Notes on completion
Before completing this form, please refer to the LCN Fund Governance Document.
Please use the default font (Verdana size 10) in your submission, the text entry areas
are predetermined and should not be changed. Please ensure all content is contained
within the boundaries of the text areas. The full-completed submission should not
exceed 9 pages
in total.
Ofgem will publish all the information contained within the Screening submission.
DNO Group
Participant DNOs
DNO area
Project title
Project summary
Estimated Project funding
Please provide an approximate figure of the total cost of the project and the LCN funding you are applying for.
Total cost of Project
LCN funding
requested
Low Carbon Networks Fund
Screening Submission Pro-forma
Northern Powergrid
Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc
Northeast and Yorkshire
The GB Flexibility Market
Demand side response (DSR) can deliver cost and carbon savings and lead to more
secure and sustainable energy supplies.
The objective of the Project is to create a multi-party market that will facilitate DSR to
be traded, potentially alongside other flexibility services. The GB Flexibility Market
(GBFM) will build on the experience gained from the DSR trials and energy-storage
trials undertaken by the Customer-Led Network Revolution (CLNR) project. The CLNR
trials demonstrated that the current industry approach to accessing DSR and other
flexibility services is fragmented across the value chain and existing arrangements will
not efficiently support the development of these services required by the low-carbon
economy.
The providers within the market will include large industrial and commercial (I&C)
customers and specialised aggregators or suppliers that will aggregate smaller customer
loads from the I&C, small and medium-sized enterprises (SME) and domestic segments.
In addition, the energy storage installed by Northern Powergrid as part of the CLNR
project could also provide flexibility for the GBFM. The purchasers will include the
transmission system operator (TSO), distribution network operators (DNOs) and
suppliers. The key benefit will be the reduction of barriers to entry for both providers
and purchasers of DSR and other flexibility services, which should result in lower
customer bills.
£28m
£17m
Problem
Please provide a narrative which explains the Problem(s) which the Project is seeking to address.
Method(s)
Please describe the Method(s) which are being trialled. Please outline how the Method(s) could solve the Problem. The type of
Method should be identified where possible e.g. technical or commercial.
DSR can play a major role in supporting the low-carbon economy, alongside other
flexibility services. Specifically, DSR can help:
- reduce carbon emissions, energy costs and avoid some investment required in
network and generation capacity through more efficient use of existing capacity;
- increase the scope of the electricity system to absorb high levels of renewable
generation; and
- improve overall system balancing and efficiency.
There is potential to increase the contribution of DSR in maintaining secure and
sustainable energy supplies, by allowing it to be traded in a market. Flexibility services
(such as Short Term Operating Reserve) are currently contracted bilaterally. This
creates a number of barriers to their provision, including:
Limited financial incentives - DSR and storage can create benefits across the value
chain. The value to one party will often be lower than the total value across the value
chain. Allowing DSR and storage providers to access the full value of their service could
help increase the supply of these services;
High transaction costs - bilateral contracts can attract significant transaction costs,
including information requirements for the sellers of flexibility services. These costs may
be reduced by establishing a market; and
Low customer awareness of the potential to sell DSR - customer awareness of the
potential to sell DSR is low. A more transparent market and stronger financial signals
should help increase this awareness.
To reduce these barriers, a coordinated approach across the power industry for the
supply and demand of flexibility services is required to ensure that the potential of this
resource is maximised for the low-carbon economy.
The capacity market planned under the UK Government's Electricity Market Reform
Programme will allow participation of DSR, although its precise design and the manner
by which it will incorporate DSR is not yet known. The interaction of the GBFM with the
emerging design of the capacity market will be a key consideration of the Project.
Method type commercial
A market platform will be developed to enable providers and purchasers to actively
trade DSR and other services, which provide flexibility in a transparent manner.
The requirements from the TSO, DNOs and suppliers will be assessed and formulated
into DSR products. The Project will assess how the DSR resources can be coordinated to
increase efficient use.
The DSR providers will comprise large I&C customers directly participating in the GBFM
with smaller customers participating via third party intermediaries (specialist
aggregators and suppliers). The participation of network storage delivered by the CLNR
project and operated by Northern Powergrid will also be investigated.
The Project will assess the capabilities of these customer groups to deliver DSR and
other flexibility services.
Method(s) continued
Funding commentary
Provide a commentary on the accuracy of your funding estimate. If the Project has phases, please identify the approximate
cost of each phase
Specific Requirements (please tick which of the specific requirements this project fulfils)
A specific piece of new (i.e. unproven in GB) equipment (including control and communications
systems and software) that has a Direct Impact on the Distribution System)
A novel arrangement or application of existing Distribution System equipment (including control and
communications systems software)
A novel operational practice directly related to the operation of the Distribution System
A novel commercial arrangement
Method type technical
The development of new arrangements to enable the electrical energy storage devices
purchased and connected to the distribution network as part of the CLNR project will be
investigated to enable participation in the GBFM.
The potential arrangements for the use of the electrical energy storage devices to
participate in the GBFM will be investigated. The electrical energy storage devices would
potentially bid load reduction and load increases into the GBFM. If legal constraints
allow, the services would be sold to all purchasers in the GBFM but within a framework
that protected the DNO requirements. If the electrical energy storage devices are
unable to participate directly in the market then understanding how a DNO may utilise
the electrical energy storage devices alongside participation in the GBFM will be
considered.
In addition, the CLNR project is developing aggregated groups of domestic and small
business customers to deliver DSR through systems under the control of British Gas.
The technical solutions will be developed further to enable consumer groups to
participate in the GBFM.
The £28m total project cost is allocated to five segments over a four-year period;
Specialist industry resource £6m
IT costs £3m
Consultancy support £4m
Customer subsidies and technology £6m
CLNR contribution £9m
The cost forecast will continue to be refined as the full submission is constructed. A key
item will be the estimate for IT costs. A request for information (RFI) process will be run
during the summer of 2012 to ensure the final cost forecast includes a robust estimate
for this aspect of the Project.
The total Project cost is £28m, with the LCN Fund funding at £17m and Northern
Powergrid committing £2m (10% compulsory contribution).
Accelerates the development of a low carbon energy sector & has the potential to
deliver net financial benefits to existing and/or future customers. Merged evaluation
criteria, as set out in decision letter.
The DNO must demonstrate that the Solution makes a contribution to the Carbon Plan and has the potential to deliver
financial benefits.
Has a Direct Impact on the operation of the distribution network
A Second Tier Project must demonstrate that the Method(s) being trialled will have a Direct Impact (as defined in v.4 of the
Governance Document) on the operation of a DNO's Distribution System.
Generate knowledge that can be shared amongst all network operators
The DNO must explain the learning which it expects the Method(s) it is trialling to deliver. The DNO must demonstrate that it
has a robust methodology in place to capture the learning from the Trial(s).
At present network planning, investment and maintenance issues are resolved by
engineering solutions. DSR can deliver benefits to the network primarily as a tool to
defer or avoid network reinforcement.
The CLNR project is assessing the capabilities of different consumer groups' ability to
deliver DSR. This Project will build on the learning outcomes from the CLNR project, and
help DNOs access DSR efficiently. The benefits for the distribution system of the GBFM
are:
- the opportunity for further DNO learning on the distribution business cost savings that
can be delivered through its use of DSR;
- more efficient use of the DSR resource as the power industry presents a coordinated
approach to DSR providers;
- the delivery of DSR at lower costs than can be achieved from a stand-alone
perspective for the DNOs;
- the consolidation of industry requirements on one platform will also encourage
increased consumer participation and the potential of increased revenues versus the
current fragmented approach; and
- the lower operating costs associated with interfacing with an existing market with
common frameworks versus the construction and negotiation of bilateral agreements for
each individual site on the network.
The electrical energy storage devices commissioned during the CLNR trials will be
incorporated into the GBFM, subject to legal constraints. The new revenue streams may
change the business case for installing energy storage by DNOs. It will also help DNOs
understand how they can get the best value from storage facilities given the legal
restrictions on their use.
The Project aims to gain a better understanding of what flexibility services customers
are willing to sell, and what industry wishes to buy, to improve the design of DSR
products and related flexible services.
Key learning outputs include:
- improved coordination of DSR trading to reduce transaction costs and improved
opportunities to maximise the industry value from the use of DSR;
- an increase in DNOs' understanding of the potential benefits of DSR in delivering
cost-savings for the distribution business; and
- understanding of the practical implications of trading through the development of an
e-platform and practical trials.
The benefits delivered by the Project all have the potential to deliver the same benefits
on a national scale.
Please tick if the project conforms to the default IPR arrangements set out in
the LCN Fund Governance Document?
If the DNO wishes to deviate from the default requirement for IPR then it must demonstrate how the learning will be
disseminated to other DNOs.
Focus on Methods that are at the trialling stage
Demonstrate why you have not previously used this Solution (including where the Solution involves commercial
arrangements) and why LCN funding is required to undertake it. This must include why you would not run the trial as part of
your normal course of business and why the Solution is not R&D.
We intend to apply the guidance of the Low Carbon Networks (LCN) Fund Governance
document, and make available freely all the information other GB DNOs will need to
implement similar schemes.
Northern Powergrid would not develop this Project as business as usual for the following
reasons:
1) The Project requires cross-party participation and is beyond the scope of any one
industry participant on a stand-alone basis.
2) The set-up costs can only be recovered by a combination of industry participants
across the value chain.
3) The Project creates significant potential for the power industry. Any IPR should be
owned for the benefit of the power industry.
4) DSR is at a more advanced level of maturity than pure research and development.
Project Partners and external resourcing/funding
The DNO should provide details of any Project Partners who will be actively involved in the Project and are prepared to devote
time, resources and/or funding to the Project. If the DNO has not identified any specific Project Partners, it should provide
details of the type of Project Partners it wishes to attract to the Project.
Derogations or exemptions
The DNO should outline if they consider that the Project will require any derogations, exemptions or changes to the regulatory
arrangements.
Northern Powergrid is joined on this Project by seven strategic partners each bringing a
distinct set of skills and resources to the consortium. Each partner along with the
external collaborators will represent each component of the GBFM.
National Grid: Owns the electricity transmission network in England and Wales and
operates the entire transmission system throughout Great Britain.
British Gas: Largest energy supplier in the UK and will leverage the expertise
developed during the CLNR project.
Centrica Energy: Energy trading and optimisation expertise.
Elexon: Implemented and developed one of Great Britain's largest energy industry
codes, and continues to handle its day-to-day governance.
Durham University: Internationally recognised leading researchers providing
engineering and social science support to the project.
EA Technology: Extensive knowledge of electricity, utilities, infrastructure and
associated sectors and will provide engineering input to the project.
Frontier Economics: Blends economics with innovative thinking, hard analysis and
common sense.
In addition, the input from external collaborators is an important element of the project.
Specific packages of work will involve a broad range of other parties potentially
including aggregators, large I&C customers and technology providers.
The Project may require a number of derogations, exemptions or changes to the
regulatory arrangements. The derogations required will be determined by the analysis
undertaken by the Project. The areas that could be impacted include:
- the interactions with the overall electricity market structure especially given the
current market reform process;
- balancing and settlement code (BSC);
- existing industry DSR frameworks e.g. Short Term Operating Reserve; and
- issues of ownership associated with a DNO-owned energy storage asset participating
in the power markets.
Customer impact
The DNO should outline any planned interaction with Customers or Customer’s premises as part of the Project, and any other
direct customer impact (such as amended contractual or charging arrangements, or supply interruptions).
Please use the following section to add any further detail you feel may support your
submission.
All customer involvement will be voluntary and the Project will follow the same
principles as those developed for the CLNR project.
Suppliers
British Gas is developing aggregated customers groups to trial a number of DSR
propositions with customers. The Project will build on these trials to create aggregated
groups that can deliver tangible resources to the power industry. The GBFM will require
direct-control capabilities.
Aggregators and large I&C customers
There are existing industry arrangements for I&C customers to provide DSR. The
Project will seek to engage with existing DSR providers and to facilitate the entry of new
DSR providers to the market.
Contractual arrangements with customers will comprise a mixture of relationships either
direct with the GBFM or via intermediaries i.e. aggregators and suppliers.
The Project will not place customers at risk from new technologies or new operating
frameworks.
Contact name
Contact Address
E-mail
Direct telephone line
Job title
Stuart Brown
98 Aketon Road
Castleford
WF10 5DS
Stuart.Brown@northernpowergrid.com
07885 711 424
Commercial Manager
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