Flexitricity is launching an exciting new offering for customers:Flexitricity is becoming a licensed electricity and gas supplier for industrial, commercial and public-sector energy users, small generator owners and battery developers. A major part of Flexitricity’s package will be access to the Balancing Mechanism (BM).
What will this new service offer? Flexitricity will provide:
- Pass-through access to the major wholesale markets for both electricity and gas, so that customers can fix their energy costs and revenues at timescales that suit their businesses;
- Transparent pricing of wholesale costs and non-energy costs;
- A market access platform that will allow customers to plan consumption and generation down to day-ahead stage;
- A major new revenue source by optimising flexibility on-the-day and in the BM;
- Complete control, with the ability to opt out, restrict availability or set parameters at any time;
- A single financial statement covering energy costs and revenues, balancing services revenue, capacity market revenue, triad benefit and non-energy costs.
Who is this service targeted at? Flexitricity's energy supply proposition will suit many sector:
- Combined heat and power (CHP) operators, including those with private wire networks;
- Flexible consumers in sectors such as cold storage, water and chemicals;
- Developers of batteries, hybrid resources and peaking or backup plants, whether behind the meter or not;
- Controllable renewable resources, such as hydro, biogas, biomass or batteries co-located on wind or solar farms.
Is Flexitricity's energy supply proposition the right fit for everyone? Flexitricity’s supply proposition is “pass through” – customers will see all energy costs and revenues explicitly, so that they can control them. This will not suit all customers. Although our supply customers will be able to make long-term trades, we won’t be offering fixed prices. If a Flexitricity energy supply contract isn’t the right fit for a customer, or the customer is happy with the supplier they have, we will continue to be the market-leading choice for balancing, capacity and peaking revenue sources. We run Britain’s largest, longest-established and most diverse demand response service from our 24-hour control room, and we’re going to keep doing that.
What is the Balancing Mechanism? The BM is one of the most important tools that the National Grid uses to balance electricity supply and demand in real time. When electricity generation and consumption are not in balance, National Grid accepts bids and offers in the BM to correct the mismatch. Unlike balancing services such as STOR, the BM is an ad-hoc market with no forward commitments and highly dynamic prices. This makes it very suitable for any “despatchable” generators like CHP, hydro or engines, for flexible consumption at energy-intensive sites, and for batteries.
Why is the Balancing Mechanism important? Energy customers and small generators cannot access the BM directly; they have to go through licensed suppliers. However, suppliers have not historically provided access to the BM for their customers. The BM is a major market opportunity for flexible capacity. By bringing its customers into the BM, Flexitricity will unlock new revenue for those customers by trading their flexibility, as and when it’s available.
How does the BM work? - All large power stations and electricity supply companies have to notify National Grid of how much they intend to generate or how much they intend to consume in each half-hour "settlement period". They must do this by "gate closure", which is one hour ahead of the settlement period concerned.
- The BM is a rolling marketplace in which any licensed generator or licensed supplier can post prices and capabilities for varying their consumption or generation "within gate", that is, 60 to 90 minutes before real time. Participants state their capacities and their prices, and can also post dynamic parameters: how fast they can change, how much notice they need, and so on. Prices are either bids (to consume more, or generate less) or offers (consume less, or generate more).
- "Gate closure" means you can't do these trades on the open market; National Grid is the only counterparty who can accept these bids and offers.
- Prices are always set in pairs, so that National Grid can reverse a decision when it wants to.
- The BM works over high-integrity communications lines known as EDL and EDT. These lines are vital to the security of the electricity system, because when National Grid accepts a bid or an offer, it's relying on the market participant to do what it's been asked. It's also essential to have a control point. All participants' systems are rigorously tested, and all must sign up to a number of codes, including the Balancing and Settlement Code and the Grid Code.
Why is Flexitricity doing this?Flexitricity is launching a new energy supply offering providing customers with full market transparency plus access to the BM – something that has until now been closed to everyone except large licensed generators and suppliers (like the Big Six). This will complement Flexitricity’s market-leading suite of demand response offerings in the UK market with a specialist industrial and commercial energy retail offering. It will also provide a path to market for emerging flexible resources, including electrification of transport, large-scale heat pumps and community energy schemes.
What/who has enabled Flexitricity to do this?Flexitricity is already equipped with the technical expertise, the innovative dispatch and monitoring systems and the 24-hour control room it needs to support this proposition. Flexitricity has an unbeatable track record in delivering balancing services to National Grid. We are the industry’s leading innovators, and are deploying both in-house experts and external market-leading service providers to create this new offering. Flexitricity is also backed by parent company Alpiq, a major European utility with extensive experience in energy trading and flexible operation.
How can customers benefit? As an electricity and gas supplier, Flexitricity will:
- Deliver more value and revenue-creating opportunities for new and existing customers;
- Deliver better value for the National Grid, and therefore, consumers;
- Create a new revenue option for battery developers at a time of volatile frequency response market prices;
- Provide new options for existing participants in demand response;
- Disrupt the marketplace to the benefit of all customers.
How do existing and new customers get involved? Talk to us. We can guide you through the details of the proposition, discuss the needs of your business, and determine whether Flexitricity's energy supply offering is for you. We will have all systems and business processes in place by late spring 2018, with customers on supply by October 2018. In the meantime, you can contact us for futher information and to discuss options:
Will this negatively affect Flexitricity’s existing customers and the current range of services? No. Existing services will remain central to Flexitricity’s offering. This move is a natural evolution of Flexitricity’s business model and provides an additional opportunity for participation and revenue generation – for customers whose business models it suits. The core of our business is unchanged – we are Britain’s leading demand response company.
Why use Flexitricity? - This service complements Flexitricity's existing portfolio of services, all of which are built around the customer. Larger suppliers, who own their own fleets of flexible generators, are conflicted: it doesn't pay them to put the customer first.
- Working with Flexitricity supports the move towards a more decentralised system, improving resilience, competition and value for customers.
- Flexitricity will be the first demand response aggregator to provide full, active participation in the BM for its customers.
- Flexitricity already has the technology, systems, expertise and appetite for detail to deliver this service. No other company can claim that.
What is the carbon impact of this service? We've already demonstrated that small, distributed flexible resources can dramatically increase the efficiency of the grid and make it much friendlier to renewable energy. By bringing customer-side flexibility into the BM, we're increasing the opportunities for business energy users to green up the grid.
Demand side response - the basics
What's in it for my organisation? New revenue from your existing assets: This turns assets that were previously cost items into direct revenue earners.
Improved asset reliability: Standby generators need to be run regularly on load to ensure that they provide reliable emergency power. Generators which are only tested off-load have a much higher likelihood of failure in service. All assets connected to Flexitricity are continuously monitored, and we can inform you immediately of any concerns.
Help to reduce national carbon dioxide emissions: Flexitricity's demand-response solutions provide a low-carbon source of reserve energy to the national electricity system. Every megawatt of capacity connected to Flexitricity's virtual power station is a megawatt that does not need to be made available elsewhere. This reduces the need to keep coal and gas stations on hot standby or running inefficiently at part load.
Will it disrupt my core business? No. We understand that your equipment is there for your core business and this takes priority in all situations. Each site has an "inhibit" switch, allowing your site operators to opt out of Flexitricity should the need arise. Our equipment will automatically opt out if any process parameters stray beyond agreed limits.
How often is the service used? This depends on the asset type. For standby generators, utilisation hours are deliberately kept low; we aim for the amount of running that would be expected in a best-practice on-load testing regime. CHP generators provide demand response much more frequently; many will deliver up to 500 hours of reserve energy each year on top of their normal operation. The amount of demand response which flexible loads deliver depends on the capability of the individual site.
What will it cost? Flexitricity works with the assets that you already own. Some work will always be required to connect our communications equipment to your controls. For standby generators, there may also be a capital cost to allow the generator to run in parallel with the local distribution network. We prefer to support your contractors, and will help you evaluate the return on investment. We never charge for our work in developing a site, and our communications and control equipment is supplied and maintained free.
How can running standby generators be good for the environment? In two ways. First, no CO2 is released in keeping a standby diesel in reserve; the same is not true of large power stations. Second, Flexitricity runs generators only when the oldest and most polluting power stations would otherwise be needed.
Although standby generators are an important part of a demand-response portfolio, we make sure they are used only when they are really needed. Lower-carbon sources, like flexible load and CHP, are used many times more.
What’s the catch? There is no catch. We don’t use penalty clauses. Instead, strong relationships and proven technology are our guarantee of performance. Your site staff remain in control and can opt out at any time if they need to.
What is an “Energy Partner”? An Energy Partner is a company or organisation which partners with Flexitricity to connect some of its equipment to Flexitricity’s demand-response system. This allows Flexitricity to reduce its electricity consumption, or run its generators, for short periods when the national electricity system is under stress.
Balancing electricity supply and demand
Who or what is National Grid?National Grid is a public limited company with operations in the UK and overseas.
National Grid has two major UK electricity businesses, both of which are monopolies regulated by the Office of the Gas and Electricity Markets (Ofgem). These are:
GB Transmission System Operator (TSO) – National Grid is responsible for maintaining the balance of supply and demand in the national GB electricity system. Flexitricity sells services such as Short Term Operating Reserve (STOR) to National Grid to help with this, and provides revenue from STOR to the industrial and commercial electricity users and generators who participate.
Transmission Owner, England and Wales – National Grid owns the electricity transmission infrastructure in England and Wales. Other companies own the transmission network in Scotland, and links to offshore wind farms.
The term “the national grid” is also often used to refer to the whole of the electricity system, including transmission and distribution. In the industry, “distribution” means the networks of local wires that connect individual homes and businesses.
Can you store electricity? No. Electricity cannot be stored any more than light can be stored. It is generated in the same instant that it is used. This means that balancing supply and demand is the critical process in any electrical system.
You can store what electricity does: pumped water, finished or intermediate product, fuel, heat, “coolth”, hydrogen and many of the other inputs and outputs of electricity consuming or generating equipment. New energy storage technologies are also emerging.
Flexitricity exploits these different types of flexibility or “inertia” to help balance electricity systems in a low-carbon way.
How are electricity supply and demand kept in balance now? In every electricity network, a “Transmission System Operator” (TSO) takes charge of this process, using different tools for different timescales. There are three categories: response, reserve and contingency reserve.
Frequency response (seconds) – the supply frequency tells you whether the electricity system is balanced or not. If frequency is low, demand has exceeded supply. If frequency is high, supply has exceeded demand. Frequency response happens automatically, and can only hold the system stable for a few minutes if a large power station fails. Traditionally, frequency response comes from large power stations which open and close the steam or fuel valves as frequency rises and falls. In order to do this, the power stations have to be running at part load, which is inefficient. When electricity users allow some of their processes to be turned down if frequency falls too far, that reduces the amount of response that power stations have to provide.
Reserve (minutes) - the TSO can start fast-acting generators or turn down consumption when demand goes higher than forecast, or when a power station fails. Reserve calls last until either the demand peak is over or slower power stations are ready to take over. The main type of reserve is Short Term Operating Reserve, or STOR.
Contingency Reserve (hours) - the TSO can warm up large power stations and hold them in “hot standby” if there otherwise wouldn’t be enough STOR on the system. This is very carbon intensive. In longer timescales, balancing supply and demand is largely left to the free market.
Aren’t industrial and commercial sites too small to make any difference? On their own, they are too small. Flexitricity aggregates them into a versatile and highly flexible “virtual power station” which is large enough to make a real difference.
How can diesel generators be “greener” than large power stations? Flexitricity is called only when the national electricity system is under stress, when National Grid would otherwise call on the oldest and most polluting power stations. All of these emit more CO2 for the same generation than diesel engines.
Many older power stations require up to twelve hours’ notice before they can generate; in contrast, standby generators can reach full power in under a minute. No CO2 is released in keeping a standby diesel in reserve.
Finally, diesels provide only a small minority of the reserve and response energy that Flexitricity delivers to the system. Flexible loads, CHP generators and small hydro power stations are used much more frequently. Flexitricity keeps diesels for only the most critical events.
What emissions are associated with “reserve” capacity? Reserve generation capacity, used for balancing electricity supply and demand, produces between 300 and 750 tonnes of CO2 per annum for each megawatt of reserve required.
By working with Flexitricity, your sites will prevent these balancing emissions, whether you use generation or load reduction.
Can I claim carbon credits for Flexitricity operation? No. CO2 emissions from electricity generation varies continuously throughout the day, but the government uses an annual average to calculate the carbon impact of electricity consumption. This means that the emissions benefit of demand response can only be calculated indirectly.
The emissions saved by Flexitricity are actually saved at large power stations, and double counting of carbon credits must be avoided. However, the cost of the CO2 and fuel saved in large power stations is one of the factors that drives the value of flexible operation, and is included in the revenue you receive for working with Flexitricity.
What about the fuel I use in my generators? Fuel consumed by standby diesel generators creates CO2 emissions at your site, and these are less than the corresponding emissions which would have occurred if National Grid had been forced to buy the reserve electricity elsewhere.
The target annual run hours for Flexitricity operation are similar to those of a best-practice generator test programme.
Most CHP generators are fuelled by natural gas, so their carbon emissions are lower than diesel engines and coal power stations. Because heat from CHP is captured and used – often using storage to match heat customers’ needs – CHP generators can deliver quite regular demand response and still reduce national emissions.
Can I use biodiesel or other liquid biofuels in my standby generators? In theory, this could happen, but in practice it does not. There are many reasons for this:
- Many biofuels must be heated. This makes them unsuitable for generators which run for limited hours each year.
- If a biofuel is genuinely cost-effective and environmentally friendly, it makes more sense to use it, for example in a vehicle fleet, rather than holding it ready for a demand-response event.
- There are significant questions over the sustainability of many biofuels. If an alternative fuel isn’t really better than fossil fuels, there’s no point in using it.
Don’t small generators just displace efficient, base-load power stations? This isn’t generally true, and in fact the opposite is true of generators working with Flexitricity. By giving National Grid the ability to choose when generators run, and by careful pricing, we ensure that your generators will displace the most polluting electricity – which would be National Grid’s next best option when the electricity system runs short.
Why do we need Flexitricity if renewable and nuclear generators are the future? Electricity from wind, wave, solar and tidal power stations is generated when the resource is available, not when consumers need electricity. By allowing the electricity system to adjust both consumption and generation, Flexitricity makes it possible for a much larger volume of variable renewable generation to be absorbed.
Nuclear power stations can be designed to be moderately flexible, but for a number of technical and economic reasons, it is much better to operate them as “base load” stations. Furthermore, nuclear generators are large, and getting larger. A big generator needs a lot of reserve in place just in case it trips.
Why does National Grid pay so much for Flexitricity’s services? National Grid has to keep the electricity system safe and stable at all times. If National Grid were to rely wholly on the short-term energy markets, the cost of system balancing would be significantly higher, and there would be no guarantee that the capacity would be available when required.
How much will my site earn? Earnings from Flexitricity are significantly greater than the operational costs. Sites vary, so before you commit to anything, you will see an economic and technical appraisal tailored to your particular sites.
What capital investment is required? Depending on your site, the following may be required:
- Controls interfacing and modifications to PLC code;
- For some generators, installation of synchronisation and G59 protection equipment;
- Where controls are obsolete, replacements may be required.
It is very common to discover faults on standby generators, and these must be rectified before the site commences Flexitricity operation. Most of the capital investment is either beneficial to, or vital for, the security of the power supply to your site.
Does Flexitricity charge for its equipment? No. We supply our outstations without charge, and we continue to own and maintain them. We also provide communications lines, which we pay for.
What are Flexitricity’s management fees? Zero. Our revenue is a percentage of payments received from utility customers like National Grid. Our philosophy is “win as a team, lose as a team”. We have never lost.
Can I sell the electricity that is generated? You still own the electricity that you generate. Electricity that you use on site reduces your site import, and any exported electricity can be sold.
What happens if my operating costs rise? The price paid for energy in the STOR market has consistently been substantially above the wholesale electricity markets. This makes it possible for us to place a wide variety of asset types – flexible load, CHP and standby generation – into STOR at profitable prices. We closely analyse market conditions and participate in every tender round to make sure that you always make a profit.
Historically, the value of triad management was strongly dependent on the location of the site. However, triad prices are likely to even out across GB, at a level that makes all types of flexible operation economic. Other flexible services can be dynamically priced to reflect the cost of provision, and to ensure that you are only called if there is profit in it for you.
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