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A Lesson from the UK: For More Effective and Profitable Power Flexibility Markets, Collaboration is Key

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Jan Ydens's picture
Head of Product Kiwi Power

Jan has over 25 years’ experience as a technology executive in the Enterprise Software sector, predominantly focused on the energy domain. He has worked across the business and technology...

  • Member since 2021
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  • Mar 16, 2021
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Distributed network operators (DNOs) across the U.K., equivalent to local utilities and municipalities in the U.S., have committed to an unprecedented collaboration that will drive newfound scale in their flexibility markets. In the fall of 2020, four of the six UK DNOs announced they will provide flexibility providers across their networks with one single platform for participation. This unifying program, named “Flexible Power,” will simplify participation for asset owners and aggregators with footprints across any of the four networks–such as UK retail chains–and allow them to access local flexibility requirements, declare their assets’ availability, receive dispatch signals and view performance and settlement reports in one place.

This move is a major milestone on the path toward simplifying participation in local flexibility markets. It is part of an ongoing shift of value away from the supply of power and toward the supply of flexibility. And it provides a model for local utilities and municipalities in the U.S. and elsewhere to embrace collaboration in the pursuit of more efficient and reliable power grids. With more sharing and increased standardization between flexibility markets, we can expedite learning, lower program costs, and grow participation across all markets.

Learning
A frequent question that comes up around a collaboration like this is whether sharing a platform would detract from the competitive advantages or put stakeholders’ proprietary information at risk. The answer is absolutely not. DNO pricing is always transparent, so there’s nothing to hide, and there is much to gain from sharing operational insights and learning together. For example, now that they have a shared platform, when a participant in one DNO suggests a great idea for a new feature for Flexible Power, all participants across all the DNOs will benefit from the enhancement. Furthermore, the shared platform can measure the effectiveness of various incentive programs and rules used in the different DNOs. If the data makes clear that structuring a demand response program in a certain way drives greater participation, the others can adopt these incentive structures and the platform can easily adapt. Getting the right incentives in place motivates participation and is a key driver in growing the flexible capacity traded in each market. And higher rates of participation by asset owners and managers benefits the program as a whole, making a positive impact on all involved DNOs.

 

Costs
When running a DNO or local utility, keeping costs low for ratepayers is the ultimate goal. While operating a successful flexibility program brings efficiencies and lowers power costs, operators need to ensure the cost of implementing a flexibility program does not negate the value they’re creating. The UK DNO partners came to us at Kiwi Power, a veteran flexibility platform provider, to get started since we had proven systems and functionality already built out. By customizing our baseline product together, instead of on their own, they were able to keep developing costs low for all parties. In addition, on an ongoing basis, Kiwi Power can host and operate the shared platform at a lower cost per DNO as a result of their alignment. Even from a contract costs perspective, all four DNOs were able to use the same legal contract, making the process more cost-effective for everyone. The collaboration saved time and money for each individual entity and led to a more robust, advanced and elegant platform than any of them could have developed on their own. 

 

Participation
For flexibility suppliers, gaining entry to and starting operations in a network is one of the biggest barriers to entry. The countless programs and complex platforms to navigate across DNOs or local/municipal utilities are deterrents to participation worldwide. By collaborating to provide one standardized platform, the DNOs in the UK can now share one participant base. Participants that were previously operating in just one DNO because expanding their program would be too complex can now seamlessly connect assets they own or operate in the other  DNOs’ territory on the standardized platform and begin planning and executing their dispatches with ease and on a platform they are already familiar with. As a result, participants that were previously working across all four DNOs, signing into four different portals for each, can now spend more of their time and energy focused on adding distributed energy resources to the system and optimizing their performance and less on administrative work. A better customer experience means more participation, the ultimate driver of flexibility market growth.

 

Local utilities and municipalities ought to take a close look at this innovative initiative in the UK and find ways to come together around flexibility programs. As in the UK, the whole will certainly be greater than the sum of its parts. With expedited learning, lower program costs and increased participation, flexibility programs will flourish and we’ll be well on our way to a clean energy future. 

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Matt Chester's picture
Matt Chester on Mar 16, 2021

Was the learning curve you had to overcome for these types of initiatives ones that U.S. based organizations would have to learn on their own, or can the lessons be transferrable to make adoption that much easier for the slower to move? 

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