Virtual power plants have been around for a few years now, with ever-increasing capacities installed around the world. Cornwall, in the southwest of England, has taken center stage with what utility Centrica says is a global first. In the new energy network which has been established, electricity distribution and transmission system operators have started procuring flexibility via a third-party, auction-based marketplace.
The milestone was achieved by Centrica’s Local Energy Market (LEM) trial, which was conceived in 2017 with funding from the European Regional Development Fund. Through the LEM, 100 Cornish homes were equipped with solar and storage systems, beginning last year. Some 125 businesses also had flexibility, monitoring and low carbon technologies installed with the aim of integrating the systems into a market that could be accessed by grid network operators.
Grid companies such as Western Power Distribution and National Grid ESO can place offers for flexibility services and capacity on the LEM. Homeowners can then react and participate in the auction-based market and interactions can take place months ahead or on an intraday basis.
An algorithm developed by advanced analytics company N-Side manages the swell of bids and offers and aligns them with grid conditions and asset constraints. N-Side drew on its experience of developing the algorithm that powers the European Day-Ahead electricity market.
“Exploring the provision of flexibility through a local energy market is a first for us, and even though we’re in the early stages of the trial we’re looking forward to evaluating the results,” said Colm Murphy, electricity market change development manager with National Grid ESO. “In particular we’re keen to understand how flexibility can be procured efficiently and cost effectively between different markets. The potential is really exciting as we look to unlock more flexible energy resources in the market and greater cost benefits to consumers.”
Centrica asserts that the approach will make energy markets more efficient and will reduce the cost to provide flexibility and capacity reserves. There is also likely to be less interference between transmission and distribution system operators as they are both dipping into the same pool of resources.
“This is expected to be increasingly important as we plan to make increasing use of flexibility services, which in turn raises the chances of conflicts occurring,” said Jenny Woodruff, project manager at Western Power Distribution. “It’s potentially a significant problem so this trial is an exciting step to find a solution. It also allows us to find out how flexibility providers behave in marketplaces that have different rules and processes. We’re keen to encourage new players to join the market, so finding out what they like and dislike will be useful in shaping future markets.”