Project Summary

CrowdFlex will meet the aims of the SIF Innovation Challenge by developing digital tools to help unlock full chain flexibility. Following the successful world-first Demand Flexibility Service (DFS) trial, we will be further exploring domestic flexibility as a novel, reliable flexibility resource of national significance, capable of competing alongside BAU alternatives in system balancing services, generation capacity, or network reinforcement. Our objective is to build a forecasting model of domestic demand and flexibility, informed by large-scale consumer trials, to validate domestic flexibility as a firm resource and inform new product design. This will feed into the Virtual Energy System (VirtualES) programme.

VirtualES will enable secure and resilient sharing of energy data across organisational and sector boundaries, facilitating complex scenario modelling for optimal whole-system decision making. Whole-system decisions will result in better societal, economic, and environmental outcomes, balancing the needs of users, electricity/gas systems and other sectors.

Since the original CrowdFlex:NIA (2021), CrowdFlex has been aligned with SIF Whole System Integration innovation challenges. Earlier stages proved fundamental principles, clarified the opportunity, developed the scope, and de-risked Beta plans, which aim to:

• Develop a comprehensive understanding of domestic flexibility by building forecasting models of domestic demand and flexibility, integrated into the VirtualES, and improve ESO confidence in domestic demand and flexibility, advancing "coordination of emerging innovations across the system."
• Demonstrate that simple incentives, reflecting whole system challenges, can "reduce complexity, bureaucracy, and barriers to entry" for aggregators to deliver domestic flexibility.
• Trial consumer interventions (financial and informational) targeting different system challenges to "clarify consumers' preferences and inform future market designs."
• Trial the service primacy rules developed with ESO and DSO stakeholders in previous phases to "Improve coordination between networks and other system participants."

CrowdFlex:Alpha laid the foundations, scoped and de-risked Beta, by clarifying the immediate market opportunity:

• Identified Thermal Constraint Management (transmission and distribution) and Energy Balancing as key Beta use cases.
• Tested primacy and stacking implications for domestic consumers participating in flexibility in constrained areas of the distribution network.

Furthering innovation:

• Developed a specification for predictive models of statistically expressed domestic demand and flexibility, to be developed in Beta within the VirtualES framework, to ensure interoperability.
• Identified how the full value of statistically declared flexibility can be recognised by the ESO, to be pursued in Beta.

Focussing the scope:

• The consumer segments and key behavioural research questions to be investigated.
• Identified white goods, electric vehicles (EVs), and electrified heat as the project technologies (and their technical requirements).
• Confirmed the inclusion of manual and automated response.
• Developed a trial specification to ensure that consumer incentives reflect system requirements and balances cost and statistical power to give significance at good value for money.

The Alpha phase responded to insights generated by CrowdFlex:NIA, CrowdFlex:Discovery, and the outcomes from the Demand Reserve Scarcity Trial and DFS. The apparent success of the DFS has confirmed the potential of domestic flexibility to address system scarcity stress events. DFS was an enhanced action for winter 2022/2023 and not a full commercial service, meaning more work through CrowdFlex is needed to support full adoption in both system stress and routine events.

CrowdFlex:Alpha's work on the statistical nature of domestic flexibility has highlighted the opportunity for, and commercial value of, probabilistic forecasting to increase reliability. This is critical to the VirtualES and will improve the economics of existing network assets and target future system investments through reliable modelling of domestic demand and flexibility.

The requirement for domestic flexibility is increasingly apparent. The Ukraine invasion led to increasing energy prices, highlighting the precariousness of international gas trade and the need for alternative flexibility sources. FES 2021 projects a 19% system peak increase from 2020-2030. Domestic flexibility has a vast potential (~7GW turn-down and \>10GW turn-up, CrowdFlex:NIA) to offset this increase and address operational challenges as well as capacity and network investment planning.

CrowdFlex brings together partners spanning the energy system, from system and network operators to energy suppliers and technology providers, directly interacting with consumers who will be the users of the services emerging by CrowdFlex. The CrowdFlex consortium has experience working together and is best placed to address whole system challenges. The consortium partners are (the Project Management Book provides further details on partners and subcontractors):

• ESO: system operator for the GB transmission network.
• SSEN and NGED: DSOs with \>1GW of flexibility services contracted.
• Octopus and OVO: energy suppliers offering customers innovative tariffs and services encouraging flexibility.
• Ohme: home EV Charge-Point Operator providing smart charging and flexibility services.
• CNZ: NfP consultancy providing expertise in modelling, data science, and consumer engagement.
• Element Energy: leading low-carbon energy consultancy, providing subject matter expertise and analysis on energy system needs.

ESO/DSOs can use the new flexibility resources and the associated modelling to lower operational costs and reduce capacity and network investments. Benefits will be passed down to consumers via energy bill reductions.

Innovation Justification

Current state-of-the-art ESO flexibility is dominated by large, carbon intensive thermal power stations, which have reduced load factors to operate flexibly, increasing cost. Recent events show how exposed this market is to gas supply interruptions, further increasing costs to the consumer (constraint management cost £174.12/MWh in 2021/22). In 2021-22, ESO spent £1.41Bn on thermal constraint management, and £580Mn on energy balancing, including Reserve, with a total operational cost of £2.2Bn (NGESO, Balancing Costs, 2021-22). DSOs primarily reinforce areas of the network that are constrained; CrowdFlex will therefore focus on Constraint Management Zones (CMZs) and Load Managed Areas (LMAs) where deploying flexible solutions can mitigate/delay reinforcement.

The DFS is the only ESO domestic flexibility service and is an enhanced action that focusses on system scarcity events. It was run 15 times in 2022/23 and cost up to £3,000/MWh, totalling £4.73m (NGESO, 2023). System scarcity does not represent the full potential for domestic flexibility. Without further development it is highly likely this first use case would remain its only contribution to meeting system needs.

CrowdFlex goes beyond incremental innovation by using a large-scale (2-years; ~150,000 customers) trial to develop a statistical basis to underpin modelling and deploying domestic flexibility. We will combine automated and manual responses from diverse technologies to understand how flexible capacity varies between households. By utilising a randomised control trial approach, CrowdFlex:Beta's breadth, granularity, and statistical confidence will be unprecedented and mature this nascent asset, which could provide ~7GW turn-down and \>10GW turn-up.

CrowdFlex builds on two previous trials, CrowdFlex:NIA and the Domestic Reserve Scarcity Trial. While both were large-scale, they did not answer the whole system integration questions associated with domestic flexibility. CrowdFlex:Alpha showed for the first time how statistical declaration of domestic flexibility capacity avoids deeply sub-optimal derating associated with deterministic declaration. CrowdFlex:Beta will set a pathway for adoption of this transformative system view, which could provide system savings of ~£228m by 2035.

CrowdFlex:Beta will address the key research questions surrounding domestic flexibility that remain unanswered. We will develop a probabilistic model of domestic flexibility, significantly improving the system value and reliability standards of domestic flexibility. Currently unknown behavioural parameters such as price elasticity, duration, seasonality, and fatigue of domestic response will be vital outputs of the trials to inform this modelling. Finally, confirming the primacy rules for domestic flexibility in a large-scale trial will ensure that domestic flexibility meets the future needs of the whole system.

The scale of the CrowdFlex project is necessary, as:

• A large trial size is required to ensure outcomes carry statistical power and represent the widespread commercial rollout of domestic flexibility post-CrowdFlex.
• Multiple incentive levels are needed to establish price elasticity and cost-optimal incentives.
• The trial extends over multiple years to test seasonal supply, fatigue, and to deliver system stakeholder confidence.

Domestic flexibility is nascent, with the first customers engaging with time-of-use tariffs, DSO flexibility markets, and the DFS. The technical capacity of domestic assets to supply flexibility is better explored than the commercial profitability. As such, the current commercial readiness level (CRL) of domestic flexibility is CRL3/CRL4 and the integration readiness level (IRL) is IRL4. Post-CrowdFlex we estimate improvement to:

• CRL7: Large-scale trials enable initial service entry from consumers. All stakeholders are involved in the trial. Trial data and flexibility models will provide the insight needed to confirm the economical deployment scenarios.
• IRL6: The integrating technologies (models) can accept, translate, and structure information for its intended application. CrowdFlex includes a Business-As-Usual (BAU) and exploitation plan to rapidly integrate domestic flexibility as a resource.

CrowdFlex improves market competitiveness by increasing electricity market depth of supply. Households represent a large fraction of electricity demand, but have limited participation in electricity markets. CrowdFlex:Beta will develop the frameworks to integrate domestic flexibility into competitive marketplaces and encourage participation from many Flexibility Service Providers (FSPs), improving consumer choice.

'Do-Nothing" is the key counterfactual to domestic flexibility. In this scenario, decarbonisation continues with flexibility provided by large-scale thermal assets. As electrification and renewables deployment increase, thermal load factors reduce, and the cost of providing flexibility from these thermal sources would increase significantly. Vast investment in new capacity and network reinforcement will be necessary to meet increasing demand from low carbon technologies. This alternative will have very high costs and long lead times compared to domestic flexibility, meaning CrowdFlex will accelerate decarbonisation. Greater use of energy storage will offer an alternative to thermal capacity and network reinforcement; however, solving seasonal supply issues would require uneconomic investment in batteries or in hydrogen storage, which will not deliver system improvements at scale in the timeframe that CrowdFlex can.

With its many unknowns and uncertainties, domestic flexibility is unlikely to attract significant private/BAU investment to fund the trial scale required to develop the necessary forecast modelling to mature the technology and cannot be funded by the price control mechanism.

Benefits

Our CBA demonstrates that domestic flexibility, following the completion of CrowdFlex: Beta, has a NPV of -£0.81m in year 1 (2026), £30.1m in year 3, £203m in year 5, and £1.48b in 2035 (year 10) at full roll-out. These benefits continue to increase out to 2050 when the annual net benefit of CrowdFlex is £2.2b/yr, leading to a NPV of £12.0b. CrowdFlex delivers Whole System net benefits by reducing system operational costs, mitigating/delaying generation capacity and network investments, and accelerating decarbonisation.

The CBA identifies both operational savings we well as reduced capital investments for the ESO and DSOs. The CBA includes domestic consumers providing energy balancing via the Balancing Mechanism and thermal constraint management on the transmission and distribution networks reducing operational and network investment costs. These are the largest expenditures at ESO level, £580m/yr (27%) and £1.4b/yr (67%) of ESO costs respectively (2021/22). The NPVs of these benefits in years 1, 3, 5, and 10 (2035) are the following:

• Reduction in ESO operational costs via energy balancing: £2.2m, £13.0m, £47.0m, £232.3m
• Reduction in transmission network reinforcement investment, realised as reduction in ESO thermal constraint management costs: £1.7m, £39.8m, £150.7m, £740.6m
• Reduction in distribution network reinforcement investment: £0.3m, £7.7m, £31.0m, £156.8m

In addition, through the development of a probabilistic forecasting model of domestic demand and flexibility, deratings of residential capacity will be avoided, prediction accuracy improved, and additional savings will be generated for the ESO. We plan to begin implementation into the Control Room from 2026, subject to trial success. Leveraging this model will deliver additional and highly innovative processes and services that will benefit the whole energy system. First, the moderate benefit of improving the forecast of domestic demand will be introduced, reducing Reserve requirements. By 2030, once confidence in probabilistic modelling of domestic flexibility has been demonstrated, it will stimulate a shift towards the statistical procurement of. Despite high upfront costs to implement the modelling, it will encourage the full benefits of domestic flexibility to be captured. The NPV of the additional benefits from the modelling undertaken in CrowdFlex is -£0.6m, -£8.9m, £64.8m, £216.8m in years 1, 3, 5, and 10 respectively, continuing to increase to £439.7m in 2050. This excludes the potential value in exporting these digital assets to electricity networks worldwide.

As the users of network services, flexibility service providers (FSPs) (e.g. energy suppliers and aggregators), stand to generate new revenues from aggregating their domestic customers' flexible capacity to participate in the flexibility services that emerge from CrowdFlex. Assuming a 25% margin, CrowdFlex will provide FSPs with a total net benefit of -£0.1m (2026), £27.8m (2028), £135.2m (2030), £841.0m (2035). The FSP modelling of domestic demand and flexibility, which will be scoped in CrowdFlex (and developed by FSP partners as a contribution-in-kind) is essential to forecast domestic flexibility to access new markets.

System savings from CrowdFlex will be passed down to consumers through energy bill reductions. However, by directly participating in domestic flexibility, consumers will be able to generate revenue from ESO and DSO services. This will come in the form of a reduction in participating consumers electricity bills or direct payments, via the FSP. Based on our CBA, from 2026, the cumulative net benefits for consumers in the years 1, 3, 5, and 10 are £0.8m, £64.9m, £255.3m, £1.3b.

Currently participation in domestic flexibility services is extremely limited, only available nationally via the enhanced action of the Demand Flexibility Service. The FSP and ESO models that will be developed in CrowdFlex:Beta will be transformational in our understanding of domestic flexibility, vastly improving confidence in domestic demand and flexibility forecasting. This development will unlock the application of flexibility products and services to domestic flexibility, enabling this large but nascent sector to participate in "routine" events as well as improving confidence during system stress events. Furthermore, adopting a statistical approach to forecasting and eventually procuring flexibility would represent a paradigmatic shift in how system operators manage networks. It would improve network security, while reducing the cost of reserve and capacity procurement.

CrowdFlex will help accelerate decarbonization, reducing the need for thermal generation to support VRE dispatch and provide energy balancing. From 2026, this equates to a cumulative discounted benefit of avoided CO2 emissions equating to 0.13MtCO2eq, 0.57MtCO2eq, 1.40MtCO2eq, and 5.91MtCO2eq in years 1, 3, 5, and 10 respectively. This calculation is based on the assumption that the counterfactual is "Do-nothing", i.e. flexibility continues to be primarily large Open-Cycle Gas Turbines (OCGTs) as variable renewable energy roll-out continues. We are aware that the "Do-nothing" approach leads to residual emissions of the counterfactual in 2035, which is contrary to the Government's Net Zero target. However, we felt that zero carbon options (e.g. battery storage and H2GT) introduced another layer of cost assumptions. Therefore, we have selected the "Do-nothing" approach to be transparent on cost and emissions.