‘Fully prepared’: National Grid ESO plots winter expansion of demand flexibility service

National Grid ESO has confirmed it anticipates energy supplies this winter will be sufficient to meet demand, with the expansion of the grid operator’s Demand Flexibility Service set to play a growing role in shoring up the energy system’s resilience and minimising price shocks.

The company this morning published its official Winter Outlook, which sets out its predictions for energy supply and demand and how it plans to manage the country’s energy supplies over the winter months, when gas and electricity demand is at its highest.

The report noted that energy supply margins were set to be higher this winter compared to last year, due to better gas storage stocks across Europe and increased availability of nuclear power imports from France. But it stressed that as a “prudent regulator” it was planning for a “wide range of eventualities” that could see margins come under pressure. 

As such, the reintroduction of its Demand Flexibility Service is one of a number of measures set out by the operator to boost the resilience of the grid this winter.

Launched last year, the service aims to alleviate pressure on the grid by incentivising domestic, industrial, and commercial energy users to intentionally shift energy usage out of specified peak periods.

National Grid ESO said it was committed expanding the balancing service to reach more consumers and businesses, confirming plans for a dozen incentivised test events over the winter months, alongside “potential live uses” of the service.

Electricity suppliers, aggregators and businesses who participate will receive a guaranteed acceptance price of £3 per kWh for at least six of the test events, subject to registered volumes from January 2024, it said.

Last year, the Demand Flexibility Service saved more than 3,300MWh over 12 events, equivalent to enough energy to power nearly 10 million homes, according to National Grid ESO. The approach also leads to reduced emissions and costs, as it minimises the need for grid operators to fire up costly fossil fuel power plants during periods of high demand and low renewables generation.

Craig Dyke, head of national control at National Grid ESO, said the company was putting in plavce plans for a range of scenarios to ensure it was “fully prepared for any changes in circumstances this winter”.

“To support our preparations, we have chosen to reintroduce the Demand Flexibility Service for this winter, following the impressive response from consumers and businesses to act as virtual power plants,” he said. “Following regulatory approval, we will be publishing more details on how households and businesses can get involved and participate in the service this year.”

The Winter Outlook was published a day after Octopus Energy announced its customers are taking part in a pioneering vehicle-to-grid (V2G) trial with National Grid to help balance the grid.

The trial will explore the role that electric vehicles (EVs) and other small-scale, decentralised energy resources could have in providing flexibility to the energy system. It marks the first time EVs have entered the Balancing Mechanism, the market where power is traded to balance the grid in real-time.

Traditionally the Balancing Mechanism has been dominated by carbon-intensive power stations. But V2G technology – which enables power in EV batteries to be pushed back to the power grid at times of high electricity demand – would enable households to contribute to balancing the electricity system when they are not using their cars.

Claire Dykta, head of markets at National Grid ESO, described the opening up of the Balancing Mechanism to EVs and other clean technologies as “an important step for extending consumer flexibility in a net zero world”.

“This industry-wide trial will provide valuable information to our control room, to help enable the full time availability of electric vehicles in the Balancing Mechanism in future,” she said.

Customers signed up to Octopus Energy’s smart flexible car charging tariff – Octopus Intelligence – are set to take part in the trial.

Kraken, Octopus’s tech platform, will connect to the cars taking part in the trial and continually manage their response depending on changing grid needs, while respecting drivers’ charging schedules.

“EV drivers on our ‘Intelligent Octopus’ tariff now form the UK’s biggest virtual battery – and for the first time ever EVs have entered the Balancing Mechanism,” said Alex Schoch, head of flexibility at Octopus Energy Group. “Whilst we sleep, EV drivers are driving down grid balancing costs that are passed on to all customers – saving us all money. This is the ‘smart energy grid’ today – complete radicalisation of the way the system is balanced is here now.”

In further related news, think tank Green Alliance has this week urged Ministers tasked with reducing congestion on the grid to rule out a shift to a locational marginal pricing regime and instead pursue efforts to boost energy storage capacity and introduce more local flexibility markets.

The think tank said a shift towards locational marginal pricing would be a radical, expensive structural reform that would distract attention from the urgent need to build more renewables capacity.

Analysis published by the think tank on Wednesday found there are nine times more savings on offer from building renewables today than might be generated under the best-case scenario for shifting to a locational marginal pricing system. 

The think tank said locational marginal pricing would add the cost of network congestion and transmission losses to the wholesale price of electricity at any given location, and ultimately lead to different energy prices in different places at different times.  

“Locational marginal pricing is likely to be an expensive distraction, preventing us saving money from cheaper renewable power in the meantime,” said Dustin Benton, policy director at Green Alliance. Given the uncertainty created by the Prime Minister’s review of environmental policy – and if we don’t want to drag out our dependence of expensive oil and gas – we need to make it clear that we’ll set a credible price for renewables this November, making a successful Contracts for Difference auction possible next summer.” 

Locational marginal pricing is one of the options on the table in the ongoing Review of Electricity Market Arrangements (REMA), which is due to reopen this autumn. Advocates of the approach argue it would help to boost the efficiency of the grid, reduce the need for investment in additional transmission capacity, and result in lower curtailment payments to renewables operators by incentivising energy users to take advantage of the lower prices available in areas with high levels of renewables generation.

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