2017 was an incredible year of change in the UK energy industry, with important industry firsts for renewable and low carbon generation sources. In March we saw day-time power prices fall below night-time prices for the first time, due in part to increased solar output. In April we had our first coal free day since the industrial revolution (135 years ago!). In the first half of 2017 only 2% of electricity was from coal. On 7th June National Grid reported that low carbon sources of energy (nuclear, wind and solar) were generating more electricity than coal and gas combined for the first time ever. Overall, low carbon’s share of electricity generation reached record highs of over 50% in 2017.
In 2017 we also saw OFGEM announce winners of the NIC projects and Origami Energy will be involved in two. These projects will consider fundamental aspects of the future role of the Distribution Network Operators (DNO) as the industry evolves.
2018: 6 changes ahead for a volatile energy market where technology will be key
With the wave of change to renewable sources of power, I expect to see greater volatility and more stresses at the extremes of the electricity system this year. The inflexible nature of these energy sources is driving the need for access to flexible generation, demand and storage to ensure the system stays in balance. For Distributed Energy Resources (DER’s) this means they will need to be more responsive to value opportunities as they arise. Smarter solutions through advanced technology are going to be needed to enable increased amounts of renewables on the network and make it fit for the 21st century at the most efficient capital cost. Technology is going to become more and more critical to unlock additional value, enable new services and future-proof revenue streams; by controlling assets in real-time, and remotely optimising assets as the market signals change.
1. Localised Services
2017 saw Distribution Network Operators (DNO) procure constraint management services for the first time, to help manage local peak demand. UKPN’s first constraint management service will come into operation this year, to be followed by WPD and SSEN. Beyond the regulated DNO role I see a vibrant opportunity emerging for localised services (e.g. industrial micro grids, community energy schemes) offered on a commercial basis, particularly in grid hot-spots. The ability to match supply and demand in real-time will be a key enabler.
2. Energy storage
Given the Capacity Market de-rating factors placed on short duration batteries in late 2017 and changes announced by National Grid to the Frequency Response markets, the success of new storage projects will hinge on an ability to adapt technically and commercially to market changes. I expect wholesale market access to be a critical part of the evolving business case. There are exciting opportunities for industrial and commercial companies for behind-the-meter projects.
During 2018, National Grid will announce System Needs and Product Simplification (SNaPS) feedback, which Origami have responded to. Whilst SNaPS will aim to rationalise and simplify the market, it is unlikely to make it any easier to win ancillary market tenders. We have a great bidding track record in this challenging market and I look forward to continuing our 2017 success in delivering value for our customers. We are also kicking off 2018 pre-qualified for the capacity market auctions this month. I’m confident in the ability of our responsive technology to deliver value no matter how the market changes.
4. EFA alignment
A big change will be that Response and Reserve products will be tendered in line with Electricity Forward Agreement (EFA) blocks. This will make it easier to sweat DER’s for value. This greater compatibility between the wholesale market and the ancillary services market will see greater commercial optimisation opportunities. It will see opportunities to use assets more efficiently and to their full potential.
In the valuable Frequency markets we will see Enhanced Frequency Response and Dynamic Firm Frequency Response combined. We will also see a move away from long term contracts and move towards real-time markets with National Grid trialling a week ahead market (we would like a day ahead market). For our customers this means more opportunities for shorter term optimisation income, a more active approach to managing assets and a move to automating decisions around asset usage.
6. More Competition
Increased competition between suppliers drives the need for innovative service offerings and we are helping suppliers offer innovative products to their customers. Late last year, Good Energy launched its fully funded battery proposition to its customers supported by Origami, and we are looking forward to developing new and on-going partnerships with energy suppliers, traders and off-takers to deliver innovative customer propositions and improve their own trading positions. Our technology platform will help our partners unlock the value of flexibility to buy better, trade better and sell better and offer their customer more compelling bundles of tariffs and services.
All of the above highlights a need for technology that delivers real-time solutions to enable change and optimises value creation.
The Origami platform is capable of efficiently handling changes both at short timescales and also over the longer-term as markets are redesigned. Our technology is designed to be future-proofed; as new value opportunities are created, or as those who are seeking to benefit from flexibility change, our customers can benefit through our platform’s ability to enable continued optimised value creation with minimal disruption. Already in 2018 we are seeing increasing appetite from energy market participants for our technology and services.
We’re looking forward to demonstrating how our technology can help support and accelerate the transition to an increasingly decentralised, decarbonised and digitised energy world in 2018. More on this transition can be heard on the BBC World service, where I shared my perspective on this last year.
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