The importance of demand-side flexibility in balancing services and the role of independent aggregators

The uptake of intermittent and variable renewable electricity sources, such as wind and solar, has increased the need for flexibility, as well as for additional balancing services which are required for network stability.

As energy systems transition from centralised, fossil-fuel based models to decentralised, renewable energy models, the availability of traditional sources of flexibility is declining, and the need for alternative sources of flexibility is increasingly essential to this transition. As opposed to generation resources that alter their output based on grid needs, demand response (DR) helps balance the electricity system through altering assets’ consumption. These assets, that represent alternative sources of flexibility, usually have the following characteristics:

1. Small to medium size in comparison to utility scale generation units;
2. Non-designated resources, i.e they already exist (meaning utilising them on electricity markets is cheaper compared to developing designated resources).

These alternative sources of flexibility include behind-the-metre renewable or non-renewable generation assets, energy storage systems, electric vehicles and other loads with flexible consumption profiles, and can be collectively referred to as demand-side flexibility (DSF). DSF is needed by various market participants, namely Transmission System Operators (TSO), Distribution System Operators (DSO) and Balancing Responsible Parties (BRPs), and can be dispatched by DSF providers directly across various markets, including balancing markets. DSF can also create value in indirect mechanisms, such as shifting load to avoid peak charge costs, or avoiding/deferring transmission and distribution infrastructure development costs. Given the nature of these distributed demand-side assets, there is often a need for an aggregator to unlock their potential on electricity markets (see the next section for further explanation).

What is an aggregator? The role of an independent aggregator in providing demand-side flexibility

DSF can be unlocked and dispatched by various Balancing Service Providers (BSPs). In some cases flexibility can be provided to the market directly by large commercial and industrial businesses. However, most consumers do not have the means to trade directly into the energy markets because they are too small to manage such complexity. Large businesses can also benefit from working with an independent aggregator by utilising their market knowledge and operational experience to maximise the revenue.?

They rely on the services of an aggregator to help them participate. An aggregator is a services provider who operates a set of demand facilities in order to sell pools of electric loads made up of many smaller demand-side assets, as single units in electricity markets. The aggregator’s roles include, amongst other things, bidding flexibility prices, application and service management, pool optimisation, relationships management with asset owners, expertise in flexibility markets and grid operator requirements, offering technological solutions (hardware and software) to unlock flexibility.

Aggregators acting as independent DSF players are able to provide services to the different market participants (TSOs, DSOs, suppliers and utilities). By acting as an independent body, aggregators can provide flexibility across a number of markets avoiding conflict of interests and maximising the value and availability of their portfolio’s assets.?

This benefits the energy system as a whole, by boosting the value of flexibility to the benefit of asset owners, and enabling competition in markets where flexibility is traded - ultimately reducing costs for all electricity consumers.