Utility Week

34 | NOVEMBER 2022 | UTILITY WEEK Analysis Analysis Customers must be paid to encourage flexibility Households are an essential part of the flexibility equation, but they must be adequately compensated for reducing usage or we won't get the take-up we need. T he energy revolution is under way. Top-down, linear energy systems are becoming relics of a bygone age. In their place, we're seeing dynamic bi- directional flows of energy, a proliferation of decentralised assets, and the beginnings of a future energy system that – if it is to be clean, reliable and resilient – must put peo- ple at its centre. We know that this will hinge on more active consumer participation – but the cor- responding benefits and rights consumers can expect are unclear because they relate to markets and business models that are themselves still evolving and in some cases untried and untested. How do we ensure consumers are fairly rewarded for providing domestic flexibility? How can we build a framework that delivers protection and engenders trust? As citizens across Europe and beyond are increasingly being called upon by gov- ernments to turn down their energy usage to support struggling grids amid the energy crisis, we're beginning to confront these questions. Some countries are encouraging volun- tary energy reduction – others are mandat- ing it. Following its hottest day in recorded history on 6 September, the state of Califor- nia's power grid asked residents to volun- tarily reduce their electricity use, issuing a #FlexAlert over nine days that successfully averted any blackouts. Meanwhile, the German government has issued a set of binding measures to reduce energy consumption nationwide for six months, including bans on heating halls and corridors in public buildings and private pools. A real opportunity While we're yet to see the UK government launch a public energy reduction campaign, and ministers have repeatedly ruled out the possibility of energy rationing, the risks and uncertainties of possible shortfalls in Europe's gas supply this winter are palpable. As a result, National Grid Electricity Sys- tem Operator (ESO) is rolling out a series of voluntary flexibility schemes in the coming months, aiming to incentivise consumers to reduce or shi" consumption and protect the grid. The level of the proposed incentive remains a topic of debate. Earlier this month, disagreements between the energy retailers helping run these trials and ESO regarding the level of proposed financial reward for participation made headlines. Both Octopus Energy and Eon warned that the proposed payment to customers of 52p for each kilowatt-hour of electricity saved during peak times was too low. They argued, first, for higher rates of at least £1 to £2 per kWh to incentivise customers to sign up and, second, the importance of testing different price points with customers and adjusting prices accordingly. While these kinds of schemes are embry- onic, as more distributed energy resources (DERs) are adopted in people's homes – such as EVs (electric vehicles), heat pumps and batteries – there is real opportunity for households to benefit from more actively participating in energy markets and offer- ing flexibility, provided wholesale and retail markets are structured accordingly. A DER bill of rights? But broader questions will also need to be tackled, beyond pure market economics. We don't yet have a coherent framework that sets out reasonable consumer expecta- tions, complete with prac- tical technical defi- nitions of how these may be applied. What do consumer rights look like in a DER-domi- nated future? What are the con- sumer obligations that arise from being connected to a public asset (the grid)? And how can we ensure that consumers are compensated fairly in comparison to large-scale generation? Australian academics have recently begun to explore these types of questions, proposing a first attempt at a "DER Bill of Rights and Responsi- bilities" for both passive and active par- ticipation in energy markets, using their country as an example jurisdiction. Its world-leading penetration of distrib- uted solar photovoltaics (PV) is already reshaping grid operations, power system security, and how customers can use and export their own PV-generated energy, making it critical to address these issues in the near term. As decentralised energy sys- tems proliferate, other coun- tries will need to address these same questions. Addressing this issue at a household level is key – but we also need to take a systems-level approach and consider how we manage and coordinate this proliferation of assets. When low-carbon technologies are used simultaneously, this can compound to put the grid under stress; interventions such as randomised

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