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Using battery energy storage to gain revenue through the dynamic flexibility market

A revolutionary scheme, which rewards people for reducing their energy use during the busiest periods of the winter, launched recently. We talked to Aaron Lally, managing partner at VEST Energy, and asked him to give us the lowdown on how it all works and why energy storage is key.

05/12/2023

The new Demand Flexibility Service incentivises businesses and households to reduce their demand on the grid during peak periods.

The scheme was trialled in winter 2022 and now looks to be commonplace over the years ahead in response to the increasing demand for electricity and the requirement to balance the grid at peak times.

Since the scheme launched last month, there have already been three ‘events’ – which incentivised people to reduce their energy consumption for an hour at 5.30pm. Businesses that took part were eligible for a financial reward. We asked Aaron to explain what the scheme means for their customers and how he is working with Connected Energy customers to help them take part.

First there were TRIADS

Most businesses will have heard about the TRIADS market. This was a scheme which ran a few years ago that incentivised businesses to reduce their energy demand. It was a lucrative scheme for businesses but now long gone.

Last year it was replaced with the Dynamic Flexibility Service (DFS). This scheme is a game changer for the energy flexibility market and is incredibly lucrative for businesses. For just a short amount of time, at periods throughout the winter, businesses could be earning a significant amount of revenue for very little inconvenience. This is especially true for businesses which have energy storage on site.

Reducing energy taken from the grid

Over the winter period, November to March, there will be at least twelve periods of time where the National Grid will ask businesses and homes to stop drawing energy from the grid. These are at times when demand is exceptionally high likely to be between 4pm – 7pm – and will be for short periods of time.

During this time a business must reduce the energy they take. Which is where battery energy storage comes in. Any business with battery energy storage can store the energy they need in advance and use the energy during the session. Meaning no interruption to operations, no turning the lights off or stopping equipment from running – but knowing that they will be paid at the end.

How long is a dynamic flexibility service session?

A session could last up to four hours but they tend to be an hour at a time. A business doesn’t have to participate for the full length of time, the minimum period is 30 minutes and you get paid for the length of time you take part.

How many times does a business have to participate?

Over the winter, a business can take part in as many of the sessions as they want. It’s super flexible. They could participate in all twelve or decide in advance if a session is not feasible for them. You’re not penalised if you don’t take part – you just won’t be paid if you choose not to.

How it works

VEST Energy works with Connected Energy’s customers to make it simple for them to take part in this market.

VEST are registered with the National Grid to take part in all twelve sessions. We receive alerts in advance and we then make sure that the battery system is fully charged to operate the battery during the time period. The customer will probably never even know that they’ve taken part – except when they receive their payment at the end of the month.

We also interact with businesses, so we know what the customer needs. There may be times when a customer needs the energy in the battery for something else – say for example if a customer has a constraint issue and needs to charge their electric vehicles at a time when a session is planned. That’s fine – they simply choose not to participate.

Most businesses, however, just want to make as much money from the scheme as possible so are keen to find ways to work around it.

Revenue to be made

A business will be rewarded for the energy that they don’t use during the time period. National Grid has quoted this as £3,000 per MWH.

To get the maximum from the scheme you do need to be a relatively heavy energy user between the peak times. We can model this for Connected Energy customers. Based on a company using 300kW of stored electricity during this period, this can generate around £1,000 each session. Take part in all twelve events and that’s over £12,000 – for virtually nothing.

Although there are many ways to make a financial business case for battery storage – this revenue is an additional bonus and helps the figures really stack up.

I think everyone should be doing this if they have a battery on-site, especially with bills going up. I don’t think that people have realised how easy it all is. Do you want to be paid to flex your load a few times over winter with minimum disruption? Who wouldn’t?

Aaron Lally, managing partner at VEST Energy

Other ways of revenue generation

There are more and more avenues to make money through flexibility services and energy trading than there were two years ago.

Demand flexibility is just one of multiple things that businesses could be doing to make money from their battery storage system. It is the most lucrative for the least amount of input however there are other schemes out there which can also add up.

The capacity market, for example, can make businesses up to £5,000 – £6,000 a year. This gives customers a 15-year contract with the National Grid in agreement that they will turn their power down if the grid is over-stressed. Again, it’s a lucrative way to make money if you have a battery energy storage system on-site.

This is definitely the start of more schemes things to come. The regulatory environment is becoming more and more pro-flexibility and the direction of travel suggests more schemes will be launched. Businesses will be financially rewarded if they can provide flexibility to the grid – and that’s what energy storage can give them.

Let's connect!

Connected Energy is working with VEST to include DFS revenues in our feasibility studies, if you’d like to know more get in touch.