Aggregator Flexitricity plans to become an energy supplier from mid-2018. The firm has applied for a supply licence and will target specific customers ahead of launch.
Some aggregators already hold a supply licence but do not actually supply much energy to their customers.
Instead, they use it to access the balancing mechanism (BM), which is becoming an increasingly valuable source of revenue for demand-side response providers.
The BM is a real-time balancing market used by National Grid to balance supply and demand, whereas its other demand-side response products tend to be awarded as contracts for set services for set durations.
The BM provides a year round opportunity for those with flexibility to sell to National Grid. But currently, only those with supply licences can access the balancing mechanism, a market currently worth around £350m a year.
While Ofgem plans to make provisions for non-licenced parties to have some access to the BM, potentially by mid-2018, Flexitricity chief strategy officer, Alastair Martin, told The Energyst unfettered access on its terms was the primary reason to acquire the licence.
“We are not convinced that the arrangements coming forward will be sufficiently immune to soft power from incumbent suppliers. The BM has been in place for around 16 years and still customers can’t participate. They could have participated all the way through if suppliers had made it possible. So if existing suppliers remain gate holders of the BM then we have to open the gate.”
However Martin said the company would not be a ‘shell-type’ supplier using the licence for the BM alone, but hopes to supply customers for whom its approach could unlock greater value.
“We intend to be an actual supplier. Not to every customer we have, it will be quite specialist and will only suit some of them, such as those on a pass-through contract. We are not going to be offering people [long-term, fixed price] deals, if they need that, they should stay with traditional suppliers,” he said.
“It will suit some customers, but not all. But there’s a niche customer base out there who could do more if they had the opportunity. That’s what this is about. We’re cracking open the most important market in flexible energy for those who can both earn from it and contribute to it.”
Initially the new service will be targeted at businesses and public sector organisations, and is particularly suited towards those that operate community energy schemes, combined heat and power (CHP) generators and cold stores, as well as battery developers.