Flexibility exchange

Flexibility exchange to be demonstrated in UK

The FleX competition will support the development of innovative solutions to value and trade flexibility in the electricity market.
Published: Tue 28 May 2019

The UK government has launched a competition to support the development of flexibility exchanges in the UK energy market. Up to £4m is available which is expected to support up to three demonstration projects – with up to £2.5m for any one – over the next three years.

A smarter and more flexible electricity system is key to integrating the increasing levels of renewable energies and other distributed resources such as energy storage and electric vehicles, particularly behind the meter at the distribution level. The challenges are in how to deliver that flexibility with multiple parties both as providers and users and how to value it so that all the parties will benefit.

The UK Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem have been working towards the delivery of a decentralised and decarbonised system with flexible technologies and the competition is planned as the next step to harness these.

Flexibility markets

For the competition the term ‘flexibility exchange’ has been coined and is envisaged as a neutral exchange, such as those that exist for stocks and other goods, to bring together the multiple buyers and sellers of flexibility services. The competition document states that the exchange “would provide a platform through which to access the flexibility products, as well as a standardised approach to metering and settlement (where practicable). The exchange operator would act as a neutral market facilitator between flexibility providers and the electricity system operator, the distribution network operators and other potential buyers such as aggregators or suppliers”.

Projects are expected to provide access to as many buyers and sellers and as many markets as possible, both local and national. Sources for flexibility include energy storage, demand side response, demand reduction and generation and from both domestic and business consumers. Revenue streams that flexible technologies can compete for include wholesale price arbitrage, the capacity market, balancing mechanism, ancillary services and contracts to alleviate network constraints. Some of the services are procured nationally by the electricity system operator while the distribution operators would procure for the local markets that are emerging for network constraint management. Suppliers and aggregators may purchase flexibility services to manage their balancing position, or to offer them as part of an aggregated product to other buyers.

In addition to demonstrating the implementation and commercial viability of flexibility exchanges, a key outcome of the competition will be the impact on system costs with the potential for flexibility to provide a non-wires alternative to reinforcement. The impact on community engagement and energy consumers/producers is a further objective.

Technology innovation

Entries for the competition were due by 18 April and assessment is currently under way with a June announcement of the winners anticipated. Projects are expected to get under way immediately and trials completed with operational prototypes involving at least 100 real participants by the end of 2021.

The BEIS has not divulged the number of applications but the level of interest is indicated with some 80 individuals having registered or attending the competition briefing in March.

As examples of potential projects, Jon Ferris, Strategy Director at Electron presented at the briefing a shared marketplace for collaborative trading of multiple value attributes on the blockchain. Hari Sutha, Chief Strategic Growth and Policy Officer, Opus One Solutions proposed a whole system benefits flexibility market that actively accounts for network needs, while Rebecca Todd, Senior Lecturer at University of Manchester, proposed a coordination algorithm to maximise the use of assets.

The FleX competition forms part of the BEIS’s Smart Energy Innovation Programme with a £70m budget up to 2021. Other components include vehicle-to-grid and demand side response and demand reduction applications for domestic and commercial consumers, which are already under way, and energy storage cost reduction and smart meter load control and energy saving, which like the FleX competition are under evaluation.