Flexibility Markets in Great Britain

Transcript

1. Flexibility Markets in Great Britain Chris Galpin Senior Policy Advisor, Smart Energy Department for Business, Energy & Industrial Strategy
2. Flexibility Markets in GB Contents • GB market context • Decarbonisation – and implications for the power sector • Smart energy & flexibility • DSO flexibility and market platforms
3. Flexibility Markets in GB GB Market Context Ø Sets policy Ø Establishes frameworks and regulations to enact policy Ø Sets budget for CfD auctions Ø Sets reliability standard and volume to procure in capacity market auction Ø Ensures compliance with regulations in the operation of the energy market Ø Protects the interests of energy consumers Ø Promotes value for money and security of supply Policy Makers Independent Regulator Private-sector System Operator Ø Operates the electricity network Ø Balances demand and supply to ensure the security Ø Designated Electricity Market Reform (EMR) Delivery Body making them key stakeholders for the CfD and Capacity Market auctions
4. Flexibility Markets in GB GB Market Context (cont.) 4 Transmission Owners (TOs): Distribution Owners (DNOs):
5. Flexibility Markets in GB UK Climate Commitments – Net Zero Emissions by 2050 • The UK has signed and ratified the COP21 Paris Agreement • In 2019, the UK became one of the first major economies to legislate for zero greenhouse gas emissions by 2050. • The UK Climate Change Act has cross- government support and includes legally-binding carbon budgets. (Base Year) 3,018 Mt (24% lower) 2,782 Mt (30% lower) 2,544 Mt (36% lower) 1,950 Mt (51% lower) 1,725 Mt (57% lower) 88 Mt Net Zero (100% lower) Base year (1990/95) First Carbon Budget (2008-12) Second Carbon Budget (2013-17) Third Carbon Budget (2018-22) Fourth Carbon Budget (2023-27) Fifth Carbon Budget (2028-32) 2050 target UK carbon budgets and 2050 target Source: BEIS, UK legislation
6. Flexibility Markets in GB Energy is leading the way on carbon Source: BEIS: Digest of UK Energy Statistics (DUKES), BEIS Energy Trend Ø 44.3 GW 2018 renewable electricity capacity Ø 110 TWh 2018 renewable electricity generation Ø 79% Reduction in annual CO2 emissions (1990-2018) Ø 33% of power came from renewables in 2018
7. Vision and Objectives Flexibility Markets in GB Distributed, local energy is growing Ø 116% Growth in distributed connected capacity (2011 – 2018) Ø 10.5GW Solar added between 2011-2018 Source: Digest of UK Energy Statistics (DUKES)
8. Flexibility Markets in GB Flexibility is key to decarbonisation Sources of flexibility: • Storage • Demand side response (DSR) o Smart appliances o Smart charging of Electric Vehicles (EVs) and Vehicle-to-Grid (V2G) o Flexible heat pumps o Backup generation • Electricity interconnectors • Network hardware, software and services A smart and flexible energy system enables the integration of high volumes of low carbon power, heat and transport technologies.
9. Flexibility Markets in GB Benefits of smart energy • Decreased reliance on traditional generation • Increase deployment of low carbon generation • Facilitate integration of renewables • Efficient whole system operation decisions • Defer or avoid network investments • Enable consumers to benefit & access market Key system benefits
10. Vision and Objectives Flexibility Markets in GB A smart electricity system Yesterday Emerging System – dynamic & decentralised • Carbon intensive • Centralised generation • One-way energy flow Research by the Carbon Trust & Imperial College estimates the benefits of a smart, flexible energy system at £17 - 40bn to 2050. • Low carbon • Decentralised • Bi-directional energy flows
11. Flexibility Markets in GB UK Government Policy 2015 - working towards a smart energy system 2016 - A smart, flexible energy system: Call for evidence 2017 – The Smart Systems and Flexibility Plan 2018 – The Smart Systems and Flexibility Plan: Progress Update
12. Flexibility Markets in GB Smart Systems & Flexibility Plan (SSFP) • Sets out actions for Government, Ofgem and Industry to be completed by 2022 • Objective to create a best-in class policy and regulatory environment for smart technologies • 24/38 of the actions have been completed. Remaining 15 to be completed by 2022 • Government and Ofgem are considering the next phase of Smart Energy policy taking into account our net zero ambitions.
13. Flexibility Markets in GB Smart Plan – Key Areas Removing barriers to smart technologies (storage) Smart homes and businesses Markets that work for flexibility + Unlock the potential of energy system data
14. Flexibility Markets in GB Markets that work for flexibility Flexibility Markets Capacity Market Balancing Mechanism Wholesale Market Network Charging Ancillary Services New markets at distribution level Well designed markets ensure efficient, fair and transparent outcomes. Our aims: • Open up markets to smaller players/ new technologies & business models • Enable businesses to realise the true value of their services • Improve co-ordination across the system • Allow flexibility providers to compete with more traditional energy solutions
15. Flexibility Markets in GB DSO Flexibility in the Smart Plan • Opening up network requirements to competition – so that flexibility services and energy efficiency can compete with traditional network solutions. • A whole system approach – improving co- ordination across the transmission and distribution networks so that efficient outcomes are achieved. “Distribution networks must make more efficient use of new technologies, providers and solutions” Ø 6 GB Distribution Network Operators now tendering for flexibility services as an alternative to any significant network reinforcement. Ø >400 MW Flexibility contracts signed with Distribution Networks
16. Flexibility Markets in GB Alternatives to network reinforcement The need to build network is driven by peak usage. (Peak import or export into a local area). Flexibility services can reduce the peak requirement, avoiding the need for new build. This enables more efficient usage of existing network assets.
17. Flexibility Markets in GB Whole System Approach As distribution networks (DNOs) take a more active role in system operation, they must co-ordinate effectively with the national system operator (ESO). This will involve improvements in information sharing at both planning and operational timescales.
18. Flexibility Markets in GB DSO – Next Steps • Networks continuously improving flexibility procurement. Standardising procurement processes and improving transparency. • BEIS & Ofgem ensuring markets and charging arrangements provide correct price signals. • Responsibility for “DSO Functions” – Ofgem to ensure that roles are appropriate. • Further detail provided in: o Letter from BEIS and Ofgem to the ENA (July 2019) o Ofgem DSO Position Paper (August 2019)
19. Flexibility Markets in GB Flexibility Market Platforms • We’re creating new markets for flexibility • We’re making existing markets easier to access • But taking part can still be complicated Could we make it easier to participate in multiple flexibility markets? How can we facilitate trading between flexibility providers?
20. Flexibility Markets in GB FleX - buyers & sellers in one place Buyers: Sellers: Flexibility Exchange DNOs ESO Flexibility Provider B Flexibility Provider A BSC Parties (Suppliers, Aggregators) BSC Parties (Suppliers, Aggregators) A "flexibility marketplace" brings buyers and sellers together. BEIS £4m innovation competition to develop this concept further – developing a “Flexibility Exchange” Piclo one of the successful projects chosen to receive funding to develop their platform further.
21. Flexibility Markets in GB Summary – a smart, flexible system • The electricity system will need to change to deliver a zero carbon energy system. Flexibility is key to low- cost decarbonisation • UK Government is removing barriers to new technologies and creating markets for flexibility • Flexibility marketplaces make it easier to access multiple revenue streams The transition is underway
22. Discussion