Common digital energy infrastructure proposed for GB flexibility market

Regulator Ofgem has proposed the “world’s first distributed energy ‘super’ marketplace” in the form of a common digital energy infrastructure.

Possible options range from a basic directory for users to a central digital platform for the end-to-end delivery of distributed flexibility.

In a ‘call for input’ paper, Ofgem points to issues around market access and coordination that are preventing distributed flexibility from fully offering and receiving their system value, especially for consumer resources including electric vehicles and heat pumps.

While there are pockets of excellence of distributed flexibility, they need to converge but it is not clear that a coherent ecosystem will emerge organically or on a timescale that keeps pace with the consumer energy resource uptake.

A common digital energy infrastructure would address three of the four market failures by delivering information provision, market coordination of operations and actions, and trust and governance, Ofgem states.

Have you read?
Great Britain: ‘Future system operator’ to launch
Six barriers impeding the energy transition and how to break them

The fourth market failure, market specific issues such as minimum capacity volumes, falls outside the digital infrastructure and would require specific enabling work.

Digital energy infrastructure archetypes

Ofgem presents three archetypes for a common digital infrastructure, alongside a ‘business as usual’ approach.

The ‘thin’ approach has minimal intervention and is based on the concept of an open directory listing market operators and flexibility providers and that assists them to understand the landscape of markets and assets available.

The ‘medium’ archetype most closely resembles an ‘exchange’ and is a singular scalable digital location where multiple markets are visible and coordinated under a known governance framework, but continue to retain their own market designs, platforms and systems.

The ‘thick’ archetype is the central platform encompassing all activities from exploration to settlement across all the markets.

In contrast, the ‘business as usual’ end state, based on the current trajectory, is one of the multiple individual markets with piecemeal improvements to certain processes to accommodate distributed flexibility and lacking any consistent means of coordination.

As these are open for input, Ofgem does not name a preference but in terms of meeting the core functions, i.e. information provision, market coordination and trust and governance, the ‘thick’ archetype scores best being ‘good’ for the first function and ‘very good’ for the other two.

However, in the assessment for desirability and feasibility, the ‘medium’ archetype scores best being ‘good’ in the three categories of ‘desirability’, i.e. providing the three functions, user-centric design and net-new functionality, and in one of the three for ‘feasibility’, i.e. adaptable and enabling innovation, but ‘limited’ for time and cost to deliver and low external dependency.

Other aspects the paper addresses include the delivery considerations, such as whether the infrastructure should be new-build or built out from existing infrastructure, and its financing.

Akshay Kaul, Ofgem’s Interim Director of Infrastructure and Security of Supply, says that a single digital platform will allow users to access multiple markets transparently and simply.

“The more energy consumers can help and participate, and be rewarded for doing so, the more renewable energy we can successfully accommodate and the more secure our energy supplies.”

Flexibility market facilitator

In a separate consultation paper alongside the flexibility infrastructure, Ofgem is proposing that a new flexibility market facilitator be created to deliver the flexibility market and in particular to reduce the friction at distribution level resulting from the lack of consistency in approaches between the DNOs and to align the distribution and transmission arrangements.

Specific responsibilities would include the delivery of data standards, communication protocols for APIs, standardised products, stacking rules for assets to deliver multiple products and standardised contracts among others.

Currently, the role is being delivered through the Open Networks Project by the Energy Networks Association, but due to its membership nature delivery has been slow and accountability is split across multiple parties.

Ofgem considers the Future System Operator (FSO), which is currently being created, best placed to take on the role in the absence of other entities with the capabilities or level of accountability.

However, there is a possible concern of impartiality, as the FSO is a flexibility buyer within the market itself.

With this approach, the role of DNOs in market facilitation would become insubstantive, although they would remain responsible for the procurement and dispatch of flexibility.

Other proposals in the consultation paper are delivery by the FSO of a new category of regional system planners across the country for regional energy system planning and that the DNOs should retain responsibility for the real time operations of the distribution network.

Responses to the two papers are due by May 10.