Centrica calls for Local Energy Market momentum to be built on

Centrica called for the momentum created by its successful Cornwall Local Energy Market (LEM) trial to be built on, or risk losing an important advantage in 2050 net zero efforts.

Following the trial’s conclusion in November 2020, it published a report, The future of flexibility: How local energy markets can support the UK’s net zero energy challenge, in which it summarised the £16.7mn project and its key learnings. Centrica’s aim was to create a market-based platform for flexibility and then show how it may help to manage the network, with Cornwall chosen due to it already experiencing the challenges of managing a distribution network with high levels of renewable energy.

This involved 100 homes across the county having smart batteries and monitoring equipment installed, as well as solar panels if they were not already in place – the case for 54 homes – turning them into virtual power plants. It also saw combined heat and power, solar, wind, storage batteries and device-level energy monitoring installed in 87 businesses, while energy surveys and training were conducted with a further 26 to help them unlock opportunities to cut energy costs.

An online virtual energy marketplace was then created with project partners N-Side, the local DNO, Western Power Distribution, and National Grid ESO. This allowed homes and businesses to adjust their energy demand or generation in response to the needs for the grid and be paid. It marked the first time both the national system operator and local network operator could buy flexibility at the same time. A total of 310MWh of power was successfully traded, leading to greenhouse gas savings of almost 10,000 tonnes per year.

Centrica said the trial had shown local flexibility trading works and can be coordinated with the national system, with contracts at the national level not threatening the local network nor leading to power cuts. It further set out that it had shown DNOs can use a “flexibility first” approach to managing network constraints, rather than shutting off renewable assets; the independent managing of the process had ensured it was transparent, neutral and that network-based solutions are not favoured over flexibility services; and that by automating the decision making and selection of available flexibility, it enabled close-to-real-time flexibility trading which allowed renewables and a wider range of technologies to participate.

However, it noted further regulation is required to define how local markets will interact with existing wholesale and national markets.

Considering the trial’s success, it set out a series of key actions for government, the industry and the regulator to continue its momentum, encourage flexibility and help to create a lower carbon system. This included a call for the Energy White Paper to promote grid flexibility, highlighting it as an “ideal opportunity” to identify it as a vital component in the energy transition, and look to introduce flexibility markets to the energy system by 2023.

It also expressed hope the report could serve as a rallying cry for the industry to adopt independent local flexibility markets, as well as for government and Ofgem to ensure local energy markets are well established before the next funding settlement for DNOs in 2023; called for government, the regulator and DNOs to adopt a “flexibility first” approach; for flexibility procurement to be moved closer to real time; and for flexibility markets to be independent. On the latter, it explained that for flexibility trading to work properly, providers must be confident procurement by DNOs is objective and that network-based solutions are not being favoured over flexibility services.