The impact of Covid-19 on demand side response and electricity supply security

Now as at any other time, flexible electricity users form an essential part of the security of national electricity supplies.  Demand side response (DSR) is where electricity users adjust what they are doing from time to time in order to help National Grid keep supply and demand in constant balance.  Flexitricity has remained fully operational throughout the Covid-19 pandemic, and our customers continue to earn revenue from flexibility as they help to keep the lights on.   

Here we’ve answered some of the Covid-19 related questions we’ve been asked over the last few weeks. Please feel free to get in touch if you have any additional questions.

Will Britain be plunged into a blackout due to the impact of Covid-19?

A nationwide blackout is extremely unlikely.  We don’t consider it to be any more likely than at any other time, though there are a small number of differences in the way supply security works just now. 

It’s important to understand that there are two quite different types of blackout.

First, there are major events like the blackout on 9^th August 2019, which cut power to around 5% of homes and businesses in England and Wales.  Events like this are extremely rare – before August, the last time this occurred was in May 2008.  These blackouts can happen when there is insufficient capacity to feed supply, or when unexpected events happen in such quick succession that countermeasures just can’t keep up.  The August 2019 and May 2008 blackouts were both driven by the speed of events.

As the nation stays at home, electricity demand is substantially lower than normal at this time of year.  This means that there is plenty of available capacity to meet the remaining demand.  However, the proportion of our electricity coming from wind, solar and nuclear power is higher than it otherwise would be.  Wind and solar are both “low inertia” resources, and nuclear tends to be inflexible.  Together, these characteristics change the way that National Grid secures the system.  This doesn’t make it less secure, but we do think it will alter the market for flexibility as we head towards the summer, possibly opening up new opportunities for Flexitricity customers.  We’re in discussion with National Grid about the types of flexibility which will be most valuable, and will be discussing with our customers as these details are confirmed.

The second type of blackout, and the one which most people will have experienced, is a fault in a local distribution network.  In rural areas, this is often caused by bad weather.  It’s less common in urban areas, but accidents such as a digger striking a buried cable can be the cause.  Alternatively, it might be a simple fault in a transformer at a substation.

There may be fewer diggers in the streets, but local power cuts will still happen.  If a distribution network operator (DNO) is suffering from a shortage of staff, then it’s possible that they may struggle to fix faults as quickly as they normally would.  That is the motivation behind UK Power Networks’ writing to its more vulnerable customers, advising them to take basic precautions.  Unfortunately, this led to some newspaper headlines suggesting a bigger risk than is really present.

National Grid has set out details of its own operational planning for the pandemic and Ofgem has asked suppliers to make emergency repairs a priority.

Does the Covid-19 crisis put net zero on hold?

The target of net zero by 2050 is now in UK law.  Given the distance which Britain must travel between now and then, there is no time to waste.

The recent drop in energy use and transport emissions has created a short-term gain in the fight to tackle climate change. However, whether or not environmental performance is better in the long term depends on how governments around the world manage the recovery phase. We are optimistic that serious green investment by governments will be seen as a means to accelerate both the economic recovery and the drive towards net zero. This could include, amongst other initiatives, accelerated switch to electric vehicles and heat pumps.  These new ways of using electricity are inherently flexible, which bodes well for future supply security and environmental performance.

At Flexitricity, we’re continuing to do our bit: driving policy change and bringing forward the customer-side flexibility which our energy system needs to be both secure and green.

How is Flexitricity coping with the crisis?

Flexitricity fully transitioned to Covid-19 operational status before the lockdown.  We have robust contingency plans in place to ensure the continuation of our 24/7 operations.

The markets for our services remain active and thankfully the vast majority of our customers are able to continue to provide critical services to National Grid, which provides us and them with an uninterrupted revenue stream.  During the initial phase of the lockdown, we saw some change in National Grid’s patterns of use of flexibility, but this happened at the start of British Summer Time when we would normally expect to see some changes of this sort. 

Flexitricity’s strategy has always been to build a diverse portfolio, both in services we deliver and the customers we serve.  Our commercial model minimises our exposure to credit and market risk and continues to generate positive working capital.  This means we can continue to maximise the revenue earned by our customers.

Are you able to onboard new customers?

In most cases, we’re able to onboard sites remotely either by connecting via an API or shipping our outstations to the site and then working closely with site staff to complete the installation. This is obviously dependent on the ability of local staff to attend their own sites under the Covid-19 legislation and guidelines, meaning that for a few sites commissioning could be delayed. This is becoming less likely as restrictions continue to be lifted.

Our business function comes under the Government’s definition of vital professions and some of our staff are classified as “key workers”. Although we have moved all routine activity to working from home, we are able to access our office for discrete tasks where these cannot be accomplished without being in the office.   We ensure that on these occasions, Flexitricity continues to be socially responsible and to apply social distancing guidelines when planning and risk assessing activities, including the act of travelling to the office. 

Is there less industrial and commercial (I&C) flexibility available due to business having to focus on their core functions and / or struggling with the financial impact of Covid-19? What impact will that have on aggregators and National Grid?

Whilst we can’t comment on other aggregators, at Flexitricity we have not seen a noticeable drop in I&C flexibility.

A minority of our customers supply the NHS and the Government. We always give sites full opt-out rights, and naturally this group has exercised those rights. We managed the contractual position with National Grid to ensure that we are not in breach and to give National Grid plenty of time to procure alternatives at normal market rates.

How are National Grid’s requirements changing?

Lower-than-normal demand as we head towards the summer means National Grid will have to take steps to guarantee the right level of inertia is present on the system.  Among other things, this means that more frequency response will be needed, and makes faster frequency response (such as Dynamic Containment) even more important.  We’re ready to provide Dynamic Containment and are eager to see the service launched.

What impact has Covid-19 had on the energy markets and how has Flexitricity adapted?

The intraday energy markets are currently suffering from a lack of liquidity. This increases the importance of the Balancing Mechanism, which must correct any imbalances which the intraday markets leave. Over the medium term, we expect to see liquidity return. This proves, once again, that the ability to move between all revenue sources which are relevant to a particular asset type is crucial to success in demand response.

Flexitricity has the capability to provide a breadth of services which can support a variety of energy market changes and has the agility to move our customers’ assets across all the services as market needs change.