Time for a national strategy on household energy flexibility

With more than a million households participating in demand flexibility pilots and trials in 2023 consumer energy flexibility in the UK has progressed faster than anyone could have imagined, according to Lucy Yu, chief executive of the Centre for Net Zero. Yet we must ensure that the overall system keeps pace as more and more renewables come online. Writing for Utility Week, Yu calls for a national strategy for flexibility that puts people at its centre.

Consumer energy flexibility has progressed faster here in the UK than anyone could have imagined. Successive pilots and trials have gone from involving thousands of households in 2021, to 100,000 in 2022, and over a million in 2023.

What has driven this rapid innovation – and what does it entail? Much of it comes down to necessity and invention. Faced with immense supply-side challenges during the energy crisis, focus shifted to the demand side. In one of the greatest reimaginings of the grid’s relationship with consumers, National Grid ESO (NGESO) launched the Demand Flexibility Service (DFS) in November 2022. Households were called upon to shift their energy consumption outside of peak periods, in exchange for payment. The trial was designed to test the appetite and reliability of consumers to support the grid during both ‘test’ and ‘live’ events when it was under strain and there was a chance of blackouts during cold snaps.

The trial was hugely successful and delivered system-level impacts: Centre for Net Zero’s analysis shows that nearly 3GWh was reduced from the grid, equivalent to the amount of electricity required to make every person in Great Britain a cup of tea, and over 680 tonnes of carbon emissions were saved, equivalent to taking 450 cars off the road for a year.

But this isn’t just a short-term play; a flexible energy system is critical to our ability to effectively harness renewable power. We’re on track to shatter more green energy records this year, with the International Energy Agency (IEA) predicting that the world will add a record 440GW of new renewables in 2023 – which is 24% higher than estimates it made in December and double those made in 2020. In the UK, the government set what was considered an ambitious offshore wind target of 40GW in 2020, to revise it within two years to 50GW.

There should be no doubt that we’re on the cusp of the fastest and most profound disruption to the way we generate power – but we need to ensure that the overall system keeps pace and can ‘flex’ in order to reap the rewards of this change. This requires intelligent demand, whereby households are incentivised to ‘turn down’ their energy use when there’s less sun or wind, and to ‘turn up’ their consumption when it’s plentiful – and low cost – via price and carbon signals.

To achieve this at scale, we need a national strategy for flexibility that puts people at its centre. And we need it now, given the recent success and momentum of the DFS, the ongoing focus on energy bills savings and the salience of a low-cost energy transition. A fully flexible energy system could cut the cost of reaching net zero by up to £16.7 billion a year in 2050. Even households who aren’t directly participating in flexibility would benefit from reduced energy bills, because of the overall reduction in system operating costs and avoided grid reinforcements.

We can either proactively develop a plan and related policy tools that are needed to accelerate and benefit from consumer flexibility – or we can continue to invent complex and parallel markets in the hope that they create aligned incentives that benefit industry, consumers and the overall system.

Whilst the government and Ofgem recognise the value of flexibility, policy to date has been high level. Where it focuses on consumers, it considers digitalising infrastructure, enabling conditions via marketplaces, and the beginnings of consumer protections. Recent learnings from industry and NGESO can inform the development of a clear and coherent strategy that is owned by one organisation – whether that’s the Department for Energy Security and Net Zero (DESNZ), Ofgem, NGESO or the Future System Operator – with defined supporting roles for each.

An obvious first step would be to define the ‘end-game’ for routine and events-based flexibility, including specific gigawatt capacity targets for 2035 and 2050, akin to those provided for generation. The specific financial value of consumer flexibility must also be determined, in terms of net annual savings. A roadmap can then be developed to meet these targets, outlining policies to support a compelling consumer flexibility offer.

These might include introducing greater incentives for adopting smart meters and dynamic tariffs that unlock flexibility, outlining best practice for consumer engagement, and streamlining the digital user experience – so that consumers don’t need to download separate apps for their car, car charger, energy provider and flexibility aggregator in the future. The experience must be digitised, automated and seamless.

Finally, we should collectively apply systems-thinking to develop policies which consider barriers, dependencies and synergies across the whole energy system. This could include policy at the intersection of energy and buildings to create positive feedback loops between providing flexibility and upgrading homes.

We’ve hit an inflection point: there is a huge opportunity for the UK to build on the progress of the DFS this winter and increased consumer engagement following the energy crisis. But if we’re to stay ahead of the curve, it’s time to confront head-on how we plan to unlock a people-centred flexible energy system.