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Network February 2020

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Maher-McWilliams: "Consumers across the UK are already benefiting from lower energy bills and 'even smarter' devices which, at scale, will engage people with the energy transition rather than imposing it" NETWORK / 41 / FEBRUARY 2020 tal challenge, AI is already harnessing the flexibility in these devices to shi consump- tion. In doing so, these flexible devices are helping solve the considerable demand problem they create and stand to save the UK billions of pounds on infrastructure reinforcements. Today, what we lack are ad - equate frameworks and incentives to unlock the full potential of flexible technology in the push towards a smart, zero-carbon grid. In 2019, we made huge strides in prov - ing how smart technology works to create flexibility. Indeed, consumers across the UK are already benefiting from lower energy bills and 'even smarter' devices which, at scale, will engage people with the energy transition rather than imposing it upon them. Technology platforms are optimising EV charging in response to real-time data from the wholesale electricity market, live network signals, customer preferences, device telemetry and weather forecasts. Its integration with vehicle-to-grid technology is enabling customers to make hundreds of pounds a year by exporting surplus energy back to the grid. Price signals and markets that are fit-for- purpose are key ingredients in effectively orchestrating the intelligent control of smart devices, like EV chargers, in line with evolving grid conditions. Without them, we see the development of flexible technolo - gies stifled and the actual removal of value from customers already benefiting. For example, Ofgem's recent Targeted Charg- ing Review (TCR) decision to enforce fixed charges on consumers to recover residual network costs, has removed important price signals for flexibility. Particularly, it deals a strong blow to the residential sector where providers don't yet have a level playing field in National Grid's more established balanc- ing and ancillary services markets. In light of this, it's imperative that the flexibility markets rolled out at a distribution level by DNOs are open and practical for residential providers. Looking to the future Over the next few years, the volume of flex- ibility that residential assets can provide is going to increase rapidly in the wake of wide-scale EV and electric heat uptake. Laying the right market foundations for this proliferation of flexible devices and attracting them to participate in markets is crucial. This means that we need universal half-hourly settlement for consumers and strong price signals through network charg - ing that incentivise new domestic devices, connecting anywhere on the network, to shi their charging away from peaks. Flex- ibility markets will compliment these price signals by providing a direct service to grid operators in order to mitigate any remaining network issues. To get the most out of the flexibility on offer, markets will need to operate with a high degree of automation and coordina - tion across voltages and licences. The good news is that the DNO flexibility markets are relatively young and there is still plenty of opportunity to develop the way they work to improve participation in the short term. Building market liquidity should be top pri - ority and will ultimately drive efficiency and lower the operating cost of the networks. A key consideration in the market design needs to be the nature of flexibility avail- able from all assets, from large commercial and industrial (C&I) scale to kilowatt scale residential devices. Ultimately, it is much harder to ac- curately predict the amount of residential flexibility available weeks or months in advance, so moving closer to real-time pro- curement across all DNO flexibility markets is a key first step to increasing participation from residential providers. Long contracts and procurement cycles require a signifi - cant degree of redundancy to be built in, meaning that residential flexibility will be used ineffectively. This issue is exacerbated by the rapid rollout of EVs as deployment is also difficult to forecast over long time windows. While the evolution of domestic flexibil - ity has been thrilling and fast-paced, the government and Ofgem play a vital role in ensuring its transformational impact. It is imperative that the right incentives are placed on the DNOs through RIIO-ED2 to call on flexibility to defer or avoid network reinforcement and maximise the efficiency with which the networks are utilised. We look with anticipation to 2020 and beyond to see how the market adapts for flexibil - ity, so it can fully deliver on decarbonisa- tion and saving customers' money. FUTURE OF FLEXIBILITY

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