By Peter Stanley, Elexon Chief Executive
In July, the Energy Networks Association confirmed that network companies had procured a record 4GW of flexibility capacity – nearly double what was contracted in 2022. Flexibility is where market participants change their generation or consumption patterns in response to an external signal such as a change in price. The increase in capacity procured is a clear indicator that flexibility is moving rapidly from ‘nice to have’, to being an important lever for managing supply and demand.
The case for flexibility continues to increase following the Election
The need for flexibility to play a more prominent role has only increased since the new Government committed to ‘clean power by 2030’, which is five years earlier than the previous administration’s commitment to decarbonise the electricity sector by 2035. Flexibility allows networks to better monitor supply and demand as more low carbon capacity is connected, and the interconnectivity of smart appliances and meters improves.
Flexibility markets need to be more coordinated
Elexon provides market rules and data insight (market transparency) for wholesale electricity, including national flexibility markets. We also deliver major programmes and settlement services to facilitate the transition to Net Zero, such as Market-wide Half Hourly Settlement (MHHS). Ofgem’s appointment of Elexon as the market facilitator for local distributed flexibility markets will give us the ability to align national and local markets. It will be our role to work with Ofgem, the National Energy System Operator (NESO), flexibility providers, and Distribution System Operators (DSOs) to create more open, coordinated and transparent local flexibility markets, and support their growth. We will continue to work closely with both Ofgem and the NESO, ensuring a strategic whole-system approach is taken to deliver against the ambitious clean power target.
Stacking and Primacy rules
We understand the challenges and barriers that flexibility providers face in providing their services. The local flexibility markets are currently fragmented and uncoordinated, and the amount of time providers must spend to interact with each market reduces their appetite to provide services – hindering the speed at which we can move to a more flexible energy system. There is clearly a need for ‘stacking’ rules that will allow for better revenue forecasting by determining whether a single flexibility asset can deliver multiple products. Primacy rules also need to be agreed upon to provide clarity on issues such as which flexibility purchaser takes precedence when the same asset is called on to provide a service.
Leveraging our in-depth experience in helping flexibility providers
Elexon has in-depth experience in supporting flexibility providers, having made successive changes to the rules governing the wholesale and balancing markets, to help them find more opportunities to offer their services. In 2019, together with National Grid ESO, we opened up the Balancing Mechanism so that independent aggregators (whose partners include flexibility providers) could compete against incumbent companies in offering balancing services. From November 2024, we are making ground-breaking changes so that independent aggregators can also offer services in the wholesale market alongside suppliers.
Rolling our sleeves up to deliver the role
We will begin market facilitator operations in early 2026 and the preparatory work starts now. This involves transitioning responsibilities and functions of the market facilitator’s role, working with Ofgem and market participants. Two changes to market rules also need to be raised and agreed to enable Elexon to take on this additional role and adopt an appropriate governance and funding model. We expect these changes to be implemented this winter (in relation to our vires), and in late 2025 for the changes relating to governance and funding for the market facilitator role.
Addressing the lack of data to help flexibility markets
The lack of data to support flexibility markets is also putting a brake on progress. Providers and buyers of flexibility need detailed information about flexibility assets, and long-term forecasts showing locations where flexibility services are needed.
The Flexibility Market Asset Register that Ofgem has proposed is one of the elements needed to fill this data gap. It would be a single source of the truth for all flexibility assets under 1 MW, accessible to all market participants. Digital infrastructure will be needed to host the register, backed by standards for data-sharing so all participants can use it. We believe that this infrastructure should be operated by the market facilitator. Elexon has expertise in developing data platforms at scale which the market relies on for storing hundreds of millions of meter readings per day. We will work with Ofgem and participants to share our experience and support further development of the concepts for the register, and the digital infrastructure.
Flexibility will have a transformative effect on the electricity market
As a sector, we need to work together so that flexibility can transform the electricity system. Over the coming years, new technologies and products will make it easier for consumers and businesses to offer flexibility.
Development of electricity storage, and other technologies coupled with an expected increase in the build-out rate for renewables will require GB to have more co-ordinated markets that are simpler for buyers and sellers of flexibility to navigate. A more flexible system will defer the need for investment in costly grid infrastructure, and these savings can be passed on to consumers. Greater flexibility also enhances security of supply. We are looking forward to delivering the market facilitator role so that we can capture these benefits for all market participants.
