Growing DSO flexibility markets to reach net zero - summary

In June 2022, Piclo hosted a conference alongside UK Power Networks, SP Energy Networks and Electricity North West.

The day focused on engagement and growing market liquidity alongside UK Flexibility Service Providers.

Two collaboration sessions were held on the day. This public summary provides an overview of the main points of discussion.

Transcript

1. Collaboration Session Findings Growing DSO flexibility markets to reach net zero June 14th, 2022
2. 2 CONFIDENTIAL © Open Utility Ltd Background “Growing DSO flexibility markets to reach net zero” was coordinated jointly by Piclo, Electricity North West (ENWL), SP Energy Networks (SPEN) and UK Power Networks (UKPN) The aim of the event was to: • Stimulate market engagement • Boost market confidence and transparency • Drive participation and liquidity Collaborative roundtables: were used for engagement and to gather feedback from Flexibility Service Providers (FSPs) and guests. Piclo and DSO colleagues facilitated the discussions: • Collaboration 1: RIIO ED2 priorities • Collaboration 2: Overcoming market barriers Stimulate market engagement 57 attendees Boost confidence and transparency 14.06.22 Manchester Drive participation and liquidity
3. 3 CONFIDENTIAL © Open Utility Ltd Collaboration sessions Collaboration 1: RIIO ED2 priorities - watch the recording • ENWL, SPEN and UKPN delivered short presentations and a panel Q&A on their priorities for flex markets during RIIO ED2. • The room was divided into two focuses for the collaboration session: ◦ Pre-procurement and contracting ◦ Post procurement - operations and settlement Collaboration 2: market barriers • Piclo presented findings from their investigation into market barriers • The collaboration session was split into two parts: ◦ Identification of barriers: in the first half, tables identified the main barriers they faced. Each table then prioritised and presented their top barriers to the rest of the room ◦ Overcoming barriers: in the second half, each table discussed potential ideas to overcome the identified barriers
4. 4 CONFIDENTIAL © Open Utility Ltd Themes discussed On the day, similar themes were discussed across both roundtables: FSPs + Assets Markets + Revenue Information Processes Miscellaneous Short term markets Revenue ESO markets Penalties Connections ANM Location Planned assets FSP Readiness Education Market data Standardisation Contracting Manual vs automation Planning consents Cyber security Single platform Market regulation FSO role P2P
5. Collaboration Session 1 RIIO ED2 priorities for flexibility markets
6. 6 CONFIDENTIAL © Open Utility Ltd Roundtable 1: ED2 priorities (1) • Short term markets: are a significant opportunity for DSOs to prioritise during ED2. The shift to closer to real time procurement was seen as helpful in overcoming barriers, such as dispatch uncertainty with long term contracts. Barriers facing this development include: standardisation (e.g. dispatch) and that aggregators participating in DSO flex markets are mostly bidding with planned assets. • Penalties: were viewed as both an opportunity and threat for DSO flex markets during ED2. All agreed the procurement process is flawed and needed to change. Some viewed penalties as a threat when market confidence and understanding is still low… Overview: attendees had mixed levels of experience participating in DSO flex markets, with some being completely new. As a result, discussions were broader than the original focus of priorities of pre-procurement and post procurement processes during ED2. The following topics were highlighted: …Others considered penalties as a possible solution to issues such as FSPs not delivering on contracts or developing planned assets. Italy was highlighted as an example of where implementing penalties had been a success. • Connections: one table focused on the importance of connections during ED2. Costs, time taken to connect and complexity remain a significant barrier to asset deployment (with a knock on impact for flex market participation). • Assets: Some assets deployed aren’t suitable to provide flexibility services, lacking suitable controls, metering or processes to join aggregators even if they wanted to sign up. The postcode lottery nature of local markets remains an issue. Short term markets Penalties Connections Assets
7. 7 CONFIDENTIAL © Open Utility Ltd Roundtable 1: ED2 priorities (2) • Market data availability in ED2: to encourage participation, the value proposition of DSO flex services must be made clearer and DSOs must increase the visibility of what kind of services will be needed in future. ESO/DSO market data sharing must be improved to understand the “big picture”. • Standardisation during ED2: was the focus of many discussions including: short term markets, remuneration, platforms, APIs, processes plus: ◦ Operation and dispatch: it was viewed that the industry was not moving quickly enough to standardise. Already, differences between DSO dispatch and settlement was a barrier for FSPs. ◦ Product standardisation: despite common names, the technical product requirements vary across DSOs e.g. different metering requirements. Topics discussed continued… • ED2 Contracting: A framework contract should be prioritised during ED2, enabling FSPs to add assets and data as and when available, when already in a contract with a DSO. Additionally, a variety of short, medium and long term service contracts should be available to suit different FSPs. E.g. domestic suppliers can’t aggregate customers on long term contracts, whereas other FSPs indicated long term contracts were better for forecasting. • Manual vs Automation: scaling up using non-automated channels is difficult, particularly to understand when things have gone wrong for settlement purposes. APIs can help but some FSPs don’t have the confidence to dedicate resources to implement these now. • Miscellaneous: other priorities discussed included planning consent reforms, cyber security and the preference for a single platform to coordinate DSO flexibility markets Market data Standardisation Contracting Manual vs Automation Miscellaneous
8. What we’ll work on Penalties Assets Market data Standardisation Manual vs Automation Contracting Short-term markets A section of the next event will be dedicated to short-term markets, continue working on ENA. Piclo will present the mixed views regarding the implementation of penalties to Ofgem/ENA, discussing their applicability and role in DSO flex. Emphasising that standards must develop to ensure all assets are “flex ready”, so that those who want to participate are not held back by technological barriers UKPN, SPEN and ENWL will increase visibility of future flex procurement plans - Piclo will also share these. DSOs/Piclo will participate in ENA operations standardisation work to advance it at pace. All will feed in concerns to ENA gap analysis on flex product differences DSOs will focus on ENA workstream developing framework contract and commit to its adoption Piclo will continue to make all information about our APIs public and will publish info on any upcoming APIs for FSPs and DSOs. ENA consultation covers APIs in development and is open for feedback Ideas we will raise Actions we will take
9. Collaboration Session 2 Overcoming market barriers to DSO flexibility
10. 10 CONFIDENTIAL © Open Utility Ltd Roundtable 2: market barriers (1) • Dispatch certainty: FSPs highlighted they lacked a forward commitment of dispatch volumes to build business cases. • Revenue: DSO markets are in direct competition with more lucrative markets and some DSOs only offer very small amounts of revenue. Other complications include that for assets providing BTM services, if an FSP increased demand for a DSO service the FSP would be billed for the additional demand by their retail company & the additional cost removes any profit from the DSO service. • ESO markets: are worth more and FSPs have more experience with these. Additionally, many ESO services are moving to day ahead and it is difficult to participate across markets currently or evaluate all market data. Overview: discussions across the tables varied substantially, highlighting a large number of different barriers. There was some crossover of discussions in the first ED2 focused collaboration session. • Planned assets: there remains a lack of confidence in the market due to high volume of planned assets bidding, many of which are uncertain will develop to be operational. • Education: there is a lack of basic understanding on DSO flex, including how local constraints can get, how to participate and the value. It was also expressed that there is a lack of interest from customers at lower voltage levels, who are unaware of markets or they are too difficult to access. • Market data: there is a lack of visibility of what services are being requested and the opportunity. The market is missing consistent info on how ESO/DSO markets interact, revenue modelling help and better forecast data of dispatch to share with customers. Dispatch certainty Revenue ESO markets Planned assets Education Market data
11. 11 CONFIDENTIAL © Open Utility Ltd Roundtable 2: market barriers (2) • Connections: the number of connections will increase massively. Currently, it can take over a year to get an agreement, connections remain costly and consultancy advice differs. FSPs are concerned that ANM agreements will limit their ability to provide services (e.g. ANM cannot provide ESO services) and that DSOs may use ANM instead of market procured services. • Standardisation: there is a lack of standardisation across flex service products, payments, contracts, APIs and integrations. FSPs highlighted that many of the ENA’s ONP standardisation efforts had not been implemented by DSOs. However, others suggested that there were some areas of over standardisation and that with some processes DSOs and Piclo should be more flexible e.g. FSPs that don’t fit into any FSP/asset options. Topics discussed continued… • Assets: Aggregators highlighted they have insufficient volume of assets to meet DSO needs - they are able to aggregate sufficient MW nationally but not locally. FSPs highlighted that they don’t want to register assets on multiple systems. Piclo only has postcode checker, FSPs face difficult if only have MPANs. • Contracting: lack of framework contract acts as a barrier to participation. In the market, there is a need to separate out pricing and services from the notion of contracting. The lack of contract stacking with ESO services was highlighted. • Manual vs automation: Cost to implement APIs is a barrier. • Miscellaneous: Some suggested the FSO role should be expanded for whole system approach Connections & ANM Standardisation Assets Contracting Manual vs automation Miscellaneous
12. What we’ll work on Revenue Education Market data Connections & ANM Standardisation Assets Dispatch certainty UKPN, SPEN and ENWL will work to provide clear dispatch forecasts Highlighting issue of double charging of BTM flex. Improving transparency of revenue opportunities for flex Highlighting the need for market-wide simple guidance for participating in DSO flex, revenue available and value Raising the market need for DSO and ESO flexibility data sharing and availability to be improved. ED2 Business Plans set out DSO plans for this. Raising concerns in ENA workstream developing improved and consistent ANM practices and how this impacts flex services. SCR also looking at this Re-emphasising the support for the development of a single asset registry DSOs and Piclo will raise the concerns regarding product differences in the ongoing ENA gap analysis review Ideas we will raise Actions we will take
13. 13 CONFIDENTIAL © Open Utility Ltd Summary • Connections: Raise concerns within ENA workstream to develop improved and consistent ANM practices, plus how this impacts flex services • Penalties: mixed views regarding the implementation of penalties. We will discuss their applicability and role in DSO flex. • Assets: the view that standards must develop to ensure all assets are “flex ready” and the support for the development of a single asset registry • Market data: the market need for DSO and ESO flexibility data sharing and access to be improved. • Revenue: issue of double charging BTM flex. Improving transparency of revenue opportunities for flex • Education: Highlighting the need for market-wide simple guidance for participating in DSO flex, revenue available and value. Actions we will take Ideas we will raise • Short term markets: next event will focus on short-term market development • Market data: UKPN, SPEN and ENWL will increase visibility of future flex procurement plans - Piclo will also share these via their newsletter. • Dispatch certainty: UKPN, SPEN and ENWL will work to provide clear dispatch forecasts • Manual vs automation: Piclo will continue to make all information about our APIs public and will publish info on any upcoming APIs for FSPs and DSOs. • Contracting: feed in to the ENA workstream developing a framework contract and adoption • Standardisation: DSOs and Piclo will raise the concerns regarding product differences in the ongoing ENA gap analysis review, plus highlight standardisation concerns in ENA dispatch workstream to advance it at pace. We recognise the interconnected nature of the feedback and for any suggestions we have assessed as not directly or solely in our remit to progress, we will be transparent in sharing the findings with the ENA and Ofgem. This includes highlighting:
14. Thank you For any questions please email: comms@picloflex.com