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Flexibility experiments work to cut the system costs of solar and wind

Network operators tasked with managing the steadily bigger swings in demand and supply that accompany greater uptake of solar and wind energy have had to choose between constraining clean generation, which adds to operating cost, or increasing grid capacity requiring capital expenditure. A less costly way is to buy system flexibility in a competitive but carefully coordinated process. Trials in areas of Britain challenged by grid constraints are producing encouraging results 

An online trading platform allows network operators to pay energy producers and consumers for either more generation or reduced load

EASE CONGESTION
Adding flexibility tools to an already-constrained grid allows for more zero-carbon generation without having to add transmission infrastructure COMPETITIVE ELEMENT
Market-based solutions provide returns on investment for participants and avoid the need for direct market interference by the national operator KEY QUOTE
Real-time flexibility procurement is certainly the direction of travel in the future When a local electricity network operator in the far southwest of England acted with the national power system operator to simultaneously buy flexible capacity from a third-party platform the pair reached a milestone in a quiet revolution. The capacity they increased was their combined ability to match supply and demand in a region with rising volumes of roof-top solar and distributed wind generation. Adding more flexibility makes it easier to manage the extra uncertainty that behind-the-metre solar contributes to demand forecasts and that variable wind generation adds to supply forecasts. Uncertainty carries a cost as does heavy-handed market intervention to balance supply and demand and secure system stability. Buying in nimble flexibility is the better and cheaper option. The platform trade, back in late 2019, was part of the Cornwall Local Energy Market (LEM), a three-year £16.7 million project to test the role of flexible demand, generation and storage on a new virtual marketplace. Cornwall is one of the sunniest and windiest regions of the UK; the amount of electricity generated by renewable technologies in the county had surged from around 6% in 2009 to around 37% in 2020. Without ready tools to manage the rising variations in supply and demand in Cornwall, grid constraints were inevitable and held back new installations of renewable energy capacity. Traditional network reinforcement would solve the problem, but installing pylons, transformers and substations takes time and has a high up-front capital cost. Instead, national utility Centrica partnered with local distribution network operator (DNO) Western Power Distribution, the National Grid Electricity System Operator (ESO), and academic institutions Exeter University and Imperial College London. The aim was to trial a more cost-effective solution to grid constraints that also boosts the business case for both renewable energy generation and its storage—increased flexibility. Paying businesses and homes to increase, decrease or shift the times they use or produce power in response to the needs of the grid increases the network’s flexibility and helps to balance the peaks and troughs of generation that come with low carbon sources of energy. The demonstration project in Cornwall saw smart and low-carbon energy technologies, including solar panels, combined heat and power systems, battery systems, and monitoring equipment installed in nearly 200 homes and businesses.

ONLINE TRADING PLATFORM

At the centre of the LEM was an online platform for trading. It allows network operators to pay energy producers and consumers for either more generation or reduced load in a competitive but coordinated process. The 617 kilowatt-hours (kWh) of storage capacity spread across the home battery systems was combined to form a virtual power plant. The aggregated capacity could trade autonomously with the grid operators. Some businesses saved as much as 35% on energy bills by operating at times more aligned with grid needs, according to Centrica. A set of algorithms was created to clear each auction with the best-cost solution, while also considering the capabilities of the technologies involved and the grid. Auctions for reserve capacity were held three months, one month and one week ahead of delivery with balancing achieved in day-ahead and intraday exchanges. The decision-making engine enabled close-to-real-time trading on a large scale. It was this virtual marketplace that allowed simultaneous purchases by the ESO and the DNO. Colm Murphy at National Grid ESO says DNOs have typically managed congestion by building new grid infrastructure on their network, but are increasingly buying flexibility services. As the national manager of the UKs transmission system, the ESO needs to make sure that this procurement is coordinated and does not inadvertently impact its own operations. We wanted to make sure that the DNO didn’t buy a service to manage congestion on their network, that then undid something that we as the ESO were trying to do at the national level because managing national congestion is about balances of frequency,” he says.

SCALING UP

Over its three-year duration, the LEM saw 310 MWh of energy traded, facilitating sufficient renewable energy generation to save nearly 10,000 tonnes a year of greenhouse gas emissions—equivalent to the typical annual output from 2000 cars. To accommodate the UK government’s ambitions to power the equivalent of every home with offshore wind, as much as 25 TWh of flexible energy services will need to be traded every year across the whole country, which Centrica estimates is almost double the annual electricity demand of Wales. Scaling up the system to be operating countrywide will require some technical barriers to be removed. DNOs should adopt flexibility market solutions that include close-to-real time products such as day-ahead trading, to incentivise participation, Centrica says. It also wants to see a recent change by Ofgem, the UK energy market regulator, widened. In January 2021, Ofgem introduced a requirement for DNOs to procure and use flexibility services where economically efficient. They must report annually on their compliance and set out their procurement plans for the next 12 months. Centrica wants Ofgem to allow assets that can participate to include those at the electric vehicle (EV) or domestic level. Murphy says the ESO is already working towards day-ahead trading when renewables will know with more certainty how much they are likely to generate and industrial energy users will have a better understanding of how much they need. Moving markets closer to real-time means that people can be more agile, rather than having to commit to contracts far out when there’s a greater degree of uncertainty, leaving them less likely to participate,” Murphy says. The Energy Networks Association (ENA), a trade group which represents UK DNOs, says real-time flexibility procurement is certainly the direction of travel in the future” although markets remain nascent at the moment.

FLEXIBILITY FIRST

In the past, the UK has used Active Network Management (ANM) to reduce the need for costly grid upgrades to allow new generators onto the system. Under ANM, newer generators are instructed to limit their power output at times of oversupply, in order to avoid too much energy being put onto the network that could cause outages and faults. Centrica believes the government, Ofgem and DNOs ought to recognise that ANM can have an adverse impact on the flexibility of markets. It wants the market operators to commit to using market-based flexibility services as a first resort instead—as demonstrated in Cornwall. Dan Nicholls, Centrica’s programme manager for the Cornwall LEM, says that although ANM was introduced initially to encourage the installation of renewable energy, as the UK moves towards needing greater flexibility it was actually making it harder for operators to create a business case. We want DNOs to disconnect renewable generation only in a worst-case scenario. Similarly, we should only be investing in grid reinforcement where we’ve explored flexibility first,” he says. The ENA says the six UK DNOs have committed to compare reinforcement with flexibility solutions for new projects and to work with Ofgem to ensure that financial incentives provided to network companies do not favour building new infrastructure where flexibility would be more efficient.

NEW TRIALS

Centrica is hoping to continue its LEM in Cornwall in some format, though it has not yet finalised plans. The trial ended in 2020. Meantime, several other pilot projects are taking shape in the UK, including in Orkney, a group of islands off the north coast of Scotland as far as from Cornwall as it is possible to get within the UK. Here 100% of electricity is already supplied by renewables. The islands are connected to mainland Scotland via two 33 kilovolt (kV) cables with a total capacity of 40 MW. Orkney’s connected generation uses all the available export capacity in the cables, according to Scottish and Southern Energy Network (SSEN), a combined electricity supplier and DNO. With their export capacity restricted, the Orkney generators are losing around £250,000 in revenue a year from their forced participation in the ANM arrangement, says Megan McNeill, Orkney’s project manager at Community Energy Scotland, a renewable energy support charity. They are non-firm contracts, so generators are aware that your asset could be turned off when you sign up. However, a lot of them didn’t expect to be curtailed as much as they were, or lose as much revenue as they have done,” she says. The £28.5 million ReFLEX Orkney project—run by research group European Marine Energy Centre, Community Energy Scotland and Heriot-Watt University—aims to test how flexibility services can alleviate the restraints on generators. Residents and businesses have been offered a variety of low-carbon transport and services to help them use more power and manage that use, including batteries, electric vehicles, smart chargers and smart meters. The trial includes initiatives such as electric buses, a local electric car club and the integration of green hydrogen for storage and transport. Orkney residents are generally enthusiastic about their energy systems, McNeil says. But the remote location results in some of the highest electricity costs in the UK and fuel poverty is a problem, she says. Unlike the Cornwall LEM, ReFLEX Orkney is not providing technology for free and has instead developed a leasing system. We’re trying to demonstrate that this sort of system can be financially viable for residents. In the long run, the transition needs to happen everywhere in the UK and hopefully we can show that those who are vulnerable can be included in some way,” McNeil says. Returning to the south of England, in Oxfordshire SSEN is collaborating with a number of partners including local government and researchers from the University of Oxford on a £40 million Local Energy Oxfordshire (LEO) project. The area was chosen due to the high level of constraint on the electricity network, which undermines the feasibility of connecting new sources of generation. Either the constraints will stop new renewables deployment, or make it prohibitively expensive. The project includes developing business and investment models, whole system energy mapping and planning, local infrastructure for EVs including bi-directional charging, and responsive heat networks. One of the more innovative elements is considering peer to peer energy exchange, which would enable local people and businesses to trade electricity between themselves. Jack Presley Abbott, senior regulatory manager for Centrica, is optimistic for the future of local energy markets in the UK. Over the past year or so I think the momentum behind flexibility and the need for it to support net-zero and decarbonisation is being properly understood by the government and the regulator. This is great because I don’t think we quite had that previously, especially when the Cornwall LEM was first set up.”


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Catherine Early