Industry report finds Britain lagging behind for electricity market flexibility

Britain has been ranked eighth out of nine countries in northern Europe in relation to attracting and facilitating investment in electricity system flexibility, according to an industry report.

The Energy Transition Readiness Index, published by the Association for Renewable Energy & Clean Technology (REA), examined the current status of electricity flexibility markets in nine countries with the Netherlands scoring the highest. Finland, Sweden, Denmark and Ireland also scored well. These top-performing countries were found to be more advanced in exploiting new distributed flexibility resources, whereas those ranked weaker, such as Great Britain, were found to be slower.

The markets were examined against an assessment framework made up of three main transition factors: open market access for flexibility services; socio-political support for the energy transition; and their ability to exploit new technologies and business models. Each factor had a series of assessment areas, including whether regulation enables fair access for all providers, if flexibility needs are recognised and electric vehicle infrastructure and deployment is enabled. The markets were then scored on a scale of 1-5 for each of these.

The best performing countries were those that had flexibility markets allowing for fair, transparent and easy access to all participants, addressing conflicts of interest along with other barriers. They were also ones providing market certainty and sufficient visibility on returns to support capital investments by flexibility providers, while also had the backing of clear policy direction and exploitation of available technologies. All countries were found to be “relatively weak” with regards to strategies for developing electric vehicle (EV) infrastructure and markets with vehicle to grid flexibility services.

Great Britain scored an average of 3.2 out of 5. In contrast, the strongest performing nation, the Netherlands, scored 4.1. Despite DNOs in the country mapping out how they intend to enable a smarter and more flexible energy system, the report noted that the market was highly fragmented and complex with specific products essentially targeted to specific technologies. Even though major improvements were noted as being planned, including charging, access and product reforms, the report stressed implementation is slow which has been driving market uncertainty.

Britain was found to fare better on socio-economic factors with there being a strong political commitment to decarbonisation and the energy transition. The report noted the 2050 net zero target as an example. Furthermore, it found there to be evidence of good public support, though added the country’s regulatory framework will have to be further aligned with the new target and to deliver the associated transition and flexibility changes and objectives.

With regards to technology factors, the report found technical and operational constraints in several regions in the grid network risked delaying access by distributed energy resources. Progress was also deemed as being slow in providing EV charging signals and bidirectional charging to enable EVs to participate in flexibility markets, with delays to the deployment of technologies such as smart meters and open data standards further risking constraining flexibility markets.

The regulatory uncertainty, lack of visibility on returns and technical challenges connecting to the network all cited as delaying investment in flexibility services could risk delaying Britain’s clean energy transition altogether, the report warned.

Dr Nina Skorupska, Chief Executive of the REA, said: “If Britain becomes a flexibility pioneer, then a whole world of markets for exporting our products and services opens up. Whilst this index shows we’re lagging behind, there’s still time to bounce back. That’s why the REA is calling for the next government to address the barriers to flexibility by delivering wholesale systems change and reform Ofgem as a priority.”