Project Summary

Procuring flexibility through energy efficiency upgrades being rolled out by Local Authorities and Social Housing Providers, such as home insulation and storage heating, offers a significant opportunity for DSOs to enable disadvantaged 
customers to participate and benefit from new energy markets. Flex Direct aims to transform the way this type of flexibility is procured by DSOs. The project will develop novel commercial models and coordinated market approaches to enable LAs and SHPs to operate as flexibility aggregators in direct contract with DSOs. This will incentivise use of energy efficiency in flexibility markets and facilitate participation of 'hard-to-reach' customers at scale. 

Innovation Justification

Flex Direct aims to deliver an ambitious and step change approach in the way DSOs procure flexibility through the installation of energy efficiency measures. The project is innovative because it will develop a new market mechanism, allowing direct contractual and commercial arrangements between local authorities or social housing providers and the DSO, without the need for flexibility aggregators or traditional procurement cycles. This approach aims to address the information, incentive and coordination gap that is holding back the participation of energy efficiency as a flexibility solution for DSOs. 
UKPN's Socially Green project delivered a GB first trial enabling the DSO to procure flexibility from a small group of 'hard-to-reach' customers through the installation of energy efficiency measures funded through the Social Housing Decarbonisation Fund. 
Learnings suggest there is potential to establish direct contractual arrangements, technical processes and data sharing between the DSO and LAs or SHPs, essentially incentivising and upskilling them to operate as long-term energy efficiency flexibility aggregators in target areas. This type of direct relationship has never been tested before in GB. 
During Discovery, the project will establish the market structure and inclusive design requirements for Flex Direct through research and engagement with LAs, SHPs and stakeholders across the energy efficiency and flexibility market value chains. Given the fragmented market, this will include establishing an ecosystem of partners to work together to define the optimal solutions and incentives to tackle the systemic issues. The output of Discovery will include validation of the Flex Direct concept by stakeholders, an assessment of the potential network impacts and wider benefits, and a blueprint for scale. 
The contractual model and framework that will be required for this type of approach is novel (current CRL, IRL, TRL between 1-2) and will require significant engagement with the market to design, develop and trial the optimal processes (CRL, IRL and TRL between 3-4 at end of Discovery). 
This project aligns to Challenge 2: Novel technical, process and market approaches to deliver an equitable and secure net zero power system and Theme4. Considerable research, engagement and innovation will be required to develop Flex Direct, which would not be achievable as part of business-as-usual activity. Given the phased nature of SIF, the project is well suited to this mechanism as it will enable upfront research to understand the scale of potential benefits to networks, LAs and consumers ahead of solution development and testing, before widespread deployment. 
 

Impacts and Benefits

Flex Direct will provide DSOs with a new framework to unlock additional flexibility and wider benefits from energy efficiency measures. This has the potential to deliver significant value, particularly if the timing and the delivery of the energy efficiency installations is monitored and incentivised towards areas with network constraints and with high populations of vulnerable and disadvantaged customers. 
As an initial baseline, the interventions from this project will be measured against the current DSO forecast of energy efficiency flexibility product uptake, the related thermal demand reduction and number of customers participating. The related benefits include: 
Financial - future reductions in the cost of operating the network 
Energy efficiency interventions and flexibility procurement can provide benefits for networks by deferring, displacing or avoiding the need for network reinforcement. 
Metric: Model showing what reinforcement would be required if interventions were not applied. 
Financial - cost savings per annum on energy bills for consumers 
Participating in flexibility markets through installation of energy efficiency measures will result in a reduction in consumer bills. Additional financial incentives may also be introduced to encourage participation which would provide additional benefits to end customers. 
Metric: Annual customer bill savings from interventions. 
Environmental - carbon reduction -- direct CO2 savings per annum 
Energy efficiency interventions are proven to reduce customers' energy consumption which in turn reduces carbon emissions from domestic energy use. 
Metric: Tonnes CO2e reduced per year and associated £ valued (Greenbook traded carbon price) following intervention. 
Revenues - improved access to revenues for users of network services 
An increase in disadvantaged households participating in flexibility services. 
Metric: Number of households participating in the flexibility services after trialling the interventions compared to the number participating prior to the interventions. 
New to market -- processes 
Stimulating the market and increasing uptake of energy efficiency and flexibility through new commercial models and standards. Wider potential benefits across DNOs if learnings are shared and adopted across the sector. 
Metric: Documented processes that can be replicated across GB to unlock wider benefits beyond UKPN network area. 
Others that are not SIF specific 
Societal benefits: 
The project will deliver additional wellbeing benefits to vulnerable and disadvantaged consumers. This includes quality of life improvements due to having warmer homes from energy efficiency measures and the benefits of ensuring vulnerable and fuel poor customers are able to benefit from energy market participation. 
Metric: Social Return on Investment and customer satisfaction assessment of trial participants.