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EXECUTIVE SUMMARY 1

1. INTRODUCTION 7

2. MODELLING THE NEED FOR FLEXIBILITY 15

4. DEVELOPING CAPABILITY TO MANAGE GREATER COMPLEXITY IN

5. ENSURING INNOVATION SUPPORT 49

7. SUMMARY OF THE FLEXIBILITY ROADMAP AND INDICATOR

ANNEX A – SYSTEM EVOLUTION PATHWAYS TO MEET THE CARBON

From the analysis and stakeholder engagement undertaken as part of this study, we have

identified four key requirements of a future GB electricity system.

Table 1 presents the recommended high priority actions included in the flexibility

roadmap. Lower priority actions, together with a detailed description of the rationale for

the proposed actions and a high-level overview of the relevant ongoing activities is

provided in the main report (Chapter 3 to Chapter 6).

locations, GB System Operator (i.e. National Grid) employs a range of measures (i.e.

In addition to the above mentioned main flexibility services, a range of other services are

also used by the System Operator which are defined in Annex B.

A number of technologies are capable of providing the various types of flexibility services

required in the system. Table 2 summarises technologies which are currently providing

recent EFR auctions because bids were out of merit.

It is also worth noting that in some cases, although a technology is providing a given

service, its market share for the service could be very small. For example, wind

generation provided only 0.03% of total frequency response (FR) in 2015. It could

potentially provide significant volumes of additional FR in the form of synthetic inertia if

appropriate regulatory requirements or incentives were in place and this was considered

efficient.

Therefore, there is a need for: (a) innovation support to improve technical characteristics

of such technologies; and (b) improvements in existing flexibility markets, including

procurement processes, in order to enable and facilitate access of such technologies in

report is Pöyry Management Consulting.

System flexibility will be the key enabler for an efficient transformation to the future smart

electricity system. There is a general acknowledgement that a low-carbon power sector

will need greater system flexibility to maintain stable and secure operation because of the

nature of the generation technologies. However, the scale of growth and the mix of

flexibility services required will depend on the way in which the decarbonisation of the

power sector is achieved.

four alternative future scenarios of low-carbon generation.

from as wide a set of flexibility resource as possible, and not to be unduly restrictive given

the various uncertainties around new technologies. In addition, they have emphasised the

intermittent generation, or less flexible nuclear / CCS plants, or a combination of these low

carbon sources. This generation setup drives the need for significant additional flexibility

over shorter time scales (i.e. between few hours ahead to the real-time) necessary to

maintain safe and efficient operation of the system as described in the following sections.

Figure 6 shows an illustrative

demand minus intermittent generation) in a single winter week in 2030. A key observation

is that the net demand turns more volatile and often peakier with shorter duration of peak

demand in the future than today. This leads to a need for a very steep ramping

requirement – i.e. increase as well as decrease in generation or demand from

conventional plants need to be synchronised operating at least at the minimum stable

Based on the modelling of scenarios analysed in this study, it is estimated that there will

be an increase of up to 100% in the maximum ramping requirements over a one-hour time

Increased share of variable intermittent generation in the system also increases the

Frequency response (FR) refers to the automatic provision of increased generation or

In the following chapters, we outline in more detail the importance of each requirement,

the current challenges to realising the objective and the specific actions that will help to

realise the objective. A high-level overview of the ongoing activities relevant to the

proposed actions, where information is available in the public domain, is also described.

The shift to a low-carbon electricity system will require major investment, so it is important

available to all technologies, then the cost to consumers will be higher than it needs to be.

In theory, there are multiple potential revenue streams available to the market players

(both demand and supply sources). These revenues reflect different ‘products’ or

of revenue relate to:

This is particularly important for the emerging technologies and services around flexibility

provision as, in contrast to conventional generation investment, a higher proportion of their

value will be dependent on ancillary service and network support revenue streams.

For example, Imperial College has modelled the business case of battery storage facilities

which can provide a range of system services across multiple revenue streams while

taking account of the physical interactions between the different system support services.

Figure 14 shows the results for a 6MW battery storage connected in the HV distribution

The following sections expand on these observations and identify appropriate actions to

address current challenges.

In order to ensure future investments in the power system take account of the flexibility

requirements of the system, all types of flexibility services need to be valued. Under the

Even where revenue streams exist, flexibility providers do not always have access to all of

the services that they can technically offer. This means they may not be able to be

rewarded for the full value they offer to the system, leading either to insufficient flexibility

being available to the system or, more likely, to a higher cost of delivering flexibility due to

inefficient investment and operational decisions.

significant growth in intermittent generation, variation in supply is becoming more

pronounced. At the same, the nature of demand variability is changing as new sources of

depending on the system conditions. This informs that there is a significant uncertainty in

services. Therefore, these should be procuring over shorter timeframes taking account of

than 140 £/h/ MW-sec

With greater variability in system conditions in the future, there will be a corresponding

variability in the value of the associated flexibility services, meaning that more dynamic

pricing (e.g. half hourly prices), reflecting more accurately the value to the system at

different times, will become more important for effective investment and system operation

decisions.

Ofgem has recently announced its plans and a timetable

hourly settlement to sharpen short-term signals in order to better reflect the cost to the

system and enabling smart technologies to realise more value and suppliers to develop

innovative dynamic retail offerings.

parts of the network (which drive losses and the network investment needs) are becoming

increasingly disconnected from overall system peak demand. Therefore, the underlying

objective of cost-reflective charges cannot easily be fulfilled without considering both time

and location, reflecting the actual flows on the network at the time.

The current allocation of network charges has been frequently challenged

compensating some network users and/or penalising others affecting both consumers and

flexibility investors. Typical issues include:

Imperial’s analysis of the impact of a fully cost-reflective Distribution Use of System

(DUoS) charges, as shown in Figure 19, indicates that on the average flexible consumers

would have a 4 times lower share of DUoS charges in their annual electricity bills

there is a concern that the burden of system costs could be spread over a declining

residual demand. Therefore, Ofgem has been proposing several changes in the current

network charging arrangements, based on the argument that the current charges have the

potential of distorting the investment decisions due to the additional burden of costs to the

residual generators in order to compensate the cost avoidance (i.e. benefits) of the

embedded generation. Some of these proposals include:

charging structure and to encourage investment in flexible resource such as storage and

DSR (e.g. removal of double network charging for storage facilities).

https://www.ofgem.gov.uk/system/files/docs/2017/03/minded_to_decision_and_draft_impact_assessment_of_industrys_proposals.pdf

We have also identified issues with the allocation of other system integration costs /

charges of some technologies. For example:

Currently, a wide range of flexibility system balancing services is procured by the system

operator. Table 3 shows the technical requirements and the type of contract for