Ofgem firming up plans to ramp up energy flexibility from homes and businesses

Homes with EVs and/or electric heating stand to make the biggest savings

In fact, a recent study concluded that scaling up flexibility capacity across the UK’s power system could reduce annual wholesale energy and energy system costs by up to £4.6bn in 2030, increasing to £14.1bn by 2040.

Ofgem has stated that scaling demand-side response from technologies including batteries, electric heating systems and electric vehicles (EVs) will be “key” in delivering the Government’s pledge to end unabated gas-fired electricity generation by 2035. This is because additional flexibility can help to balance demand and supply as more intermittent renewable generation comes online.

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.

Ofgem is seeking views from energy businesses and consumers as well as fleet operators, public sector players and thought leaders in the energy transition space.

Ofgem’s statement notes: “For domestic demand side response to work at scale and provide benefits to the energy system and consumers, it also needs large scale consumer participation – something which is by no means a given.

“The key to unlocking high consumer uptake is making it both attractive and easy to participate in.

“It is not Ofgem’s role to specify what this domestic DSR journey should look like, but it is important that it is not left to chance.”

This is why the regulator is consulting on the design of new reforms and regulations for the market. The consultation will close on 29 September.

It bears noting that recent trials to unlock domestic flexibility proved popular. Some 1.6 million homes and businesses took part in the UK’s Demand Flexibility Service this winter and an expansion and extension is being considered for the coming months.

Under this scheme, run by the National Grid’s Energy System Operator (ESO), energy users were paid for avoiding energy use during peak times.

Multi-billion-pound benefits

As already mentioned, unlocking flexibility is crucial to decarbonising the energy grid in line with Government commitments. It can help save costs by avoiding infrastructure build-out and mitigating the need for renewable energy curtailment.

New analysis from Cornwall Insight and Smart Energy GB this month revealed that domestic flexibility could potentially slash whole system electricity costs by £4.6 billion per year in 2030, with the annual savings rising to a whopping to £14.1 billion in 2040.

This is without considering the further benefits that could arise from larger-scale assets like major battery energy storage projects.

The report says flexibility could lower peak electricity demand by 1.5GW in 2040.

The analysis concludes that the savings represent a 38% reduction in wholesale electricity costs in 2030. The average home or small business could save £105 per year on their energy bills by this point.

Homes or small businesses with an EV and heat pump could see even greater savings, of £115 in 2030 or £375 in 2040.

Cornwall Insight’s senior consultant Anna Moss said: “Our analysis has unveiled the immense potential of flexible household electricity use to support GB as it journeys towards a renewables-based system.

“By empowering consumers to become the architects of their own energy usage as well as supporting home decarbonisation technologies across the consumer base, the government can reduce expenses, alleviate strain on the grid, and even eliminate the need for additional costly gas-fired power stations.”

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