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Publications / Blogs

Don’t miss out on a flexible friend this winter

Peering through the window at leaden skies and heavy rainfall in recent weeks, you could be forgiven for wondering if winter was already here. It isn’t of course but while few people look forward to its arrival, making preparations and planning ahead of winter is essential for an industry whose product becomes even more important over the colder months.

Last winter was a very difficult one for millions of our customers – bills rocketed driven by wholesale gas costs reaching levels nobody had ever seen before and the same factors, most notably the fallout from Russia’s invasion of Ukraine, behind these unprecedented price rises also led to fears about the country having sufficient supply to cope with the season’s demand peaks.

In the end, thankfully the worst predictions didn’t materialise, a mild winter and contingency plans – which we will return to below – combining to avoid the need for any of the emergency measures that had been touted. As National Grid ESO’s (NGESO) Early View of Winter for 2023/24 illustrates, prospects for the coming months look relatively reassuring – but that doesn’t remove the need for back-up plans. We are far from out of the woods when it comes to volatility and uncertainty affecting the energy market.

And just as it’s prudent to plan ahead, it’s also wise when doing so to learn the lessons from last winter. Amidst a very challenging few months, one ray of sunshine was the success of the Demand Flexibility Service (DFS) – the first time that aggregated domestic demand response has been used to balance any national grid, as 1.6 million households and businesses signed up to shift some of their energy use outside peak hours, helping out when supply margins looked tight and getting paid for the privilege.    

As any TV executive will tell you, every new season needs a breakout star and it’s fair to say that the DFS exceeded expectations. For a few years now, those of us who work in the sector have been talking about the potential for greater flexibility and time-of-use tariffs to benefit customers and the wider energy system, saving money by shifting usage and reducing overall balancing costs.

While it’s one thing to talk about potential, it’s quite another to deliver on it. Given the aforementioned concern over supply margins, last winter National Grid ESO moved to complement back-up from coal generation with the inaugural DFS. Necessity arguably being the mother of execution rather than invention here. As an untried service, there were understandably some questions. Could the response be accurately forecast? Could it balance the grid as effectively as additional supply? Would customers really shift demand in return for the incentives on offer?

The DFS answered all these questions with flying colours – reducing energy use by 3.3GWH at a cost (£11m) that compared extremely favourably with those required to keep the accompanying coal back-up on standby (£400-£395m). Not only that but we had a practical, successful and relatable example of what a modern, flexible energy system can mean for the average customer.

As you’d expect, National Grid ESO is looking at re-running the service this winter and with Energy UK chairing a working group on the DFS, the message from our members is loud and clear: that NGESO can make the service even bigger and better, especially with the addition of greater participation from industrial and commercial customers. 

However, if we are to match that ambition and make the most of a cheaper and cleaner alternative, suppliers need clarity now on the expectations around the service, like the number of tests and the prices that will be paid, so that they can put together a business case and additionally have the time to automate their services. While it is NGESO that commissions the service, they need Ofgem and DESNEZ to throw their weight behind this.

DFS can be the country’s flexible friend this winter, helping balance the grid in a cheaper and cleaner fashion than the alternatives and in a way that epitomises the future of the energy system and consumer interactions with energy. If we leave finalising the details until the autumn, there will only be enough time to run something akin to a repeat pilot.

It would be a huge shame if we waste this opportunity by waiting until winter to deal with winter’s consequences.