We’re all agreed that to meet Net Zero we are going to need a lot more flexibility on the electricity system. This flexibility must take place at all levels – internationally, nationally, at distribution level, and within our homes and businesses. Interconnectors and batteries will play a key role in this, but we’ll also need markets and digital solutions.
Currently, the UK’s system works on a Merit Order, meaning that the cheapest forms of electricity get used first. But this system was designed for a different era - when most our electricity came from coal and power flowed outwards from the central transmission system to our homes and businesses.
Today, electricity flows in both ways and users can be paid to flex their usage. There are several overlapping markets that each player can participate in, flexibility markets at national and local levels, capacity markets, and services such as frequency control.
We need to be clearer on who controls what, we need some primacy principles.
Transmission operators could lead on frequency services, distribution operators on local constraints, and a market or technology platform could mediate. How this fits with the balancing mechanism and capacity markets also needs to be worked through. This means we’ll also need metering that’s more advanced and closer to real time.
All of this comes with the risk of gaming and market manipulation, so strong and near real time regulation with a clear rulebook will be essential.
There’s a lot of work ahead to work through who takes primacy in our future markets.
