Impact of flexibility services across Utilities value chain and energy transition

Introduction

The utility industry is aiming to end coal fueled and abated gas fired energy generation. This is where energy transition initiatives are taking center stage. This transition depends on several low carbon technology augmentation. This brings risk to power systems.  The following table lists the risk and the reason behind those.

 Risk infiltrates due to Inclusion of new devices, technology and operations poses in traditional grid network. Hence resilience and operational efficiency of the grid become paramount. These attract capital investment in most cases. But for many organizations may not be in a position to make those hefty investments due to some other constraints in business and budget. Here flexibility comes into the picture. Flexibility means continuously adjusting operating points of power system and resisting unexpected changes in operating conditions. Flexibility resources located at generation or demand side can react to the system change. Common flexibility resources for both supply and demand sides are Demand Optimization, Wind Power Plant, Virtual Power Plan, Electric Vehicle, Storage etc.

Flexibility services across value chain

Transmission Service Operator (TSO) also known as Transco are the owner and or operator of high voltage transmission grid. They also act as generation dispatch center. They provide open access to transmission system, monitor and control system operations to ensure a moment-by-moment energy balance, manage congestion, schedule generation dispatch, acquire ancillary services like operating reserves and voltage support, administer transmission tariffs and plans or approves requests for maintenance of transmission and generation facilities. Flexibility resources of TSO can be segregated into two areas, demand side and supply side. Flexibility resource providers are mainly - (a) large scale provider/aggregator (b) aggregated small scale customer. The following table shows the different flex services applicable for TSOs.

Moreover, cooperation among TSOs can lead to (a) enhanced flexibility in transmission network (b) higher penetration of renewables. Flexibility resources in transmission network can be connected to low, medium and high voltage networks.

Distribution System Operators (DSO) also known as Wireco, forecast, plan, schedule and risk management for distribution system. DSOs also take care of feeder congestion management, network voltage control and system maintenance. DSOs leverage flexibility services in the scenarios like transformer and cable upgrade, congestion management, changing topology of grid and network reconfiguration etc. The flex services used by DSOs are given in following table –

DSOs capture flexibility capacity view from metering devices and prosumers. They get the flex services through rule or grid code or through bilateral contract with flex resource aggregator and/or broker or directly with end-users.

Customers or prosumers respond to the flexibility requirements by (a) reshaping their demand based on price signals (b) prosumers provide competitive flex services to local (DSO) and system wide (TSO) through renewable sources and batteries (c) meeting the demand through own generation (d) controlling or scheduling EV charging time (f) through home energy management system (HEMS) which saves energy through optimal scheduling of controllable appliances and (g) AMI and automatic home system (AHS).

Flexibility Trading

Flexibility Service Providers sell different flex products to fulfill the requirements. Four standardized product categories have been developed for the FSPs to participate in trading. The following table lists those products.

Based on the capacity view and forecast, network operators publish flexibility requirement for a particular zone and timeframe (time of the day, day of the year etc.). Aggregators estimate flexibility demands and float offers at different prices. Network operators like DSO engage with FSPs through bilateral contracts. They impose grid code on flex resources for connecting into the network. The reference architecture of flexibility trading framework is depicted in adjacent diagram. But the trading platform has some inherent challenges across its life cycle. The challenges that require standardization and improvement are (a) challenges during bidding process which involves complex pre-qualification of FSPs and complexity of their assets (b) inconsistent framework for contract negotiation and signing (c) short window between procurement of flexibility services and service delivery restricting FSPs to recruit new assets or capacity. The trading markets also face constraint for its locational and temporal nature meaning when the network reinforcement cannot be deferred with flexibility services augmentation, the market may completely disappear, regulatory restrictions for offering and or service delivery of specific flexibility services in specific regions, the size and magnitude of the market in comparison to wholesale of ancillary service market.

Exponential increase in low carbon technologies create more low carbon flexibility services. These services are going to dictate a major part of the energy transition and will be in forefront of the net-zero goal in cost-effective way. According to the “Carbon Trust” and “Imperial College London”, flexible energy services, system and solutions are estimated to be worth in the order of £16.7bn by 2050. Market participants in collaboration with regulators are working towards improvement of the framework and standardization and alignment of flexibility products, dispatch mechanism, settlement parameters, seamless process for tender negotiation and deliver, eliminating entry barriers of FSPs. Many countries are employing market facilitator body like Elexon in the UK.

Appendix

FRP – Flexibility Ramping Product; addresses uncertainties in net load in future dispatch; provides both way ramping - FRD (flexible ramping downward), FRU (flexible ramping upward); proposed to be purchased in real time market

Ancillary Services - Ancillary services capture uncertainties due to forecast error; services like operating reserve - react to sudden loss of supply, also known as contingency reserve; only provides upward regulation

Prosumer – Customer who consumes and produces electricity

DSO – Distribution Service Operator; DNO – Distribution Network Operator

TSO – Transmission Service Operator

DR – Distributed Resources

FSP – Flexibility Service Operator

FRP – Flexibility Ramping Product

UK – United Kingdom

AHS - Automatic Home System

BES – Battery Energy Storage

EV – Electric Vehicle

DLR - Dynamic Line Rating

PV – Photo-voltaic cell