British homes and businesses to be paid for ‘flexing’ energy use again this winter

The Demand Flexibility Service was first launched in late 2022 on a trial basis. Initial trains saw Octopus Energy customers – domestic and commercial – incentivised financially to avoid using energy during peak times. Doing this at scale helped to reduce pressures on the grid.

After a total of 1.6 million homes and businesses took part in the 2022/2023 trials of the Service, with 83% stating that they would participate again, the ESO has outlined plans for an expansion and extension this year.

The ESO has today (31 August) submitted details to energy regulator Ofgem for approval. It is seeking to run 12 tests events across November 2023 to March 2024.

At least six of these will take place before the end of the calendar year. The ESO stated: “The tests are front-loaded to encourage early participation in the service and understand how different lead times impact delivery volumes.”

During the 12 tests, the ESO is proposing, homes and businesses will be paid a fixed rate of £3 for every KWh of energy use they avoid during trial times. This money will be paid to energy suppliers, who can opt to pass them on to customers in the form of either “pounds, points or prizes”.

Energy suppliers that have already taken part will not need to complete a proof-of-concept test and can go straight in to engage their customers. The ESO will, however, appeal for additional suppliers to participate; it has set out details in advance in the hope of attracting more private-sector interest. Energy suppliers will need to bid to participate.

National Grid ESO’s director of corporate affairs Jake Rigg said: “Across last winter, the Demand Flexibility Service successfully demonstrated the interest of consumers and businesses in playing a more active role in balancing our electricity needs and to be rewarded with savings for their action in the process.

“We want to work with industry to build on the past success of this new and innovative service… The ESO is keen for more consumers, both large and small, to get involved.”

Flex appeal

Earlier this month, Ofgem began consulting on how best to encourage homes and businesses to flex their energy use around peak times beyond the Demand Flexibility Service.

In a statement, the regulator said it anticipates there to be “many different ways” for differing technologies to engage in demand-side response. It sees a major role for smaller technologies in homes and businesses, too – and expects that participation will be made easier through digital automation.

Those with EVs or heat pumps could, for example, set off-peak time settings using digital timers and have a third party such as their energy provider managing their participation in flexibility markets. This could enable the third parties to aggregate capacity and maximise the benefits.

Consultations on Ofgem’s flexibility approach are open until 29 September.