Frequently Asked Questions
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:
National Grid Electricity System Operator (NGESO) – National Grid ESO is responsible for maintaining the balance of supply and demand in the national GB electricity system. Flexitricity sells ancillary services such as Short Term Operating Reserve (STOR) to National Grid ESO and trades in the Balancing Mechanism to help with this. This generates revenue for the industrial and commercial electricity users and generators who participate.
Transmission Owner, England and Wales – National Grid owns the onshore 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.
Electricity can be converted to chemical potential and stored in batteries. Lithium-Ion batteries are the most successful type. Other energy storage technologies exist, and more are being developed. Each has its own strengths and each is suited to different applications.
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?
In every electricity network, a “Transmission System Operator” (TSO) or Electricity System Operator (ESO) 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 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.
Balancing Mechanism and wholesale market trading
What is the Balancing Mechanism?
The BM is one of the most important tools which National Grid uses to balance electricity supply and demand in real time.
When electricity generation and consumption are not in balance, National Grid uses the BM to purchase changes in generation and consumption 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.
Participants can post prices and capabilities for varying their consumption or generation after “gate closure”, that is, 60 to 90 minutes before real time. Prices are either bids (to consume more, or generate less) or offers (to consume less, or generate more). After the “gate closure” National Grid is the only counter party who can accept these bids and offers—the market is closed for other buyers.
Why is the Balancing Mechanism important?
Prices in the BM can reach £2,500/ MWh, compared to around £50/MWh in wholesale markets. The market is used around 3,000 times per day at a cost of £350 million per year.
The BM is a major market opportunity for flexible capacity. By bringing its customers into the BM, Flexitricity is unlocking new revenue for those customers by trading their flexibility, as and when it’s available.
How does the Balancing Mechanism 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, plus a new API-based system which is suitable only for smaller participants. 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.
How do existing and new customers get involved?
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: 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.
The energy market is changing. Traditional generators like large nuclear, coal and gas-fired power stations are being replaced by cleaner but variable renewables. This is creating a dramatic new opportunity for flexible energy users and distributed generation to help National Grid meet the energy demands of the UK and support the renewable energy revolution.
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, capability and availability of the individual site, and which service(s) the assets are participating in.
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. 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.
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 alter its electricity consumption, or run its generators, for short periods when the national electricity system is under stress.
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 protection equipment;
- Where controls are obsolete, replacements may be required.
For sites delivering fast services like frequency response, it’s important that signals are passed around the site quickly. At large industrial sites, this may require new cable runs.
Although most combined heat and power generators meet current emissions standards, it’s important to check the specifications in case emissions abatement is needed.
Particular care is required in the case of standby generators. First, most such generators require emissions abatement equipment to be installed. Second, 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. In some cases we can also connect to sites via an API which means we won't need to install an outstation.
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?
If you’re doing DSR using generation and you’re signed up for triad management, the Capacity Market or a DNO service, you still own the electricity you generate. Electricity that you use on site reduces your site import, and any exported electricity can be sold. For other activities such as STOR and the Balancing Mechanism, the rules are a little more complicated. We will work through the processes with you once we’ve identified which revenue-earning opportunities are best for your sites.
If you sell electricity, and you’re a Flexitricity+ energy supply customer, then you’d be selling it to us.
What happens if my operating costs rise?
We monitor your site(s) and ensure that the revenue you're generating through demand side response is higher than your utilisation costs.
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?
Most combined heat and power (CHP) generators are fuelled by natural gas, so their carbon emissions are lower than diesel engines and coal power stations. Based only on electricity, gas engine emissions are generally higher than large Combined Cycle Gas Turbines (CCGTS). However, 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.
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 aim to 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.
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