How the Demand Flexibility Service can increase your organisation’s revenue this winter
30th October 2023
Following the removal of the Triads, the Demand Flexibility Service (DFS) gives organisations the opportunity to generate revenue by turning down their electricity use during times of peak demand.
In February 2023, the Triads were replaced. These were the three half-hour periods between November and February that saw the highest demand for electricity. Their purpose was to help calculate the contributions organisations using large amounts of electricity should make to maintain and upgrade the network.
However, as consumers became more skilled at predicting the highest periods of demand during the winter months, the Triads often had the unintended effect of reducing peak demand. Consumers reduced their use to minimise the likelihood of paying higher Transmission Network Use of System (TNUoS) charges. Consequently, demand for power during the Triads was often very low.
What’s replacing the Triads?
As a result of the electricity regulator Ofgem’s Targeted Charging Review (TCR), the Triads have been replaced by a set of banded charges based on users Authorised Supply Capacity (ASC). They’re designed to spread the cost of maintaining and upgrading the grid more fairly among users. You can find our forecasts for these costs in our latest Third Party Costs Guide.
A very small amount of TNUoS – the forward-looking locational element, estimated at around 3% of total costs – will still be collected through the Triad methodology.
The effective removal of the Triads with fixed costs means that there’s now no real incentive for customers to reduce their demand for electricity during the winter peak periods. Yet there’s a greater need than ever to do this.
Why do we need greater demand side flexibility?
We need more demand side flexibility because we’re operating in a changing electricity system. We used to live in a world where increased demand for electricity could easily be met by increased supply – by turning on more thermal power generation, for instance. But as more intermittent renewable generation comes online, we don’t have this option.
So stability can no longer come from supply side flexibility. It needs to come from flexibility on the demand side. Which is why the Electricity Service Operator (ESO) introduced the Demand Flexibility Service (DFS) last winter.
The ESO has announced that it will extend the DFS into winter 2023-24, helping provide the flexibility the network needs to match electricity demand to supply and maintain system stability. While Triads avoidance had the potential to deliver vast savings for high energy users, the DFS can be equally lucrative, generating revenue for participating organisations.
What is the Demand Flexibility Service?
The DFS rewards electricity consumers for helping National Grid ESO balance electricity supply and demand by reducing their consumption at peak times. By turning your electric assets down or off at peak times, you can help reduce the risk of blackouts and generate revenue for your organisation - without disrupting operations.
For example, you might switch to self-generated solar or wind power, or to power stored in batteries, when National Grid ESO asks you to flex. Or you might turn down, or even turn off your electric assets altogether for a short time - if that’s possible.
Many organisations benefited financially from taking part in DFS during winter 2022-23. As the largest industrial and commercial supplier in the scheme, we passed on flexibility payments of more than £1 million to our customers.
Flexibility with no commitment
But not everyone can be sure they’re ready to make a contractual commitment to providing electricity flexibility. Particularly if that contract includes financial penalties if an organisation fails to provide promised flexibility.
Organisations that are interested in exploring DFS but aren’t yet ready to make a contractual commitment to it, might benefit from our new ElectriFlex product.
Designed to help customers who use large amounts of electricity to benefit from flexibility, it offers cost incentives all year round with no upfront commitment or penalties if your plans change.
At Drax, we’re experts at finding opportunities in energy flexibility markets. And as energy suppliers, we’re perfectly positioned to highlight opportunities, manage the flexibility process, and pass on the rewards to our customers.
If you’re interested in earning extra revenue from flexibility, via the DFS or ElectriFlex, get in touch.Contact us