What is the Demand Flexibility Service?
- The Demand Flexibility Service (DFS) provides a way for providers (energy suppliers and app-based providers) to incentivise customers to voluntarily shift their electricity consumption away from periods where there is high demand on the electricity grid.
- It was developed last year by the electricity system operator, National Grid Electricity System Operator (NGESO), during the sudden rise in international gas prices. The service intends to reduce risks to the electricity grid and reduce costs for consumers.
- Last year, 1.6 million households and businesses supported the service by shifting demand, saving over 3,300MWh of electricity – enough to power ~10 million homes across GB.
- This year, the service could be three-times larger (+1GW) as changes have made it simpler to roll out to more domestic customers, and for industrial and commercial customers to use.
- This service is a foretaste of a Net Zero future in which demand-side measures are expected to play a far greater role in our energy system.
How can customers take part?
- Events could be either one of twelve one-hour tests or a slightly longer ‘live’ event (when the service has been called to support the grid).
- If you live in a household with a smart meter or a business site with half-hourly metering, you’ll be able to sign up for the service either with your retail energy supplier or another provider.
- NGESO has a list of registered providers on their webpage, updated regularly from the start of the service.
- When you sign up, you will need to authorise your provider to access your smart meter (so they can read your data every half-hour for the duration of the service).
- Before a DFS event, your provider will contact you to give you the details and ask you if you would like to opt-in for the event.
- Last year, most events were held in the evening peak, for one hour between 4-8 pm, with customers notified by their provider the day before.
- This year, customers will either be notified the day before or in the morning of the event.
- Events could be either one of twelve one-hour tests or a slightly longer ‘live’ event when the service has been called to support the grid.
What will customers get paid for?
- To receive an incentive (money off your energy bill, voucher, etc), from your provider, you will need to reduce your energy use compared with your normal usage during the DFS events. It’s a market-based product so different providers will offer different incentives and may have different requirements, such as a minimum reduction in energy use.
- Households could choose to run power-hungry appliances such as washing machines, clothes dryers, dishwashers, electric showers, or immersion heaters before or after the ‘event’. Or could reduce energy usage for example using a microwave instead of the oven.
- A kWh of electricity roughly equates to running a washing machine or dishwasher, putting the oven on for 30 minutes, or using an electric shower. Some power-hungry appliances (such as dryers) will use more.
- Efficient light bulbs and small appliances such as modern televisions consume very little electricity so it is unlikely to be worth adapting usage of these during an ‘event’.
- Customers can change providers to try different offers but can only be signed up to one provider at a time. Changes this year mean that if you sign up for a second DFS provider, your agreement with your original provider will be automatically cancelled.
- DFS is voluntary and there are no penalties for not participating. If you opt-in to an event but then change your mind, you just pay for your electricity usage as usual.
Overview of the service
- This year, the core service will run from 30th October 2023 to the 31st March 2024.
- It will consist of twelve one-hour ‘test’ events (plus live events if necessary).
- The system operator will pay providers overall £3,000/MWh of ‘turn down’ for the first six one-hour tests. These are likely to happen before 31st December.
- The price paid for the final six tests will depend on the available volume in the market.
- If the combined volume available in the market exceeds 1.25GW, then the auctions for the final six tests will be fully competitive. This price discovery will help NGESO understand customer behaviour at different price points.
The significance of the service: world-first innovation from the UK
- DFS was introduced by NGESO last winter, in response to the gas crisis following Russia’s illegal invasion of Ukraine.
- Last winter, the service was used twice for live events to support the grid (in January 2023).
- DFS was based on a ‘turn down’ pilot that NGESO ran alongside Octopus Energy and 100,000 households in early 2022.
- Energy UK supported NGESO with the development of the service by coordinating industry engagement into the design and then supporting the implementation of the service.
- As well as providing a buffer to help avoid an emergency response, domestic flexibility services like DFS cut emissions by displacing fossil-fuel generation.
- Whilst only customers with smart meters can take part, these approaches benefit all users by reducing balancing costs (which we all pay for via the ‘network costs’ part of our bill).
- DFS has huge potential to help manage the system and bring down costs in the long term; the annual bill to balance the grid has increased steeply in recent years and voluntary ‘turn down’ during peak periods could reduce this bill and reward customers.
You can find out more about the service and why the ESO National Grid has developed it at its DFS webpage here.
