process as clear as possible.
This has comprised a combination of in-depth documents such as the Payment Mechanism and Contract Assistance Notes and shorter guides which provide information in bullet points and flow charts.
One of the key pieces of feedback from users was the need for ‘quick reads’. The supporting document for our annual Periodic Indicative Notice, which explains what Flexible Power wants to procure, how it intends to do so, gives eligibility criteria and a list of where further information can be found is six pages – including its pictorial cover. The Procurement Process document, which is also broken down into stages, is even shorter.
Our commitment to clear and transparent procurement methodologies is closely aligned to its commitment to providing the best service it can for customers.
Procurement Process Guides
Supporting Document to PIN
Constraint Management Zone Terms and Conditions
Contract Assistance Notes
Constraint Management System Payment Mechanics
Although the distribution flexibility market is in its infancy we have already established how we see it developing and what a fully competitive market will look like. We expect a fully competitive market to be one where the oversupply in the provision of flexibility compared to the system needs means:
The required amount of flexibility could still be delivered if two participants were removed
A single provider would supply no more than 50% of the energy required.
As the market matures and there is more competition, we expect to move away from a fixed fee for flexibility to a market where providers can submit a preferred price, which will be a total price for a MWh of both arming/availability and utilisation. For the Dynamic flexibility product the arming/availability and utilisation will be availability 1.6%, utilisation 98.4%, and the Secure product will be arming 41.5% and utilisation 58.5%. Competitive flexibility zones will be settled on a pay-as-clear price based on the highest price submitted within the lowest priced group of participants.
As the definition of a fully competitive market provides for an oversupply of flexibility we need to provide a balance between delivering the best price for customers and giving suppliers the confidence to invest.
We have put in place principles that govern how we will call on providers to dispatch services as the market grows.
Fairness: we will share the dispatch of utilisation across all providers offering availability
Competitive: acceptance of availability will be shared across the largest number of providers
Operability: providers offering greater operability will maximise their chance of participation
Security: the needs of the system will be met using flexibility in such a way that supply of security is maintained
Value: flexibility will be operated to meet system needs with the minimum level of over-procurement.
As our operational experience in dispatching flexibility increases, we will use this information to provide feedback to flexibility providers in areas and support them in maximising their value to the system.
In the future, as our procurement strategy matures towards full market-led pricing, the price submitted for each flexibility asset will be the dominant factor we consider.
As part of our Flexible Power service we produce two reports. The first is the result of each procurement cycle: this provides information on the number of respondents at each stage, the amount of megawatts at each stage and a table showing where bids were received and when procurement for that zone will be re-opened. The second is an annual ‘in numbers’ report that provides an at-a-glance look at how we are using flexibility to support our network.
View and download the reports: Flexible Power 2019 Cycle 1 Procurement Flexible Power – the first year in numbers
We began producing Distribution Future Energy Scenarios (DFES) in 2016. They outline the range of credible futures for the growth of the distribution network and are produced for each licence area on a two-year rolling cycle. The scenarios broadly align to National Grid’s Future Energy Scenarios. Please visit the Distribution Future Energy Scenarios section of our website.
The scenarios encompass the growth of demand, storage, distributed generation and low carbon technologies such as electric vehicles and heat pumps. The scenario projections are mapped to our network to obtain a regionally specific outlook for each of our licence areas.
Our DFES report is published at the same time as our Strategic Investment Options reports. Together they show the types of investment we might need to make and allow people to see the options we might take – including flexibility services. Please visit the Strategic Investment Options section to view the reports.
The industry is working together to deliver a system that will operate with zero carbon content and still keep the lights on for our customers.
As well as sharing information with other networks we have also been working with National Grid, the electricity transmission system operator (ESO), on a number of projects including:
Regional Development Plans, which consider how the transmission and distribution systems interact with each other across licence areas
Real time data exchange, which shares information on the running configuration and generation outputs on the distribution network to reduce the risk of conflict between Active Network Management and the ESO’s needs
Trans European Replacement Reserve Exchange, we are working with National Grid to ensure that constraints on our network do not impact on the ESO’s ability to provide replacement reserve services.