The energy transition is revolutionising the energy landscape, as our system balances more renewable generation and increasing demand from the electrification of heat and transport. By becoming ‘good grid citizens’ more engaged with and mindful of their energy usage, businesses can optimise their electricity demand to provide flexibility to the grid.

In doing so they can take advantage of available revenue and cost-saving opportunities, creating value from their electricity contract, all while helping to reduce the need for fossil fuel generation.

There are three types of market revenue and cost-saving streams that businesses can access through flexibility optimisation:

1. Commodity trading

Commodity trading is the strategic buying and selling of wholesale electricity in the day-ahead and within-day markets.

This strategy often involves maximising the value of on-site technologies and other assets, such as Battery Energy Storage Systems (BESS) or Combined Heat and Power (CHP), by shifting operations (‘load-shifting’) using technologies or strategic energy usage, based on market conditions. In doing so, consumers can generate revenue or reduce electricity costs by taking advantage of price opportunities – buying and storing energy when it is cheaper, and selling back when its more expensive, in peak times.

This revenue stream is available to all consumers, regardless of their assets or size. Even if your organisation does not have any on-site technologies, you can still change your electricity usage patterns to facilitate commodity trading.

2. Non-commodity costs arbitrage

The second type of optimisation revenue stream available to organisations is through non-commodity costs arbitrage – strategically shifting electricity consumption to limit non-commodity charges.

Non-commodity charges are the part of electricity bills that sit outside of the wholesale cost of electricity (commodity). These costs are used to invest in and maintain grid infrastructure and support the growth of renewable energy. Examples of non-commodity charges include:

• Transmission Network Use of System (TNUoS) charges – a type of network charge that recovers the costs of installing and maintaining the transmission network, which moves electricity long distances, from generators to local distribution networks. Businesses’ ability to optimise TNUoS charges varies based on their location.
• Distribution Use of System (DUoS) charges – a type of network charge that works to upgrade and maintain local distribution networks.
• Capacity Market Supplier Charges (CMSC) – a type of network charge that is used to pay power generators, to ensure that there is a sufficient level of energy supply during peak demand.

Non-commodity charges can vary based on the time of day, the time of the week, or the time of the year when the energy is consumed, which works to encourage organisations to shift their operations away from times of peak demand.

Like with commodity trading, any type of on-site assets and technologies can be used to shift consumption to off-peak periods, such as BESS or CHP, as well as any other forms of flexible load. By optimising energy usage away from peak price periods for non-commodity charges, consumers can simultaneously support the grid during times of strain, reducing the need for grid infrastructure investment, and benefit from reduced non-commodity charges on electricity bills.

As peak non-commodity prices often align with peak commodity charges, one action of turning down their electricity usage can allow a consumer to benefit from generating revenue in commodity markets, whilst simultaneously creating savings by limiting their non-commodity charges.

3. Ancillary support services

Ancillary support services are mechanisms that energy system operators use to maintain stability and balance on the grid. These services help to maintain the integrity of Great Britain’s grid, either through frequency response, or by ensuring that supply and demand are always balanced.

These services financially reward consumers for their participation in providing flexibility when required to help balance the grid, and operate at both local and national levels. Like when engaging with commodity trading and non-commodity cost arbitrage, organisations can utilise on-site technologies to import or export energy to the grid when needed. Eligibility for organisations can vary based on location, type of asset, and size of their flexible resources.

National examples of key ancillary support services that organisations can participate in include:

• The Demand Flexibility Service (DFS) – A mechanism that can be triggered when there is high demand on the national grid, asking consumers to shift, increase or limit their electricity usage to help balance the grid, whilst rewarding them for their participation.
• Capacity Market – A service designed to ensure that the grid has secure and sufficient supply, by providing financial payments to energy providers in return for reliable sources of energy capacity when required.
• Dynamic Services – Including Dynamic Containment (DC), Dynamic Moderation (DM) and Dynamic Regulation (DR), these services help to monitor system frequency, ensuring that it is within the National Energy System Operator (NESO)’s licence obligations of 50Hz plus or minus 1%. Participants are rewarded for responding to help maintain this system frequency.

Local examples of services that businesses can participate in include:

• Distribution System Operators (DSO) services – Schemes that manage regional and local electricity networks by balancing electricity demand with available distributed energy sources. These DSO schemes include services that reward consumers for turning down their operations at peak demand times, supporting longer-term grid stability through flexibility, or responding to faults and disruptions to the network to help maintain a reliable energy system.
• Local Constraint Market (LCM) – Operated by NESO, this market aims to procure flexibility from assets in localised regions (specifically surrounding the border between England and Scotland), to help manage constraints in the transmission network.

To maximise value from an on-site asset or flexible loads of electricity within their operations, consumers can ‘stack’ flexibility optimisation revenue streams – using a single asset to receive revenue from multiple services at the same time, with the same capacity. For example, one MW of energy from a battery can be used in three different flexibility optimisation streams at the same time, maximising its value. Consumers can also ‘jump’ between services, using a single asset to earn revenue at different times of the day, using different services.

It’s important that your flexibility optimisation partner is conscious of your site requests and limits, to enter you in as many markets as possible with no interruption to your business.

These services can offer exciting opportunities for any organisation with flexible load that would like to take action to reduce their electricity bills, and they are particularly effective for medium or large businesses with high energy demand and batteries. For example, some organisations may be able to use their electric vehicles’ batteries to offer flexibility, through vehicle-to-grid (V2G) technology. Other organisations could use any industrial manufacturing processes that can be turned down to provide flexibility to the grid, such as furnaces and HVAC (Heating, Ventilation, and Air Conditioning) systems, etc.

Here at Bryt Energy, we want to help our customers use electricity more intelligently and sustainably. Our flexibility optimisation solutions and revolutionary supply product, Pure Flex Access, enables customers to take advantage of the day-ahead market to buy and sell volumes of electricity for each hour of the day before they use it, creating value from their flexibility.

With our electricity expertise and market knowledge, we’re perfectly placed to help your business take advantage of new revenue streams and flexibility optimisation services, in a way that suits your business’ needs and supports a decarbonised grid.

For more information, click here, or get in touch with our team of experts at energytransition@brytenergy.co.uk or on 0330 053 8620.