Generating Additional Markets for Mature Access to Flexibility (GAMMA Flex)

Objectives

We have a number of key objectives as follows: 

• To develop a blueprint to allow secondary market trading 
• To develop a blueprint to allow demand turn up services
• To create a blueprint for longer flexibility procurement linked to short term flexibility 
• To co-create a blueprint to link to ESO procurement of balancing services 

The need for secondary training - Allow FSPs to trade out of positions, over the longer term, secondary trading would be expected to build market liquidity.

The need for demand turn up services  - In areas of the network with a high penetration of renewable generation, including down regulation (generation downturn/demand turn up) could help free up network capacity and enable new renewable assets to connect.

The need for a link to longer term flexibility procurement -  There needs to be a link between the near-term market and flexibility purchased as longer term availability agreements. The link is needed to ensure that the most appropriate flexibility is activated.

The need for co-operation with the ESO - At present there is no direct link between DNO level flexibility procurement and ESO procurement of balancing services.

Problem(s) 

The IntraFlex project, which trialled closer to real-time flexibility procurement, identified several areas that need to be further developed for the market to mature. As part of IntraFlex, National Grid purchased flexibility services as 30-minute products, starting 7 days ahead of delivery and up until 90 minutes ahead of delivery, in a marketplace operated by NODES.

Whilst the project demonstrated that closer to real time flexibility procurement works and adds value, the project also identified a number of gaps that need to be addressed to build a liquid, well-functioning market.

The gaps that were identified included: 

• Need for secondary trading – IntraFlex only allowed flexibility service providers (FSPs) to sell flexibility services. This prevents FSPs from trading out positions, e.g. in case an FSP is operationally unable to deliver flexibility it has sold or wishes to trade out of its position for commercial reasons. Over the longer term, secondary trading would be expected to build market liquidity and is a key OFGEM expectation.
• Need for demand turn up services – IntraFlex included up regulation (generation upturn/demand downturn) only. In areas of the network with a high penetration of renewable generation, including down regulation (generation downturn/demand turn up) this service could help free up network capacity and enable new renewable assets to connect.
• Need for baselining methodology to develop - IntraFlex applied a default baseline, calculated as a simple average across historic meter readings, and gave FSPs the option of overriding the default baseline with a baseline calculated by the FSP (submitted prior to trading). Feedback from FSPs that relied on the default baseline highlighted that a baseline based on historic meter readings can get distorted when the calculation includes periods for which the FSP has already delivered flexibility services. There is value in exploring the impact of different baselining methodologies further to better reflect positions.
• Need for a link to longer term flexibility procurement - There needs to be a link between the near-term market and flexibility purchased as longer term availability agreements, such as Flexible Power. The link is needed to ensure that the lowest cost flexibility is activated, whether that means activating a longer-term agreement or purchasing flexibility in the near term market.
• Need for cooperation with the ESO – At present there is no direct link between DNO level flexibility procurement and ESO procurement of balancing services. A link would help ensure flexible resources are activated where they add the most value to the system as a whole. A link would also be expected to help build liquidity in the DNO level flexibility market, as it would encourage FSP participation by enabling FSPs to participate with assets located both inside and outside of National Grid’s congestion zones and enable revenue stacking. Part of this is also being covered as a desktop research exercise under Project COMMANDER with ESO and will feed into GAMMA Flex.

The intention is to address these needs through a project where the near-term procurement developed as part of IntraFlex is continued and the five points above are addressed, through market designs. At the end of GAMMA Flex, it will be decided whether a trial will be undertaken, either through innovation one part of business as usual.

Method(s) 

The project will be delivered through four interlinked work packages as follows: 

• Scope

  A flexible energy system is estimated to be worth in the order of £16.7bn pa out to 2050, according to the Carbon Trust and Imperial College London. Currently, whilst procurement for flexibility services is increasing across all DNOs, it is still a nascent market.

  During ED2, DNOs are expected and National Grid is committed to be taking a Flexibility First approach to constraints and so it is imperative that we are ready to take the next step. Having undertaken near real time flexibility procurement under Intraflex we believe that we can see a roadmap out to this and as such published our recent consultation on our vision for the future.

  It is anticipated that the value of National Grid Electricity Distribution Demand Side Response (DSR) services could reach £9.3m over the next five years (from our Distribution Network Options Assessment). Even if increased liquidity drove a 10% saving in this value the savings could be £186k per year however indications from Intraflex would suggest that we may be able to achieve greater savings. In addition, procurement would also defer some £134m of network reinforcement works, therefore pursuing the optimal model for flexibility services has significant benefits for National Grid and its customer base.

  Moreover, DNOs are estimating that they will be procuring £57.5m on flexibility services out to 2028 and this project could help further drive improved liquidity and drive cost savings to customers. This could equate to a conservative 10% saving across the board, which would equate to £5.75m.

  Accessing markets that may be available to us via markets like NODES (& potentially several others like EPEXSPOT) will be vital for achieving market liquidity and therefore saving customer’s money.

  All DNOs have committed to the assessment of ‘flexibility first’ services for relevant reinforcement of significant value. This method should be applicable to all flexibility procurements.

  The costs of rolling out the solutions proposed across the UK would be limited. It would require each DNO to license the required platform which is a commercial product from NODES. Moreover with the project testing the principle of linking an independent market place to Flexible Power( a product used by 5 of the 6 DNOs), via an Open API it would create the potential for all market places that may emerge to take advantage of a very simple route to accessing and providing DNO flexibility opportunities. Therefore, we believe that this would ultimately be repeatable and the cost to consumers across all DNOs would be negligible. The costs of the platforms would probably be shared with DNOs, ESO, Generators, Suppliers and Aggregators who would probably pay subscription or transaction fees.

  GAMMA Flex will aid this by designing a set of market blueprints that will simplify the process of enabling new marketplaces that can then be integrated with DSO systems, policies and processes. The need for specific blueprints have been identified to include:

  • Secondary trading 
  • Demand turn-up services
  • Implementation of appropriate baselining methodologies
  • Creating links to longer flexibility procurement
  • Enhancing co-ordination and co-operation with the ESO 
• Success criteria

  GAMMA Flex will focus on the following measures of success: 

  • Market blueprints designed for secondary trading services 
  • Market blueprints designed for demand turn-up services
  • Market blueprints designed for linking of long-term flex with short-term flex 
  • Sucessful engagement and co-ordination of stakeholders
  • Successful designs for co-operation with the ESO  
• Potential for new learning

  We will use the various forms of socialisation on our learning as follows:

  • Social media 
  • One-to-one engagement with FSPs
  • Existing relationships based on Intraflex
  • Events and webinars

  New learning will be focussed wholly on the following area: 

  • Is it possible to design a set of market blueprints that can be adopted on a range of flexibility market platforms 
• Documents and links

  Project Registration and PEA Document 

  Draft Market Design and Stakeholder Questionnaire

  Final Market Design and Stakeholder Feedback 

  IMO Blueprints

  Closedown Report

• Monthly updates

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