With its Island Grid, the UK is Forced to Take the Lead in Developing Local Energy Markets

An island grid and growing renewables production are forcing
Britain to take a leading role in the development of local energy
markets.

While new energy trading platforms are being piloted across the
world, “international projects are more about testing technology
than they are about creating a marketplace,” said Mark Futyan,
distributed power systems director at Centrica, the British utility
and global energy giant.

The local energy markets being developed in the U.K. go beyond
most current transactional microgrid concepts, which may allow for
electricity trading but usually only on a peer-to-peer basis.

In contrast, Centrica is leading a pilot in Cornwall, southwest
England, that could pave the way for transmission and distribution
system operators to source grid flexibility services directly from
end users, including residential customers.

Another U.K. project, in Oxfordshire, is being planned by a
different utility, Scottish and Southern Electricity Networks.

U.K. initiatives are more commercially advanced than local
energy markets being developed elsewhere, Futyan said. “Some of
the more commercial platforms [internationally] are not really
platforms,” he said. “They are matching services.”       
 

“At the end of the day, the need for flexibility — and
therefore local energy markets — arises from a high penetration
of renewables, a lot of distributed energy that creates local
balancing problems, and a lack of interconnection, all of which are
U.K. traits,” Futyan said.

“The U.K. is a natural first place for there to be challenges
for this approach to address.”

Sonnen’s involvement in Cornish project

Cornwall’s local energy market will deliver up to 585
kilowatt-hours of battery capacity and up to 169 kilowatts of solar
power to local grid company Western Power Distribution and to the
national transmission system operator, National Grid. 

The storage capacity will come from 100 battery systems, all
tied to residential solar arrays, that Centrica finished installing
this month. Centrica claims the battery fleet would make up the
largest residential storage-based virtual power plant in the
U.K.

The residential storage assets will be aggregated through a
platform provided by Shell-owned energy storage company Sonnen, but
the market itself will use an algorithm developed by Centrica in
partnership with German analytics software firm N-Side.

Western Power Distribution is expected to start purchasing
flexibility services off the trading platform towards the middle of
this year, with National Grid joining before year-end.

Although Centrica will act as a selling agent for the
residential storage capacity, the platform will also offer direct
trading opportunities for generation assets such as wind farms and
for commercial and industrial power users.

In these cases, “the market platform that we’re building
does not reach out to each asset and turn them on and off,”
explained Sam Wevers, product manager for the Cornwall local energy
market at Centrica. “The platform communicates with the selling
agent.”

The platform will allow these players to bid on flexible
capacity auctioned on a reserve and utilization basis three months,
one month, a week and a day in advance, as well as on an intraday
basis.

In the future, Centrica will add peer-to-peer energy trading
functionality via a separate platform, Exergy, from the New
York-based blockchain developer LO3.

Avoiding unnecessary distribution grid investment

Although Centrica believes the pilot could help rein in energy
curtailment that affects up to
10 percent
of renewable production in the U.K., Futyan said the
main value of the local energy marketplace would be to help avoid
distribution network operator investments.

“If they’re planning an outage, rather than bringing in
temporary generation they can access the market to get short-term
generation or load reduction,” he said. Or, “if there’s a
constrained part of the grid, instead of putting in new
transmission lines we can provide flexibility.”

Centrica envisages the Cornwall pilot running at least until the
end of 2020, to comply with a financing agreement secured from the
European Regional Development Fund.

But Futyan said the company may look to start other local energy
markets in the meantime and is already in conversations with
distribution and transmission network operators to export the
concept elsewhere.

Meanwhile, Scottish and Southern Electricity Networks is
planning a similar scheme, called Local Energy Oxfordshire, which
aims to be “one of the most wide-ranging and comprehensive smart
grid trials ever conducted in the UK,” according to
a press release
.

The £40 million ($52 million) Oxfordshire project is due to be
up and running in the early 2020s.

Both local energy market projects follow pioneering U.K. island
grid experiments including the Smart Energy Islands
project in the Isles of Scilly and the Northern Isles New Energy
Solutions
scheme in Shetland.

Source: FS – GreenTech Media
With its Island Grid, the UK is Forced to Take the Lead in Developing Local Energy Markets