To TA or not to TA
Published by Jill Cox 22 / 02 / 16
In the last week of January, the first Transitional Arrangements (TA) auction took place. This is part of the Capacity Market, the Government’s key policy for securing electricity supplies, in which the TAs are supposed to act as “nursery slopes” for small generation and demand response. The Government sought a target capacity of 900MW, but because the auction cleared at a higher price than expected – £27.50/kW – only 802MW of capacity was bought.
These megawatts must now get ready to deliver supply security from October 2016. Hopefully, those who secured a Capacity Agreement in the TA auction knew what they were letting themselves in for. At Flexitricity, we’re taking our TA obligation very seriously – getting from the auction to delivery is not a simple matter.
The TAs offer a monthly payment from October 2016, a full two years before the first main delivery year from October 2018. That’s their main appeal for demand response providers and small generator sites. But this comes with a lock-out from the main auction for three years, and means providers must take their chances in annual top-up auctions, which are likely to be highly volatile and are not guaranteed to be run at all. For a few of Flexitricity’s customers, TA is a path that works with their business cycles. For the majority, building up a rolling four-year progression of predictable revenue through the main auctions – with two of those years already in the bag – is a far more compelling proposition.
As always, there’s more devilry in the detail. The TAs contain a risk which can only be understood by examining the requirements for metering and performance proving, and comparing these, line by line, with the capabilities of the actual sites. These verification requirements are identical for both main auctions and the TAs. However, while main auction providers have over 30 months to verify, TA verification must be complete by 31st August this year. Given other restrictions in the Capacity Market calendar, this really means late July. This accelerated schedule imposes a challenging timetable on all parties: the EMR Delivery Body (National Grid), EMR Settlement Body (Elexon) and, not least, the capacity providers. The tasks involved can’t be understated: there is much to be done and very little time to do it.
Each Capacity Agreement awarded will be delivered by a Capacity Market Unit (CMU) with one or more components (the individual sites). Each component must be proven, and in this respect the Capacity Market Rules pull no punches. Verification and testing is rigorous; as thorough as it is for the main delivery years, but to be completed in a compressed and immediate timescale. It’s a sleeves-rolled-up job for everyone involved, including owners of the individual sites.
Metering arrangements for each component must be documented and presented to Elexon (this is the metering assessment). For between 50-75% of cases, this must then be followed with a metering test, a thorough examination by Elexon of the metering arrangements. As part of this, Elexon has the right to visit any site to inspect and verify the metering equipment, including elements like current transformers which are often buried deep inside switchgear. For aggregated CMUs, around one in four sites are likely to be visited. If one component in the CMU fails the metering test, then none of the others can progress. Following certification by Elexon, performance of the CMU must then be proven to National Grid in a DSR test. The unit will only be approved when the DSR Test is successfully completed.
For those new to demand response, a short, steep and potentially rocky few months lie ahead. But it’s worth remembering that Elexon has never done this before either: every process and procedure is right now being built from scratch. So there is a risk that without planning, management and experienced support, the TA opportunity will be missed.
In fact, at this stage, only a part of the TA capacity is really associated with fully-committed sites. For demand response, a site becomes truly committed when it’s named as part of a CMU. Sites will be required to be named as part of the verification process. Before that, a site can still opt for the main auction route. Once it’s named for the TAs, however, the three-year lockout applies, even if it turns out that site can’t be verified in time.
Flexitricity is the only demand response company to participate in both the TAs and the main auctions. We’ve been preparing for the TA testing regime for months, informing our sites of the metering requirements, and collating and preparing necessary documentation. We recognised how challenging verification would be, and in particular the effort which is required from participating sites. We entered the TA auction secure that our TA participants are already great performers in balancing services like frequency response and STOR. Nevertheless, the Capacity Market is different. Success requires diligence and hard work, and at the key decision points, a heavy dose of pragmatism. Sooner is not always better.
Vertical farm producer Jones Food Company will partner with Flexitricity on the groundbreaking Quickturn project.
Trials are about to start at its 5,000 square metre production plant in Scunthorpe, giving the producer the opportunity to transform its energy profile through access to the demand side response (DSR) market.
The partnership with Flexitricity will help Jones Food Company improve its energy efficiency and earn revenue through providing electricity system balancing services to National Grid.
The Quickturn project is funded by the Department of Business, Energy and Industrial Strategy (BEIS) and aims to provide the first realistic opportunity for smaller commercial energy users across Britain to benefit from DSR.
Previously, participation has not been economically viable for smaller sites due to the cost of hardware, communications and implementation.
Similar to large-scale DSR, Flexitricity will utilise its expertise in flexible energy-consuming assets on site to help National Grid balance the fluctuating demands of the UK energy system.
Jones Food Company produces leafy salads and herbs for UK customers, supplying produce for up to 11 million sandwiches per week. Its Scunthorpe facility is one of the largest and most advanced vertical farms in the world aiming to transform the way we meet the global population’s growing demands for food. The practice of vertical farming involves growing food inside warehouse-type buildings on vertical racks, using artificial light and advanced growth techniques like hydroponics where no soil is used.
The business is committed to utilising cutting-edge technology to produce crops in the most environmentally efficient way possible.
Managing director James Lloyd Jones believes the Quickturn partnership gives the business an opportunity to demonstrate how small commercial users can come together to support National Grid in meeting the energy needs of the UK.
He said: “We are an energy intensive site and the trial is enabling us to be smarter about our consumption whilst providing a sustainable revenue stream that improves our operational costs and bottom line.
“Whilst we have the potential to be more competitive on every pound we save, there is a bigger picture here as the UK faces a significant challenge in how it delivers clean energy of the future.
“By working with Flexitricity on the Quickturn project we can help National Grid and develop innovative solutions that transform the UK’s energy infrastructure and help us reach our 2050 net zero emissions targets.
“The sky is the limit and we are very much looking forward demonstrating the potential for smaller commercial users throughout the country to earn revenue and help the UK achieve net zero,” he added.
Flexitricity has pioneered the demand-response industry, generating over £20million for its energy partners since its started live operations in 2004. It is the first supplier in the UK to provide full, active participation in the Balancing Mechanism for demand response assets.
The Edinburgh-headquartered business now has close to 500 MW under management – a virtual power station helping the National Grid meet the energy demands of the UK.
Dr Alastair Martin, founder and CSO at Flexitricity, said: “The ongoing drive towards a low carbon economy and the UK Government’s net zero 2050 emissions targets means that small businesses will have an important role to play in helping shape the energy infrastructure of the future. The era of the passive energy user is over. Not only is a smarter energy system essential for tackling climate change, it is also fairer and will allow everyone to benefit – from businesses of all size to domestic energy users.
“Jones Food Company is an incredibly ambitious fast-growth company and we are excited to be working with them to drive innovation and help them realise greater efficiencies and revenue from their energy assets.”
Further partners include Scottish Water Horizon, Veolia, Norish, Glasgow City Council and Northumberland City Council.
With trials about to commence across the UK, findings are expected to be shared in 2020.
Issued by Media Zoo on behalf of Flexitricity.
For more information please contact:
Neil McDonald: firstname.lastname@example.org / 07428 398 402 / 0141 471 8399
Ross Henderson: email@example.com / 07954 995 104 / 0141 471 8399
Notes to Editors:
Flexitricity created and now operates the first, largest and most advanced demand-response portfolio in GB and has unsurpassed knowledge of the market and its requirements.
Headquartered in Edinburgh, Flexitricity partners with businesses throughout Great Britain to provide reserve electricity to National Grid. The word “Flexitricity” means “Flexible Electricity”. The company looks for flexibility in electricity consumption and generation, creating revenue for energy users and generators as well as reducing national CO2 emissions and helping to secure energy supplies.
Their team is fully engaged at industry and regulatory level and has a track record that demonstrates innovation and delivery success.
Flexitricity is part of the Alpiq Group, a leading Swiss electricity and energy service provider with a strong presence across Europe.
Get in touch today
Book a call with one of our energy market specialists to find out if you can participate and how much your site could earn.0131 221 8100