Aggregators look set to gain access to the Balancing Mechanism (BM) and wholesale markets as part of a governmental and regulatory push towards a smarter energy system.
Meanwhile, metering requirements look set to be relaxed, a move that could bring down the cost of demand-side response.
Ofgem has set out its thoughts around access to the BM and wholesale power markets for aggregators, which have long argued that their inability to trade within them means they and their customers cannot easily maximise the value of flexible power consumption.
For example, if day ahead prices spike due to generation outages or changes in weather, money can be made by reacting accordingly. Meanwhile, generators have to balance their supply and demand on a half hourly basis. If they get calculations wrong, they must pay ‘imbalance charges’, which are much stiffer than in previous years. Accessing the Balancing Mechanism allows aggregators and end users to exploit that requirement by selling flexibility to those that need it close to real time.
However, Ofgem has also suggested that because aggregators can exacerbate imbalances by affecting consumption patterns and therefore suppliers’ ‘business as usual’ calculations, they will have to bear some of the cost of those actions.
The regulator urged all market participants to get involved in the consultations and code modifications now being proposed in that area.
On metering requirements, government and Ofgem’s latest paper states: “The Government will simplify metering requirements for those offering DSR, enable asset reallocation by DSR providers, and allow the stacking of revenues between the Capacity Market and ancillary services.”
Separate metering requirements for the capacity market have added cost to those involved. For example, providers of similar services, such as Short Term Operating Reserve (STOR), have had to invest in new, expensive metering for the capacity market. That metering also has to be extensively tested, adding further cost and time to the process.
Enabling DSR providers to better stack revenues, or provide more than one service when viable, should also increase available DSR revenues.
See Ofgem’s letter here.
See the government’s Smart Systems and Flexibility Plan paper here.