There is a near-term risk that more demand-side response (DSR) providers could exit the market than enter, with firms urging National Grid to increase the pace of product redesigns in the face of revenue streams drying up.
Meanwhile, Ofgem must consider charging arrangements more roundly and in the context of the time it takes competitive markets to develop.
Aggregators and flexible power providers at the Electricity System Operator’s latest Power Responsive meeting presented a gloomy outlook: Uncertainty created by the suspension of the Capacity Market and the targeted charging review (TCR) is compounded by Brexit.
According to the meeting summary, “It’s hard to make a [DSR] business case for the UK right now”. Participants reiterated calls to better align changes to residual or backwards-looking charges (Triad has been a mainstay of DSR business cases) with changes to forward-looking charges and the flexibility markets National Grid and others are trying to create.
As a minimum, they believe Ofgem should not make any decisions on the TCR until it is clear that the Capacity Market will be re-approved.
Local flex markets
Flexibility providers also urged distribution network operators to show greater willingness (i.e. money) to support the market, pointing out that placing price caps on flex services has in some instances resulted in DNOs procuring nothing.
They called for better collaboration and co-ordination between the ESO and DNOs/DSOs to enable DSR providers to understand the “entire pot” available to those that can provide flexibility services. “In other words, a holistic view of where the opportunities may lie nationally, regionally and locally,” according to summary.
Market participants pointed out that it takes approximately four years until an auction can deliver from first concept and urged market makers to move faster where possible.
Cathy McClay, head of future markets at National Grid ESO, said it would “shortly” issue a full update on balancing and ancillary services, covering what they will be and how they will be procured.
She said the Epex auction will go live this month (March) with standardised versions of existing FFR products.
While Frequency Control by Demand Management (FCDM) will end, a new faster static FFR product will also launch this month.
However, new dynamic FFR products need to be stress tested – which could take “upwards of a year”.
See the summary here.