Ofgem lays the groundwork for consumer friendly flexible energy use

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The quest for cleaner cheaper power has accelerated this week as Great Britain builds a pathway to a more flexible energy future.  

 Ofgem has today (Monday 29 July): 

  • confirmed Elexon as market facilitator for local energy flexibility. Its mission is to spearhead and enable greater flexible energy use across GB’s local electricity distribution networks. It will act as a single, expert entity that will work closely with Ofgem, the ESO (Electricity System Operator), ENA (Energy Networks Association), local networks, and Flexibility Service Providers (FSPs) to drive alignment between local and national flexibility markets and remove any barriers. The appointment of Elexon follows an Ofgem consultation last year. 
  • launched a consultation on a proposed common Flexibility Market Asset Registration (FMAR) solution. This streamlined new system would provide a single point of registration for flexible consumer assets such as EV (Electric Vehicle) chargers, heat pumps and home battery storage systems to participate in all local and national flexibility markets. This would move away from the present system where Flexibility Service Providers (FSPs), who aggregate assets on behalf of consumers, must sign up multiple times for each individual market. 

The shift to more flexible energy use is needed as Great Britain becomes increasingly dependent on intermittent low carbon generation such as wind and solar power. At the same time electricity demand is expected to rise by 50% by 2035, with increasing uptake of EVs and heat pumps anticipated.  

In terms of how flexible domestic energy consumption can respond to these challenges, it can be as simple as consumers being able to take advantage of a lower tariff to charge their EV battery when wind is generating lots of electricity.  

The steps outlined by Ofgem today could help achieve the Government’s goal of clean power by 2030 and could also contribute to an estimated £30-70 billion savings form flexibility by 2050, which would reduce bills for all consumers. These savings would be achieved through more efficient use of the energy system through flexibility, reducing the need to build new energy generation and new electricity network.  

Ofgem Director Eleanor Warburton, said: “To successfully operate the developing low carbon energy system of the future we need more flexible tools to make the best use of our intermittent wind and solar potential along with network and consumer assets to meet demand.” 

She added: “We are already starting to see real acceleration in small scale flexible energy use as consumers increasingly access cheaper energy through more flexible consumption. 

“As market facilitator Elexon will be able to coordinate and align local and national energy markets to unlock the full value of flexibility. Meanwhile asset registration will create a streamlined one-stop sign-up point, which will help maximise consumer participation in flexible consumption.” 

Notes for editors  

The Government has committed to clean delivering clean power by 2030. At the same time more electricity demand is expected to rise as the number of EVs (electric vehicles) and heat pumps rises, with Climate Change Committee (CCC) modelling suggesting a 50 per cent rise in electricity consumption by 2035 in a report last year. 

Flexible power is an essential component of managing to  meet increased demand while managing less predictable supplies from renewable generation, and it has been estimated, that flexible energy use can save between £30-70 billion on system costs in the period 2020 to 2050, which means lower bills for all consumers. .  

Market facilitator  

Elexon as market facilitator will help ensure the right governance and institutions are in place as an essential part of establishing an efficient, fair and flexible energy system. In its recent  Multiyear Strategy  Ofgem committed to creating a new market facilitator role, comprising a single, expert entity with a mandate to grow and develop local flexibility markets. (Multi year strategy objective 13.1 on page 58). 

Elexon is the code administrator and central systems delivery body for the Balancing and Settlement Code (BSC) it also perform a number of additional roles on behalf of government and Ofgem, including settlement arrangements for Electricity Market Reform schemes and programme manager for Market-wide Half Hourly Settlement. 

Elexon will act as a single expert entity and play an important part in addressing the current issues with local flexibility markets.  

It will be an independent expert body, accountable for decision-making and driving technical discussions forward through open, transparent, and participatory engagement. It will be responsible for: 

  • reducing friction across DSO markets 
  • aligning transmission and distribution market arrangements, and 
  • developing local flexibility markets 

In deciding to appoint Elexon, Ofgem considered its strong track record of delivery across several industry programmes in relation to stakeholder engagement and its proven ability to take on new roles.  

Ofgem will now work with Elexon and other stakeholders across three workstreams: 

  • detailed design – to further shape and refine the detail of the market facilitator role 
  • implementation – to put in place the regulatory and legal framework to formally appoint Elexon  
  • transition – to ensure a smooth transition and handover from the current arrangements, without any loss of momentum 

Ofgem wants the market facilitator to be fully operational by early 2026 at the latest.  

For more on the Elexon’s appointment visit the decision on the market facilitator delivery body.

FMAR 

Ofgem’s original Call for Input on the Future of Distributed Flexibility  in 2023 proposed ideas for the coordinated digitisation of flexibility markets. FMAR helps make that vision a reality by proposing a one-stop-shop to register flexible assets such as electric vehicle chargers, heat pumps and home battery storage systems eliminating the complexity of the myriad platforms and processes. 

It is designed to help  maximise participation in flexibility markets and benefit system operators, asset owners, and ultimately all consumers through lower bills enabled by building a smarter more flexible energy system. 

Ofgem’s FMAR consultation will be open for 8 weeks, closing on 23 September 2024. All responses will be reviewed and help inform ongoing policy development on Flexibility Digital Infrastructure and common Flexibility Market Asset Registration specifically. To view the consultation and share feedback, visit the Flexibility Market Asset Registration consultation.