Enel X strategic energy solutions manager, Eric Bakken, on the future of flexibility – and whether an incentive for non-generation forms of demand-side response may be required to hit Net Zero.
In a shifting market, there is one constant when it comes to flexibility, says Bakken,
“The most valuable aspect is really understanding the flexibility within your business and optimising as much as you can behind the meter,” suggests Bakken.
However, when it comes to optimising, Bakken notes that auxiliary market revenue – a main driver of participation – has become far less predictable.
“A couple of years ago, you could project £x value from the capacity market, £x from Triad avoidance and £x per MW from whatever contracted programme you were participating in.” Now, he says that picture is much harder to predict, “especially three years ahead, when Triad is likely to shift to another mechanism”.
Bakken says the broader focus on sustainability, driven by the UK’s commitment to Net Zero, is an opportunity to wrap flexibility into a broader energy plan – and where the company is gaining traction.
“When we can connect flexibility with other business goals – energy efficiency, sustainability, cost reduction – we see much wider interest from leadership teams. So there remains strong interest in flexibility, but as part of an overall energy and sustainability strategy.”
Bakken thinks that may be the future of flexibility.
“Flex is often a difficult road to go down if you have tunnel vision about what it could be. If you are looking at a 5-10 year energy plan that involves swapping out ageing kit, or installing new technology – solar PV, plus storage and/or electric vehicles – flex needs to be part of that conversation to ensure you are capturing the value,” he says.
However, Bakken admits that the greater the number of moving parts, the more complex it can become.
“If you started out looking at a very simple question of how do we get more EV charging for our fleet or customers and all of a sudden you are looking at storage or generation assets and market mechanisms for selling energy back to the grid, that misses the mark of where that conversation began.”
Bakken thinks one solution is to provide smart-ready EV charging infrastructure to enable flexibility and value, “when businesses are ready for it”.
Incentives for DSR?
Bakken believes there could be scope to unlock ‘load’ forms of DSR – and room for mechanisms that recognise its value as ‘greener’ than behind the meter generation.
“I’m not sure ‘incentive’ is the right term, but if we are looking at what we want to achieve for the grid in terms of Net Zero, perhaps a separate pricing structure for ‘pure’ curtailment is necessary,” Bakken suggests.
“In the US, pure curtailment has different pricing to short-term generation – that is a fairly common model. Curtailment is a very green way of delivering flexibility, but it is not as reliable as turning on a generator or battery, because there are production and other economic issues to consider [for providers].”
However, Bakken agrees that any incentives for flexibility to help balance renewables must be carefully considered.
“What we don’t want is to structure something that is not sustainable, that might achieve one aspect of what we are trying to fix for the grid, but that ultimately moves us away from the goal of a Net Zero society,” he says. “If that is the goal, structuring the rules around how you price different technologies [might be more suitable than a subsidy]. So in my mind, curtailment should be valued above generation flexibility.”
Regardless of incentives or environmental pricing, Bakken suggests providing “some longevity … would really help. Because after a while, if the opportunities remain short-term and unpredictable, the juice may not be worth the squeeze”.
UN Sustainability Goals are driving larger corporates to demonstrate stronger environmental stewardship, with energy a key tenet, says Bakken.
Specifically, the UN Principles for Responsible Investment (UN PRI) require investors to ensure that the companies in which they invest make continuous, demonstrable sustainability improvements.
“But driving demonstrable results comes down to sitting down and having conversations with businesses to understand what is on the near, mid and long-term radar, from bringing together multinational data for reporting and understanding energy opportunities market by market,” he says.
“The reporting required to demonstrate you are making those improvements – that whole aspect of energy management takes up a lot of bandwidth,” says Bakken. “That is why larger businesses are looking to companies to provide ‘energy-as-a-service’ to encompass different aspects of energy management, optimisation and reporting within the portfolio – to bring in expertise but also to get that reporting burden off someone’s plate.
This article was first published in The Energyst’s 2019 DSR Report, of which Enel X is a sponsor.
The report provides a comprehensive snapshot of the DSR market, a survey of DSR providers and qualitative interviews with industrial and commercial firms, plus views from National Grid ESO, distribution network operators, consultants and other market actors.
Download your free copy here.
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