Utility Week

32 | MARCH 2022 | UTILITY WEEK Ho The barriers and challenges to innovation How standards are helping interoperability Technology Download report Net zero needs fl exibility A Utility Week report, produced in association with Ordnance Survey, explores the critical role location data is playing in energy service innovation and the adoption of net zero technologies. A ccording to National Grid's Future Energy Scenarios, the UK's electric- ity requirement could be as much as 113GW by 2050 at peak times because of increased electricity demand from heat and transportation. Some of this demand will need to be met by additional renewable energy generation, but National Grid also expects to be able to harness electric vehicles (EVs) and heat pumps to help ˆ atten the demand curve. Time-of-use tariŠ s and the opening up of the Balancing Mechanism to distributed assets to help balance electricity supply and demand in real time mean a range of services and business models are already starting to emerge around demand-side responseŽ(DSR). This DSR is oŠ ering ˆ exibility to National Grid, allowing Distribution Network Opera- tors (DNOs) to avoid traditional reinforce- ment of the network, and making energy bills cheaper for consumers. However, ˆ exibility has the potential to deliver even more bene• ts to the system in the future if DSR markets have an increasing focus on location. How could location underpin exibility Location is already a feature of energy services being developed by ˆ exibility aggregators for National Grid's Balancing Mechanism, and by DNOs to allow distrib- uted generation to connect, but is yet to fea- ture in the supply market. However, all areas of the market are in agreement that location will become a key foundation stone to unlocking innovation centring around net zero in the near future. Until recently, National Grid has pur- chased the majority of its ˆ exibility services on a national basis. "I would be inclined to give National Grid very high marks in terms of how it procures things, but it has got quite a bit to do around location in terms of buying ˆ exibility from small resources," says ˆ exibility aggrega- tor Flexitricity's founder and chief strategy oœ cer, Dr Alastair Martin. Where location is playing a role for small resources is at distribution level, he says. However, the constrained areas high- lighted by DNOs are extremely location spe- ci• c, and the current size of the DSR market is limiting opportunities for the two to over- lap frequently. On the supply side, DSR oŠ erings are currently focused on time, such as Octopus Energy's Agile TariŠ . Being able to harness the power of loca- tion is • rmly set in the company's sights, though, says Devrim Celal, chief executive of KrakenFlex, a distributed energy resource management system owned by retailer Octo- pus Energy. Both Martin and Celal agree that the main barrier to innovation is a lack of real markets and opportunities to entice consumers into oŠ ering DSR. For Martin, one area ripe for innovation but currently lacking the • nancial incentive to drive it is allowing renewable generation to connect to the network without constraint by investing in local storage. DNOs are already producing heat maps for renewable generators highlighting areas of the network where connection will be costly or where they may see their generation constricted at peak times. However, the real value of these heat maps cannot be realised without corre- sponding maps detailing the opportunities for DSR, he says. For KrakenFlex, the real prize of loca- tion data would be the introduction of loca- tional pricing to the supply market, but big changes will be needed to realise the oppor- tunities location could unlock. Octopus Energy is already testing the concept through its Fan Club TariŠ , which is oŠ ering consumers near two wind turbines between a 20-50% reduction in their electric- ity prices. "DNO markets are not markets, they just buy some services at an auction, and they buy what I call sledgehammer services, which provide insurance if everything fails. "I think where it needs to move to is loca- tional pricing to make use of locational data and to emphasise the need for investment," says Celal. The barriers and challenges to innovation Much of the responsibility for tackling the challenge of how to engage consumers in smart energy services falls to DNOs and National Grid as the transmission operator. Energy service providers clearly feel they could go further, but one main challenge faces DNOs, particularly in producing what the industry desires: the fact that they must try and predict the future. They are faced with the task of trying to forecast what generation will connect and what demand will be available, while also not knowing how much ˆ exibility will be provided. While DNOs have a level of certainty over what generation will connect in the future, for demand such as heat pumps and EVs there is no prior warning. "We are looking to understand the requirements of the network out to 2050, so we need to make sure that we are putting forward forecasts on what we think is going to happen," says Ben Godfrey, distribution

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