Flexibility in Great Britain: what are the opportunities? Fast actors can gain most in the honeymoon period and district heat offers ‘a lot of value’

New analysis considers GB’s ‘whole system’ energy future, with three heat scenarios, and finds ‘flexibility everywhere’ can save up to £17 billion annually. Janet Wood hears that in the short term providers can benefit from flexibility markets – but in the long term it has to be part of the infrastructure


There will be a ‘honeymoon period’  in providing flexibility for the energy market and organisations and individuals who act quickly can make returns, according to new modelling. But in the long term, flexibility has to be built into every part of the energy system to meet our 2050 Net Zero targets, so the individual return will be small and we will need new business models that offer consumers other value so they are willing to be active participants in the system.

The Carbon Trust joined with Imperial College London and a fleet of other energy organisations in a two-year exercise that modelled the GB energy sector across heat, electricity and mobility. It found that embedding flexibility across the system resulted in big savings – up to £17 billion annually – no matter which of three heat futures was modelled and across a series of sensitivities. Most flexibility arose at the distribution level, but it was valuable both locally and nationally.

The report, Flexibility in Great Britain, found that in the medium term individuals and organisations can reduce costs and gain revenue from offering flexibility to the system via their mobility, heat and power use, with millions in value to be shared. In the long term making a return from that is more difficult for individuals.

I caught up with two of the report authors, Manu Ravishankar, associate director and Hannah Evans, manager, both at the Carbon Trust, to talk about some of the results and the opportunities.


Retaining the options 

The report looked at how the future plays out under the three solutions for heat decarbonisation - all-electric, hydrogen, or a hybrid with gas used at specific times – and included options of producing the necessary hydrogen from electrolysis or steam reforming of gas with CCS.

HannahHannah Evans (left) says the modelling of extreme scenarios revealed how the systems were linked, “The report shows there is not one solution, it is likely to be a mix of all three. And it is not as simple as looking at the efficiency of a heating solution in isolation, you really want to know what does that mean for the wider system.

“You would think that the electrical scenario would be most efficient, because you are putting a unit of electricity in and you are getting up to four out. But we are showing that on a cold winter day when you don’t get that level of efficiency from your heat pump and you don’t have the ability to shift that to another vector, you are placing a lot of stress onto the electricity system and the electricity system has to be able to meet that. It’s understanding that wider system implication.”

The research has thrown up gaps in the market. A key example is those winter periods when low temperatures and low wind coincide. The model uses the unabated gas option to cover that event, which would require plant that otherwise hardly operates. Evans says the modelling shows the importance of taking these events into account. “We aren’t saying that we need this volume of unabated gas [generation] – we are saying what service is this providing? It is this cost-effective firm power that can meet demand where needed. If it is unacceptable to have unabated gas providing that service we need to have an alternative ready to go. That’s the challenge to the industry.” That has to be at the same cost point, Evans says. 

By 2050, it may be that gas turbines fuelled with hydrogen would be available. I recall the number of long-duration storage options that I have seen under development and especially a recent agreement between Invinity and Siemens Gamesa to commercialise the former’s flow battery. That winter gap may be an easier target than it seems.


Shifting the sources of flexibility

The new report looked at flexibility across our energy system, instead of focusing solely on electricity. That is because some of the largest sources of flexibility in our energy use is not within the electricity system. The gas system, for example, is important to electricity flexibility because it has to be there to feed gas turbines.

But gas flexibility also includes the gas supply network, which operates at slightly varying pressures during the day as gas is pumped in and taken out (referred to as linepack), and which can also be deliberately primed with more gas on days when there is expected to be high demand.

More widely, the fuel tanks in our vehicles have always been energy stores – but up to now we have not been able to get extra value out of them by sharing the energy elsewhere in the system. Having access to batteries in electric vehicles should change that. And we do not routinely think of building insulation or well-insulated hot water tanks as flexibility, but of course they allow us to reschedule heating demand.

Discussing what that means, Evans says, “We probably haven’t properly valued thermal storage in the past, but I also think we haven’t had as integrated a network between electricity networks, thermal storage and gas networks as we will need in the future.

“If your hot water tank is connected to a gas boiler, then it is separate from the electricity network . But if it is connected to a heat pump it has a value to the electricity system in reducing demand. There is also value in the networks acting as a store of gas or a store of hydrogen and the interplay between how you produce that hydrogen.”

Can we have a single market that brings these vectors together? Evans says, “Things like electrolysers will be interesting, because by definition they have to work across vectors.”

ManuI talk more about this interplay with Manu Ravishankar (left). He notes recent structural changes, for example “we have closed down a lot of the gas storage sites so we rely less on gas storage and more on linepack”. And he says we are far from having the detailed information we need, even from electricity options: “The exact numbers of demand side response we have at the moment is not entirely clear .. [it is] a very small proportion of the domestic and Industrial and commercial demand”.

Other vectors are even less well known. Take heat: “Hot water tanks is an example, we know there is a lot of it but it is hard to put a number on how much exactly we have in peoples’ homes” and similarly with storage heaters.

As for taking advantage of these assets, Ravishankar says there is a hill to climb. Space is at a premium, so people still tend to remove their hot water tanks. Even the ‘Economy seven’ tariffs that were linked to storage heaters have tended to disappear, for example when properties are connected to the gas network. “Even if you had them they are not being used to provide flexibility as we describe it in this work. So you could have loads of assets or flexibility, like lots of EV, but are they actually providing the flexibility they could do?” Ravishankar says building that option in should be seen as  “A critical part of the system”.


What should we do now?

Ravishankar believes, “We need to start thinking about a whole systems approach. This requires a change in mindset and also how we design markets. The question is what is the incentive for people to put forward flexibility.

“Sometimes it is embedded in solutions and it will happen as a matter of course – with EVs you have a battery, so you are buying flexibility with your low-carbon asset. In those instances the question is how it is used flexibly, so if the market signals and the planning processes don’t reflect the value of that we will never be able to use that flexibility in an effective manner.”

He says there are long term strategic questions about how to do flexibility at scale. “There will be a honeymoon period where there will be  value for early adopters.… the value of flexibility will rise and the unit value will keep on rising – until you get to a point when we start saturating the market and then there is a diminishing curve of returns and of value”.

We need to create long term business models that do not rely on the commercial value of flexibility to keep installing it, he says: “That flexibility is still very very valuable to the system but to the individual it is worth less”.


Whetting the appetite

That said, the short term gains are attractive and I suggest first movers will see a commercial opportunity. Ravishankar says that is happening: “The aggregator market is maturing and trying to make it painless for consumers to access it and a lot more people will find it exciting and rewarding.

“It’s the launch point for us to get in to flexibility and then it is how you embed the narrative, to keep the momentum going forward to 2050”.

He says EVs are doing some of that job, and the ‘vehicle to grid’ option. “It’s like getting a new toy when there is a lot of excitement and interest … the EV itself is a new toy and then you are finding new uses for it that offset the price of the car”.

How do you transfer that to other sectors, talking about things that have been around for a while – like insulation – and new options like heat pumps? We have lots of innovative technologies, he says, and “now is the time to put a lot more focus on engaging consumer narratives and the commercial and social narratives.” But we need research, “energy efficiency has never made the impact we hoped and we really need to understand people’s motives and behaviours.”

I suggest that is an opportunity for newcomers rather than existing suppliers.

He says “it’s an open call to innovators to say let’s try to unlock this.” Key to it is digitalisation, and creating an ‘ecosystem’ within which innovators can act. “We need digitalisation to allow innovators to create new propositions that match what the system needs across space and time. That is weather data and system loading information, as well as data about when you need to heat the home or make a journey. We need to optimise across all of that.”


Looking wider

I suggest building managers might be one group who could use that ecosystem to offer new services, and we may need a mindset change from aiming at a ‘passive’ zero-carbon building to an active one.

Ravishankar says, “when we take decisions about infrastructure the opportunity to make it smart and flexible is critical, so [including] things like smart metering, smart chargers, space for thermal stores. There is an element of government helping people make the right choices.”

He says using the planning system to make sure that new homes and buildings are smart and can be active players is in the energy system “is exactly where we have to get to”.

That reinforces the report’s message that flexibility has a lot of value to local systems. “It returns value to them and that returns value for the national system.”

We talk about getting gas, electricity, heat and mobility out of their silos and for Ravishankar that puts local authorities at the centre, because they know better than anyone else what facilities and industries are being planned along with industrial strategy and transport planning – rather than having single applications as energy networks do. “Empowering them to do a lot more is absolutely the right thing to do,” says Ravishankar, noting that they are increasingly in touch with energy networks.  “Working with them closely you can optimise regeneration and energy system development in the best way possible.”

Ravinshankar’s message is that “We should think about flexibility as a key part of the transition. Embedding it in heat makes heat decarbonisation more cost effective, embedding it in transport makes transport decarbonisation more cost effective”.

When I ask him to suggest some of the cross-vector flexibility opportunities we should grab now, he names an infrastructure element that has often been hard to deliver. He says, “It’s not something people immediately think about, but we found a significant proportion of flexibility in the future might rest in district heating networks.”

He says, “If they get it [flexibility] right it could return a lot of value, which makes their proposition more compelling. It is one of those examples where flexibility and infrastructure can help each other out.”

Download the report