Roadmap for secondary trading of distribution flexibility

We investigated whether the distribution flexibility market is ready for this new trading mechanism and what steps the DSO should take in the short and medium term to ensure success.

The background

Secondary trading is where participants trade a contractual obligation to provide flexibility or curtailment to another party in situations where the original party no longer wants or can fulfil the obligation themselves. This trading occurs within a secondary market, hence the name. Ofgem has asked all UK network operators to outline their plans on secondary trading of flexibility services, including batteries, flexible assets and renewable generators. UKPN were looking to investigate the potential appetite for secondary trading within their customer base, as well as understand learnings from similar schemes already operating to inform their plans.

What the client needed and their key question(s)

UKPN’s key questions for this project were:

• How is secondary trading currently used in other energy markets?
• What methodologies are used and how do secondary markets operate?
• What are the potential complexities, conflicts and synergies of secondary trading for distribution networks and the GB energy system?
• What changes are needed to enable the ideal market/network conditions to benefit from secondary trading?

Our solution

This project had three clear workstreams which were:

• Case studies: We provided UKPN with six case studies of similar examples of secondary trading within the energy market.
• Engagement with key stakeholders: We interviewed six of UKPN’s customers who currently provide flexibility to the distribution network to understand their level of appetite for a new secondary market.
• Roadmap: We developed a clear, coherent roadmap outlining the key considerations for UKPN from the short- to the mid-term. The roadmap was led by the research findings.
• Workshop: We held a workshop with UKPN staff to discuss the project findings in-depth. This ensured the full project findings were shared with our client and that we had comprehensively answered all their key questions.

Our impact

This project had a short timescale and required the team to provide information to UKPN promptly. We were able to quickly develop the first iteration of the case studies by drawing on existing in-house data. The team also reached out to stakeholders quickly to ensure all the interviews were completed within the short timescale. The project findings will be incorporated into UKPN’s submission to Ofgem. The final report is available to view here.