A year in the life of DSOs | Flexibility services and curtailable connections

In the face of growing but uncertain demand for capacity and connections, electricity distribution networks are taking a more proactive role in the management of their assets as they seek to get the most use out of what’s already been built. Tom Grimwood looks at how distribution system operators (DSOs) have been using flexibility services and curtailable connection to avoid costly upgrades and cut wait times for customers.

When UK Power Networks (UKPN) held its first flexibility tender back in 2017, it was hoping to secure 35MW of flexible capacity but was only able to obtain several hundred kilowatts.

Now, it is operating on a different order of magnitude, says its DSO director Sotiris Georgiopoulos.

To date, UKPN has awarded contracts for more than 2GW of flexibility, including more than 1.5GW in 2023/24 alone. The company says more than 300MW of this capacity is currently operational, meaning it can be dispatched by its control room.

Last May, UKPN became the first DSO to award contracts for demand turn-up and generation turn-down as part of a regular flexibility tender. Octopus Energy pitched the service as ‘Power-ups’ offering free electricity to customers during constraint periods. Georgiopoulos says there are currently 25,000 customers signed up for the service, which got a response rate of 80% when called upon: “As far as I understand, this is the highest availability or the highest response from any domestic flexibility product, including the Demand Flexibility Service.”

UKPN dispatched 7.8GWh of flexibility in 2023/24 – a seven-fold increase on the previous year. And it says around half of this came from demand turn-up and generation turn-down, which allowed it to reduce the rate of curtailment for flexible connections from 8.7% in 2022/23 to just 1%.

All six of the distribution network operators (DNOs) were at one point or another hosting flexibility auctions on the Piclo Flex platform, initially as part of a government-sponsored trial and subsequently on a commercial basis. However, over the last year or so, several have signed deals with rival platforms following competitive tenders. UKPN started migrating its tenders to EPEX Spot’s Localflex platform in April.

Georgiopoulos says the move will help UKPN make it easier and cheaper for providers to participate in its auctions, including by automating the process: “It’s going to drive more liquidity. It’s going to drive competition. It’s going to drive better prices and I think higher benefits for us.”

UKPN said the first tenders to be migrated to the Localflex platform would be the day-ahead auctions it began trialing in East Anglia in December. It said its longer-term tenders would be shifted over from May. “We’re going to continue our standard tendering process – twice a year, longer term – but we’re complementing this with procurement that’s going to happen closer to the real time,” says Georgiopoulos.

He says the day-ahead auctions align with many of the products already procured by the Electricity System Operator (ESO) and will enable it to “capture a part of the market we don’t currently have. “The most consistent feedback we’ve had over the last two years from flexibility providers was that in many cases they make decisions on the day-ahead in terms of how they’re going to use their assets, and if only there was a way they could do that for DSOs as well it would unlock additional flexibility.”

After a series of trials over the fourth quarter of last year, UKPN is now rolling this out as business as usual at a number of existing locations.”

In recent months, both Electricity North West (ENW) and Scottish and Southern Electricity Networks (SSEN) have signed three-year deals to use the ElectronConnect platform for their tenders.

ENW said ElectronConnect would serve as its “core market platform” although providers would also be able to access them through Piclo Max – Piclo’s newly launched “one-stop shop” for electricity markets around the world. Electron has emphasised its provision of an end-to-end service, including both dispatch and settlement, although Piclo has previously told Utility Week that it too is rolling out these functions on Piclo Flex.

Piclo’s chief executive James Johnston says the company’s new product “revolutionises flexibility market access by simplifying multi-market participation and asset stacking for flexibility service providers”. He adds: “We’re proud to collaborate with forward-thinking operators like Scottish Power Energy Networks, Northern Powergrid, Electricity North West, and National Grid Electricity Distribution to drive this industry transformation.”

Andrew Roper, DSO director at SSEN, says ElectronConnect will make it “simpler” for providers to participate in its tenders, whilst “also improving the administration and efficiency on our end as we deploy more.” The company procured over 700MW of flexibility in 2023/24, thereby allowing it to defer £44 million of network reinforcements. Roper says he is “very proud” of this achievement, although he also stresses that this is “not just to meet a target”. He says the growth in connection requests meant the company needed more than it had previously forecast.

National Grid Electricity Distribution (NGED) has taken a slightly different approach to the other DNOs, developing its own Market Gateway platform to host its tenders. Users can register and qualify their assets to participate in auctions cleared on their own platform. However, these assets will also be able to participate in auctions cleared on other platforms, and assets registered on other platforms will likewise be able to participate in auctions cleared on its platform.

DSO director Ben Godfrey says this will enable service providers to choose their preferred route to market and in doing so facilitate competition between different platforms: “It means we have a uniform and standardized digital interface out to the wider market. And we believe that this is the best way for us to tap into plural multiple markets, rather than running a single monopoly market, through a single provider in a particular area.”

Accordingly, NGED announced in January that it would be integrating its Market Gateway platform with Piclo Max. Godfrey says there are more than 70,000 individual assets – representing close to a gigawatt of capacity – registered on the Market Gateway platform. He says it has enabled NGED to run more tenders “without massively increasing our headcount”.

Last autumn, NGED began holding short-term weekly tenders. Godfrey says these tenders will help to ensure that flexibility is there when needed, filling any gaps left over from its biannual long-term tenders: “What we saw from our early flexibility is that it’s dead easy to go and get people contracted and signing up on paper for delivering flexibility.” He says it is a lot harder to make sure this capacity is actually available.

Last year also saw NGED’s first tender targeting domestic flexibility, seeking EVs, heat pumps and domestic energy storage to participate at the low voltage level. This tender covered around 1,500 low-voltage substations, typically supplying just a few hundred homes each.

Paul Glendinning, director of energy systems at Northern Powergrid, readily admits it has not procured as much flexibility services as some other DSOs – just 15MW across 14 primary and 10 secondary substations. But he insists the systems and processes are in place and ready to go: “If you counted the number of megawatts of flex, it’s not big, but everything else is there.”

Last summer, the company signed a two-year deal to use the Piclo Flex platform for its tenders.  “What we intend on doing is keep looking at the market because it’s a brand-new world,” he remarks. “By no means are we Piclo forever.”

Glendinning says the particular circumstances in its region, where there is more spare capacity on the distribution network, means it just doesn’t need much flexibility at the moment: “Demand is still dropping in the north. The fuel crisis and the cost-of-living crisis has reduced electricity demand. Fewer people are moving to EVs and heat pumps than might have been forecast five years ago.” But this will change over time, and he expects their requirements to “take off” somewhere between 2027 and 2029.

These circumstances explain Northern Powergrid’s recent comments in a consultation on the three ‘outturn’ performance metrics introduced by Ofgem as part of a wider DSO incentive. The incentive package was originally intended to be worth +0.4%/-0.2% of return on regulatory equity split 40:40:20 between a stakeholder survey, a performance panel assessment, and the three outturn performance metrics. The three metrics are intended to gauge DSO’s performance in using flexibility services to address network constraints, improving visibility over the low-voltage network, and limiting the curtailment of users with flexible connections.

Ofgem proposed to hold off on switching on the metrics until the second year of ED2 to give it time to collect performance data and calibrate the targets. However, the regulator recently decided to keep them switched off for the whole of the period and reallocate their value to the other two parts of the DSO incentive.

Some of the strongest criticisms of the metrics were from Northern Powergrid, which said the first of the three, concerning the deferral of reinforcement using flexibility services, would be “volatile and sensitive to externalities such as flexibility market growth, tender success and the location of flexible assets”.

Although the company supported Ofgem’s decision to keep the metrics switched off for the ED2 period, Glendinning says it only did so reluctantly when it became clear that the specific design of the metrics would “miss the mark”.

“Some of them were nearly there to be honest – we nearly had agreement across the DNOs – and we were saying we just need to set different band positions,” he explains.

“If Ofgem said you have to have 100MW of flex contracts in place, it’d be a long time before we could score on that. But if they said something like increase your flexibility by 15% or 30% – something which was a challenge to each area, which is a percentage – then we could have probably signed up with that”.

Glendinning says Northern Powergrid sees metrics-based incentives as the most objective way to measure and reward, hence why it opposed Ofgem’s decisions to reassign their value to the more subjective stakeholder survey and performance panel report.

He says these measures create “perverse incentives” to focus on “highly visible initiatives, potentially at the expense of those that would deliver greatest value”.

Curtailable connections

While Northern Powergrid has little need for flexibility services right now, Glendinning says there is demand in their region for curtailable (also known as ‘flexible’ or ‘non-firm’) connections “because it just so happens that proportionally more people want to connect in the north than down in the south.”

He says the number of accepted connection offers has grown two-and-a-half times over the last 18 months: “That puts an enormous strain on that department and that’s why we’re recruiting heavily into generation and demand major connections liaison teams which are made up of business development and engineering types.”

Glendinning says flexible connections are enabling the company to unlock large amounts of network capacity that would previously have gone unused. He gives the example of a solar farm, which would previously have been offered “unfettered” access to the network, including overnight, when they are obviously unable to produce any power. He says curtailable connections allow this capacity to be offered to a battery storage project, which can work around the needs of the solar farm.

In its performance panel report, Northern Powergrid says it currently has more than 500MW of flexible connections being managed across four zones with “minimal curtailment to generators” and plans to add another eight zones over the next several years. It has also offered flexible connections to 1.5GW of generation under the Technical Limits scheme, which is part of the Energy Networks Associations three-step plan for accelerating connections. The scheme allows generators to be connected ahead of required reinforcements to transmission network so long as DNOs keep power flows through the relevant grid supply points within agreed technical limits.

SSEN has offered 2.5GW of connections through this scheme and expects this total to rise to 7GW once it has finished rolling it out across its licence areas. Roper says it has also offered 3.2GW of flexible connections relating to distribution constraints.

Godfrey says NGED has done “a huge amount of work” on flexible connections over the last year, unlocking 10GW of capacity through the Technical Limits scheme.

In its performance panel report, the company says it has already issued offers for 3.3GW of connections, of which 1.38GW have been signed – “more than any other DNO”.

“We’ve spent a lot of time taking with these customers to be able to give them modelling assumptions to see how that might play out and give them a bit more confidence in making an assessment of that curtailment,” adds Godfrey, who says the first of these connections has already been energized.

This is the second in a three-part series looking at how DSOs have evolved over the first year of the ED2 price controls. The first part is available here. In the last part, we examine how they have been improving visibility over their networks and opening up access to their data.