The value of flexibility within the power system could increase tenfold over the coming years according to Ofgem’s Andrew Wright. The regulator’s senior partner for energy systems believes flexibility will ultimately become more valuable than energy efficiency within the energy system.
Speaking at National Grid’s Power Responsive conference, Wright said that the “real value is in [businesses’] flexibility. That value is going to increase, maybe by an order of magnitude”.
Failing to capitalise on flexibility would require step changes in technology to decarbonise the power system, Wright suggested.
“Without flexibility, you have to hope we can crack carbon capture and storage,” said Wright. “If we can’t, you wonder where cheap flexibility is going to come from.”
However, he acknowledged commercial challenges within demand-side response markets.
“There are a lot of parallels with energy efficiency. You are asking people to invest in something that has uncertain value going forward.” But he said that, as with energy efficiency, flexible power consumption would become the norm.
“Today, you wouldn’t dream of building a supermarket without thinking about energy efficiency,” said Wright. Flexibility, he added, would follow the same path to maturity “and [ultimately] become more valuable than energy efficiency”.
He said Ofgem would work to help enable the “marketisation” of flexibility and try to create a level playing field for providers, but warned those looking to exploit current charging arrangements that the gravy train may soon be coming to halt.
The government has called a review of so-called embedded benefits, which some market participants believe are overly generous to small generators, creating market distortions.
While Ofgem has not yet made any specific recommendations, but “[developers] should not be siting generation [on the distribution network] purely to exploit distortions in charging arrangements,” said Wright.
Energyst Media, along with National Grid, aggregators and suppliers, is running a demand-side response conference in September for businesses that want to learn more about making money from their flexibility. It is free for end-users. Find out more here.