The Megawatt Hour is the latest podcast boxset brought to you by Energy Voice Out Loud in paid partnership with BDO. This monthly series examines how energy storage technologies are reshaping, reinforcing and recharging energy markets in the UK and around the globe.
In the fourth episode of our series, content editor Andrew Dykes is joined by BDO senior audit manager Caroline Ingham and Flexitricity head of commercial Andrew Langlands to discuss aggregators and optimisers.
Aggregators help manage the supply and demand of electricity on the grid by increasing or moderating the consumption of a group of consumers. This helps ensure stability on the grid and generate revenue for asset owners.
In this episode we explored how companies like Flexitricity work, how they can help determine when to discharge and recharge battery storage assets, and what the future of this rapidly evolving segment might look like.
Ms Ingham explained: “Aggregators are there to try and help support and guide the generators to get the best part of flexible services or whether or not they’re going to actually merchant the asset on the market.”
As Mr Langlands described, Flexitricity’s role is as “a route to market provider”, offering a wide range of services that both monetize the electrical flexibility of energy assets and provide stability and other support to the grid.
The company works with a range of different flexible energy assets from batteries to gas peaking assets, but also combined heat and power (CHP) and industrial commercial sites, all of which can use their flexibility to generate revenues for the owner.
Looking at batteries specifically, the role of the optimiser is to maximise the revenue potential for these assets, enabling them to participate in wholesale markets, the balancing mechanism and frequency response, in particularly dynamic containment.
Indeed, Flexitricity was the first to deliver aggregated frequency response in 2012, securing a contract with National Grid for a service called “frequency control by demand management,” in which assets could step in within 30 minutes to absorb excess power on the grid to frequency close to 50Hz.
That scheme has since been superseded, Mr Langlands pointed out, by a new suite of ‘dynamic regulation’ or ‘DR’ services – incorporating dynamic containment, dynamic moderation and dynamic regulation.
Part of the reason for that change, as the Megawatt Hour has explored previously, is the changing nature of the technology and energy supplies on the grid, with batteries more able to provide power faster and smarter than in the past. However, that also brings its own challenges.
“One of the big challenges was large fossil plant provides inertia, which kind of helps keep frequency relatively stable, whereas renewable energy does not provide inertia,” he added.
“What you’ve been seeing happening with frequency over the past few years is that the rate of change of frequency (ROCOF)…is increasing, which means you need assets that are capable delivering a much faster response to frequency deviations and that’s what the new suite of dynamic services are here to deliver.”
That’s not to say dynamic markets are the only source of revenue for battery owners. Flexitricity has delivered around 15 different services with assets since taking on its first such assets in 2018.
Each service and market may offer different opportunities to asset owners depending on the asset’s capabilities. While a wholesale market could see a full charge and discharge (one cycle), dynamic containment may need 0.2/0.3 cycles a day, or three cycles a day in dynamic regulation, he noted. Meanwhile, battery owners will also want to make sure they charge when power is cheaper to maximise returns.
“You need to consider cost of charge and cost of a cycle in your decision making,” he explained.
In today’s markets buying and selling power has become increasingly complex and difficult to predict. “The volatility that we’ve seen in the market recently is unprecedented,” added Mr Langlands. “We’re seeing 200p/therm swings in gas price in-day, which means depending on when you run the models, you could get quite different outcomes. So that is challenging the longer-term forecasts.”
Policy support for optimisers
As a company at the forefront of smarter and more decentralised energy development, Flexitricity has also been quick to respond to several of the consultations and changes proposed within the UK energy market, not least National Grid’s upcoming winter demand flexibility services and the Review of Electricity Market Arrangements (REMA).
“We’re absolutely engaged in that process and part of our role with asset owners is to get a feel for what they are looking for as well and use that to kind of help push the market forward,” he said.
Along with those regulatory changes, changes within the makeup of the sector itself are coming as more flexible suppliers and storage assets spring up.
“I could certainly see more changes happening in the industry in terms of new entrants, although it could be challenging coming into this one fresh – we’ve got a number of competitors that provide the same services as we do and to get to that level of asset optimization from a standing start could be a challenge,” noted Mr Langlands.
“I could also see some asset owners looking to take optimization in house,” he suggested – something Ms Ingham said mirrored moves by other renewables asset owners, where services like trading or operations and maintenance (O&M) may be overseen by the asset owner rather than a third-party provider.
Looking even further ahead, Flexitricity and Mr Langlands see more changes on the horizon.
“Clearly with more renewable generation coming online there’s going to be more intermittency and you need more flexibility. We are working on a number of different code modifications at the moment that will allow us to onboard different types of flexibility,” he said, both in front of and behind the meter.
These include regulatory modifications that could see other distributed energy sources such as heat pumps, electric vehicles, domestic batteries, small-scale industrial plants harnessed to provide flexible demand and supply.
“I think is absolutely something that needs to be encouraged and we are all for it,” he said.