The UK's distribution networks need to get smarter in order to balance supply and demand, writes John Hayling of AMT-Sybex.
That's why distribution system operators (DSOs) are creating new markets where companies can sell flexibility services to their local network.
If the DSO needs extra capacity for a certain period, they can call upon these companies to either reduce their consumption (for example, turning down the air conditioning in a large office block) or provide additional generation (for example, switching on their backup generator and connecting it to the grid).
Making flexibility work
DSOs are working hard to get these new local markets up and running as quickly as possible, but it takes two to tango. Without a wide range of companies acting as flexibility providers in each market, there will not be enough liquidity for the markets to function effectively.
The UK needs to recruit new market participants within each of our distribution networks. We need to look beyond traditional partners such as heavy industry and water companies, and find new allies in other energy-hungry sectors, such as companies that manage large office buildings or shopping centres.
In many cases, these new companies won't have been involved in energy markets before, so it's up to the industry to educate them about the benefits of becoming a flexibility services provider.
- New revenue streams: in most cases participants can expect to earn fees just for making flexibility services available - even if the DSO never needs to use them. On top, DSOs will typically pay fees for each megawatt they utilise.
- Minimal business impact: in practice, DSOs rarely need to use flexibility services for more than a few hours, and they are unlikely to call on any individual provider more than a handful of times per year.
- Greater sustainability: helping DSOs build smarter networks is good for the environment and good for corporate social responsibility, as well as good business sense.
- Low barriers to entry: AMT-SYBEX and other vendors can provide powerful software that automates energy asset and market optimisation, making it easy for companies to participate without needing to hire new people or learn new skills.
If we can raise awareness about the upsides of these new energy markets and get new companies on board, it will be a key step towards a smart grid future - where not only large enterprises, but also small businesses and even homeowners, can participate in a cleaner, more efficient energy market.
John Hayling, AMT-SYBEX