The transition to a flexible electricity market
The transition to a flexible electricity market is rightly seen as fundamental to the decarbonisation of the sector at least cost. The ability to provide a quick response to the intermittent supply provided by renewable sources is a necessity to their more wide-spread deployment.
This flexibility will come from a variety of sources; fast-reacting thermal plants, battery storage and increasingly, demand side response (DSR). This DSR comes from two primary sources; industrial turn-down, for example of commercial refrigeration units, or behind the meter generation.
These sources of flexibility are active participants in the Capacity Market auctions, where they made up a significant portion of new-build capacity, reflecting 500MW of new batteries and nearly 1.5GW of demand side response in the December auction. In addition to the annual Capacity Market auctions which normally take place before Christmas, there is a transitional auction solely for DSR technologies which takes place in the spring. This year the auction took place on the 22 March with just over 372MW of de-rated capacity entering the auction. Once it had closed, the auction had cleared just over 312MW of capacity at a clearing price of £45/kW/year.
The transitional auction provides a clear price signal and a resultant sense of security and reliability to those organisations looking to invest in the UK’s energy infrastructure. Whilst eventually it will be rolled into the main Capacity Market auction, it provides the emergent DSR sector with not only a clear price signal, but also a clear indication of the support that the DSR sector has from the wider energy industry and the UK Government.