Posted on: 16/10/2020
This year, unprecedented conditions have given us a glimpse at the future energy system, which necessitates energy market participants getting familiar with complex energy scenarios and managing short-term fluctuations in supply and demand. VP Sales & Marketing, James Graham, explores what we’ve been doing to adjust to this 'new normal' and considers what’s next.
Reflecting on my discussion with Henning Bottger and James Constable from Baringa in their first 'Energy Innovators' podcast last week, it's clear that there's a complex and challenging energy landscape evolving, sped on by the COVID-19 pandemic.
In the podcast, we concluded that the impacts of COVID-19 have accelerated a market shift. Not only was there a need to manage unforeseen demand destruction in the initial lockdown period – when energy demand dropped ~20% overnight – but there's been peaks in intermittent renewable generation to manage. Meanwhile, we’ve also seen ongoing volatility in Balancing Services Use of System (BSUoS) charges impacting customers' bills and an increasing push for both flexibility services and net-zero propositions.
How have we responded to these challenges? And what’s next?
Demand destruction: To overcome demand destruction, we’ve been actively working with our I&C customers and their consultants to reforecast and understand changes in their energy use brought about by the COVID-19 pandemic. This was important during the initial UK-lockdown, but continues to be just as important as subsequent local lockdowns are being introduced based on the Government's new tier system.
As we look to the future, demand will continue to shift beyond the impacts of COVID-19. Existing peak demand patterns will change as more electric vehicles (EVs) take to the roads with vehicle-to-grid (V2G) capabilities, and largescale storage assets are commissioned. We’ll have greater ability to flatten the demand curve and be smart about when we consume electricity.
Peaks in intermittent renewable generation: We've been onboarding generation customers to the National Grid's Optional Downward Flexibility Management (ODFM) service over the summer months. This service sought to manage COVID-19 situations where intermittent renewable generation (e.g. solar and wind) was high, but energy demand was low, by allowing National Grid to curtail renewable outputs. This was especially helpful over the May bank holiday weekends when there were real discrepancies between renewable generation on the system and demand for energy.
National Grid are now turning their attention to creating an enduring downward flexibility service, which will continue to support their efforts to balance generation and demand in real-time. Current and future flexibility services will enable generators to access additional revenue streams, which could see increased financial backing for new projects deemed viable to build and operate in the post-subsidy era.
Digitalisation becomes evermore important
The impacts of COVID-19 have been a stark reminder that we have to be effective at interrogating data, managing risk, balancing portfolios and overall cost management.
Our ability to understand the big picture and respond quickly to short-term fluctuations will be driven by near-time and real-time views of generation and supply portfolios. Those that invest in technology to handle big data successfully, will be able to better manage generation assets, leverage flexibility services and support smart businesses in achieving their net-zero ambitions.
Making long-term green commitments feasible
Despite the challenges faced this year, we've also been having proactive conversations with consumers about their journey to net-zero. There's optimism about the future and businesses are considering long-term commitments such as Corporate PPAs that align with their ambitions and sustainability goals. In the background, we're busy working on making every effort to share the risk involved in such long-term contracts, which will make it easier for corporates to support independent renewable generators.
For the future, to get momentum and accelerate the development of added renewable capacity, we have to find ways to engage smaller consumers and connect this segment to the renewable proposition too. It’s clear that they to want to demonstrate their commitment to net-zero and be a part of the UK’s efforts to decarbonise.
By helping to build an understanding of renewable products, including Corporate PPAs, we believe businesses will be better able to select the energy procurement options that are right for them.
To listen to the full podcast and hear us discussing these topics in more detail, tune in via our Info Hub.