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National Grid Electricity System Operator (ESO) has unveiled details on this year’s Demand Flexibility Service (DFS) after submitting plans to Ofgem.
Utility Week revealed earlier this year that the DFS was to return this winter, with the ESO exploring the possibility of a full commercial product for winter 2024/25.
In an announcement on Thursday (31 August) the ESO confirmed that this winter’s DFS would look very similar to last year’s service, which saw around 1.6 million households and businesses save 3.3GWh of electricity.
A total of 12 tests from November 2023 to the following March are planned as part of the latest scheme, with these being run at “a number of procurement lead times” in order to support the shift towards procuring the service closer to real time.
The first six tests, running from November to December, will incorporate a guaranteed acceptance price (GAP) which will ensure that if providers bid to participate at £3/KWh or less they will be guaranteed to be accepted. This year’s GAP is set at the same level as last year.
The ESO said the tests are front-loaded to encourage early participation and understand how different lead times impact delivery volumes.
If the level of participation in the service exceeds a set volume in the following six tests after the New Year, they will be competitively tendered, without the use of a GAP.
Live uses of the DFS will not be subject to a GAP, with the ESO taking the lowest available bids to manage network requirements, as it does with other market services.
More details on the volume threshold will be confirmed in the ESO’s Winter Outlook report in the autumn.
Meanwhile, the ESO has confirmed that unlike last winter, there will be no onboarding tests. This means if a provider is registered and onboarded after the first test, they will only be able to participate in the 11 remaining tests.
Jake Rigg, the ESO’s corporate affairs director, said: “The ESO will be reintroducing the DFS for this winter and is keen for more consumers, both large and small, to get involved. We want to work with industry to build on the past success of this new and innovative service.
“Across last winter the DFS successfully demonstrated the interest of consumers and businesses in playing a more active role in balancing our electricity needs and to be rewarded with savings for their action in the process.”
Following the ESO’s announcement, Alistair Martin, founder and chief strategy officer at aggregator Flexitricity, gave his thoughts on the new scheme to Utility Week. He was specifically pleased with the fact the GAP has remained at £3/KWh and said “dropping it would have been a very foolish move”.
He said: “By holding it up at the level it was at I suppose they are tacitly backing the point that these customers who are coming in for the first time into this don’t get availability payments, don’t get Balancing Mechanism start-up payments, don’t get any of the other service payments…basically everybody in the industry gets something somehow, but these customers don’t have access to any of that.
“So they are tacitly acknowledging that while every other participant in the market can pull together a package that makes their participation worthwhile, it is essential that domestic consumers are in at least no worse a situation. Holding the payment at the level it was at was certainly a means of helping to demonstrate that.”
Martin further spoke about the need for real-time dispatch, and said he hoped the ESO makes further progress on this.
He added: “Other than the exclusion of Capacity Market capacity, I think they have been moving in the right direction. They are not at real-time dispatch yet. The last I heard they were moving towards it by opening up opportunities for DFS to be dispatched closer to real-time and I would like them to continue on that trajectory.
“It turned out to be not something that they could achieve for this winter, fine, I accept that. I want them to keep moving because the more they move to real-time, the more useful it is for them and also, for any participants, the clearer it is to them that the capacity or the demand reduction they are delivering is, in fact, useful.”
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