Project Summary
Increasing flexibility is required on energy networks to manage changing demand and generation patterns. This includes reducing power consumption at system peaks (e.g. winter teatimes); and increasing power consumption at certain times to take advantage of renewable energy availability.
Consumers can benefit from providing flexibility, through reductions in in their bills and/or receiving payments for providing services to the network. However, the current offerings and their benefits are most easily accessed by more affluent and engaged customers.
Equiflex aims to remove barriers to accessing these benefits, ensuring no customers are left behind, enabling a just transition to Net Zero.
Innovation Justification
Equiflex addresses Innovation Challenge 2 - "Novel technical, process and market approaches to deliver an equitable and secure net zero power system" and Theme 4, "Enabling disadvantaged consumer segments to participate in flexibility markets".
The Core innovative aspects meet the requirements of Innovation challenge 2 and Theme 4 as follows:
- Theme 4 - Specific consideration of the needs and resources of vulnerable and low-engagement customers.
- Innovation Challenge 2 - Development of flexibility options designed for specific groups.
- Innovation Challenge 2 - Development of a 'Tool' to identify the best areas to deploy. flexibility products given network parameters and customer demographics.
We have learnt, from other network innovation projects, that collaboration between the networks and the target audience for the product is key. This was evident during the Discovery phase of Equiflex and other SIF projects we have been involved in. We have therefore included multiple partners to represent and engage with our target consumer groups.
To develop this Alpha project, we have worked in the open with UWS to collaborate with their (and EAC's) Barshare project and created an opportunity to engage with our target consumer group. Targeting products at these groups will require significant departure from current flexibility market offerings, providing access to the market through entirely different concepts for flexibility provision.
The key innovation is in allowing consumers without expensive flexible assets (batteries and EVs) to provide flexibility. This is facilitated by two product development streams identified during Discovery.
- Turn-up opportunities in areas of curtailment. We will address the technical and social barriers to increasing energy usage on demand, delivering increased quality of life and lowering network peak demand.
- Turn-down opportunities in areas of constraint. Specifically refining our Discovery findings to quantify the consumer benefit in reducing peak energy consumption and conducting a technology review to identify, for our target groups, if; a) future high load appliances (such as heat pumps) present an opportunity and b) if additional product development is needed to capitalise this on opportunity.
Comparing our aims to existing domestic flexibility products suggests that this market is nearing maturity with turn-down at CRL 9 and turn-up at CRL 8, with similarly high TRLs and IRLs. However, there is not significant take-up amongst vulnerable and disengaged customers. Currently no targeted products exist to reach vulnerable and disengaged consumers, these concepts are at CRL 4, and we aim to improve turn-up products to CRL 7 and turn-down to CRL 5.
The scale and size of our project means we will achieve a significant step toward increasing participation in the flexibility market. Our scale means we can draw the experience of six partner organisation representing important areas of expertise. It also allows us to engage with enough of our target group, through a consumer survey, to draw meaningful conclusions which will align developments with consumer requirements.
This size and scale, as well as collaborative approach between six partners means this activity would not be possible as part of Business as Usual. It aims to address a whole UK network challenge which currently is not at a stage where it will deliver significant near-term network benefit.
Counterfactuals have been considered and discounted on the basis that the disadvantages identified outweigh the benefits. These are:
- 'Do nothing' - DNOs simply respond to market demands for flexibility services and take any benefits provided. Disadvantage: minimal savings will be available, and flexibility provision will be piecemeal, making deferred network upgrades unlikely.
- Investigate flexibility without customer focus. Disadvantage: whole-system synergies won't be fully exploited, and the limited consideration of vulnerable and disengaged customers risks them getting left even further behind.
Impacts and Benefits
The current position
A just energy transition should seek to make flexibility offerings accessible to everyone, including vulnerable and disengaged. Our work in Discovery has highlighted that opportunities for flexibility provision among these demographics are currently lacking, with available flexibility products being targeted at, and most effective for, those with high demand or readily flexible loads, who tend to be more affluent and engaged.
Without the development of innovative approaches, a significant proportion of GB energy consumers will continue to be locked out of contributing to progress on net zero and will only receive possible indirect benefit from the growth in demand-side flexibility, furthering and deepening a sense of exclusion and disengagement.
The importance of involvement and engagement in flexibility within this demographic will only increase as the electrification of home heating gathers pace. A lack of access to flexibility tariffs, and ready means to practically engage, will potentially expose fuel-poor consumers to additional hardship as their electricity usage rises.
Metrics for the impact of the Equiflex project should include the numbers of consumers within the target demographic who are signed up to a flexibility tariff. Overall energy usage, time of use and energy bills for sample groups of customers who have engaged should be conducted to measure the impact of interventions and inform fine-tuning of the tariffs and products.
Forecast Benefits
Our Discovery phase has produced order of magnitude estimates for the benefits that 4 flexibility options might provide - 3 routes to demand reduction and one turn-up service (full description in the CBA). The benefits have been estimated based on the demographics for the East Ayrshire local authority and then scaled to provide an estimate from the benefits that would accrue over SPEN's network in Scotland. It should be noted that East Ayrshire is largely rural with a lower proportion of its population in the target demographic, which will lead to an underestimation of the whole-network benefit. Here we group the benefits from the 4 options in the categories highlighted in Q5. The 30-year total NPV for the project options (from CBA workbook) are: £43.4m, £29.6m and £40.1m for the 3 demand reduction options, and £65.3m for the turn-up option).
While the flexibility options examined do deliver some network financial benefits --allowing reduction and deferral of network upgrades and reducing constraint costs - these do not outweigh the costs, and they all come at a net cost to the network. However, each delivers social benefit and carbon savings that bring an overall positive net present value.
The flexibility options all deliver cost savings per annum on energy bills for consumers, which will be focussed on Equiflex's target demographic. We estimate that the demand reduction options could save vulnerable SPEN households between £1m and £2m a year, and the turn-up option around £2.5m. Applying a social return on investment multiplier of 1.9 to this (see CBA) implies a total benefit of between £2m and £5m for each option. It is not clear to what extent these benefits are additive.
By allowing use of previously constrained renewable generation (turn-up option) and by shifting demand away from peak hours when the carbon intensity of the grid is likely to be higher, Equiflex would deliver Direct CO2 savings. The demand reduction options are estimated to reduce carbon emissions within SPEN's Scottish region by 300 - 400 tCO2e/yr. The turn-up option is estimated to save 1,200 tCO2e/yr.
Depending upon the options identified in Alpha, Equiflex offers the potential for delivering new to market products, processes, and services. It will also deliver significant social return on investment through promoting a fairer energy transition.
