Ofgem seeks views on how to ramp up domestic flexibility

Ofgem is seeking views on how best to encourage domestic customers to provide demand-side response from devices such as electric vehicle chargers and heat pumps.

The call for input comes as a new report from Cornwall Insight and Smart Energy GB highlights the tens of billions of pounds that households could save over the coming decades by using energy more flexibly.

Ofgem said demand-side response will enable Great Britain’s rising electricity consumption to better match the growing output of intermittent renewable generators such as wind and solar farms, and is a key element in the government’s plan to decarbonise the electricity system by 2035.

The regulator said there will be many ways for consumers to provide demand-side response (DSR), both manually and automatically, including configuring smart devices, optimising their consumption under time-of-use tariffs and participating in flexibility markets via third parties such as suppliers and aggregators.

“All of this is underpinned by greater digitalisation and decentralisation, which enables better monitoring and response to grid activity and better use of an increasing number of local grid assets such as wind and solar farms,” the regulator explained.

Ofgem said new reforms and regulations are being developed and implemented to expand the market and ensure consumer and the electricity system are protected. However, for domestic DSR to work at scale, the regulator said there needs to be widespread consumer participation – “something which is by no means a given.” It has therefore issued a call for input on how best to encourage this participation.

Marzia Zafar, deputy director of digitalization and innovation at Ofgem, said: “Domestic demand-side response is about optimising the way we consume energy so it works best for a decarbonised energy system and consumers. The key to unlocking high consumer uptake is making it both attractive and easy to participate in.”

She added: “It is not Ofgem’s role to specify what this domestic DSR journey should look like but it is important that it is not left to chance. Therefore, as the regulator we are seeking input from a wide range of stakeholders including those working in industry, the providers of smart home and transport assets, consumer representatives and other parties interested in flexibility.

“This will help build a shared vision of what the emerging domestic DSR customer journey should look like and how to make that vision a reality.”

The deadline for responses is 29 September and Ofgem plans to hold a series of workshops over the autumn to consider the feedback it receives.

Meanwhile, a new report from Cornwall Insight and Smart Energy GB has estimated that domestic flexibility could potentially slash whole system electricity costs by £4.6 billion per year in 2030, with the annual savings rising to a whopping to £14.1 billion in 2040.

In the case of the latter, the vast majority of the savings would come from lower wholesale electricity costs, which would be cut by £12.3 billion per year. The report says this represents a 38% reduction when compared to a scenario with no domestic flexibility and equates to an average annual saving per household of £105.

The report says the savings could be even greater for households with devices such electric vehicles and heat pumps, which increase their overall consumption but also allow them to provide greater amounts of flexibility.

It says flexibility could enable such households to reduce their wholesale electricity costs by 52% in 2040, thereby cutting their annual energy bills by £375 on average. They could already be saving £115 per year by 2030.

The report says flexibility could lower peak electricity demand by 1.5GW in 2040, delivering annual savings of £1.2 billion and £0.5 billion by avoiding the need to build new power stations and reinforce electricity networks. It says the savings would actually be greater in 2030 when flexibility could reduce peak demand by 3GW and lower these costs by £2.5 billion and £1 billion respectively.

Commenting on the findings, Cornwall Insight senior consultant Anna Moss said: “Our analysis has unveiled the immense potential of flexible household electricity use to support GB as it journeys towards a renewables-based system.

“By empowering consumers to become the architects of their own energy usage as well as supporting home decarbonisation technologies across the consumer base, the government can reduce expenses, alleviate strain on the grid, and even eliminate the need for additional costly gas-fired power stations.”

Sara Higham, director at Smart Energy GB, said: “The debate on how we can meet the country’s growing demands for electricity often focuses on how we create more national infrastructure to generate more energy to meet demand, but this report clearly shows that there is another side to this debate: enabling and incentivising consumers to use the energy we generate in a more flexible way.”

She continued: “More than half of GB households now have a smart meter and the benefits to individuals and the country as a whole will only increase as installations continue.”