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NETWORK / 28 / JUNE 2017 DEMAND-SIDE FLEXIBILIT Y Barriers to DSF Respondents were asked to identify the barri- ers to success in their DSF projects. While a notable minority (18 per cent) said there had not been any barriers to date, the majority had experienced eco- nomic, regulatory and, to a lesser extent, technical barriers. Economic barriers that its role depends on the extent to which regulatory and market barriers are removed (25 per cent). Once again, suppliers were the least enthusiastic group, with a significant minority (22 per cent) that did not expect DSF to play a significant role in their business's strategy in the foreseeable future. However there was wide variance within this group, with 28 per cent saying it already did play a significant role, 22 per cent saying it would do in the future but not for the next three to five years, and 28 per cent saying it depends on the removal of market and regulatory barriers. This perhaps reflects the open market nature of the supplier industry, and its participants' differing strategies. Given the relative immaturity of the DSF market and the barriers to its full deployment, it was interesting that respondents rated their current participation in DSF projects at an average 6.3 out of a possible 10. Once again, aggregators and flexibility providers were the most involved, at 8.8 and 7.9 respectively. Traders scored their involvement highly at 7.8 out of 10, suggesting the market barriers that exist are not blocking all activity, and suppliers were once again the laggards at 5.4. Respondents were also asked to score the success of the DSF projects they had participated in to date, and there were some interesting contrasts. While aggregators' high success score of 8.4 reflected their high participation score of 8.8, other groups that had high participation reported more limited success. The biggest contrast was for traders, who scored their participation at 7.8 but success at just 5.3, reflecting the market barriers that have yet to be resolved. Flexibility providers scored their participation at 7.9 and their success at just 6.2, again suggesting that systemic blocks are preventing the value of flexibility from being fully realised. Experience was mixed with regard to the successful outcomes that had been achieved to date. The clear winner was financial return for end customers, although with 46 per cent of respondents choosing this option, its success was not overwhelming. A lower proposition (32 per cent) had seen a financial return for their own business, and surprisingly low proportions reported reduced pressure on infrastructure or demand for new infrastructure (32 per cent); and just 28 per cent reported reduced energy demand. These figures reflect a market still in its infancy and suggest there are a number Lack/ low level of fiscal incentives 58% Barriers to participating in the capacity market Barriers to participating in the balancing market Barriers to trading flexibility in the wholesale market Other 38% 33% 42% 21% Regulatory barriers to DSF Lack of fiscal incentives 38% 23% 46% 27% 58% 19% Cost of technology Lack of smart tariffs Current structure of distribution charges Lack of price incentives for market participants Other Economic barriers to DSF More than half of respondents identified the lack or low level of fiscal incentives, at 58 per cent. The second most commonly experienced barrier was to trading flexibil- ity in the wholesale market at 42 per cent, with barriers to participating in the capacity market (38 per cent) and the balancing market (33 per cent), coming close behind. The lack of incentives was cited as the most common economic barrier. 58 per cent of respondents highlighted the lack of price incentives for market participants; and 46 per cent identified the lack of fiscal incentives. Just 23 per cent cited the cost of technology as a core economic barrier, and 27 per cent distribution charges. of practical issues around the use of DSF that have yet to be resolved. However, when the responses to this question were broken down by respondent type, DNOs were significantly more likely to report reduced pressure on infrastructure, at 75 per cent, with the average being pulled down by suppliers, who scored it at just 15 per cent, reflecting the different nature of the respondents' businesses. Outcomes of DSF projects Financial return for customers 46% Financial return for your business 32% Reduced pressure on infrastructure/reduced demand for new infrastructure 32% Reduced energy demand 28% Other 20% Not seen any successful outcomes 16% In association with As part of this research, Utility Week and CGI hosted a working party on DSF. Three groups of participants attended: suppliers; networks; and aggregators. Speaking among themselves, it was fascinating to see how the suppliers focused on what the networks needed to do differently to enable a more flexible system. The aggregators focused on problems with the suppliers, particularly with vertical integration. The networks, mean- while, focused on engineering challenges and how to provide system resilience. Energy suppliers agreed that the"'size of the prize" could be significant, though the na- ture of the prize was focused more on system value than on commercial gain. It was felt that early movers in the provision of demand-side services will gain commercial advantage, but the political environment around energy supply currently makes it unacceptable for energy firms to admit much interest in the possibility that demand-side services might be lucrative for them. As well as providing some insight into the collective character of each group, the experience showed how communication and co-operation is one of the main challenges the market faces. While government must do its part to overcome the policy and regula- tory barriers, market participants themselves would do well to break down their established thinking and see the challenges from one an- other's perspectives. Together, they can then work towards a solution. Time is short. were the clear leader at 52 per cent, with regulatory barriers close behind at 48 per cent, and technical barriers apparently less common at 24 per cent. Respondents were then asked to rate the degree to which they had experienced particular economic barriers, and particu- lar regulatory barriers. The energy industry must work together