It is crucial that flexibility resources play a greater role in optimising the costs of the electricity system and delivering Net Zero. The Market Facilitator role will oversee a much smoother process for all on flexibility provision and dispatch.
Ofgem’s December 2023 consultation on whether Elexon or the Future System Operator (FSO) should take on the Market Facilitator role recognises our independence and neutrality in markets. Ofgem believes that we are a ‘strong option’ to take on the role.
We have a proven track record of enabling flexibility in the Balancing Mechanism and the wholesale market, delivered by our inclusive governance process, and strong market design capability.
We will respond to Ofgem’s consultation setting out our views on the critical success factors to ensure rapid implementation of the role.
What is electricity flexibility?
Energy flexibility is essential for the energy system to achieve Net Zero. Flexibility is where generators and users of electricity change their production or consumption patterns, in response to requests and signals. This gives users the ability to reduce energy use or shift energy usage to different times of the day.
As the energy sector transitions toward Net Zero and becomes more reliant on renewable energy sources, flexibility needs to play a much bigger role in the electricity system.
Barriers that flexibility providers face
At Elexon, we talk regularly to flexibility providers – users who provide flexibility services by making temporary changes to the way they consume, generate or store electricity, to help balance demand and supply in the electricity network, when requested. Flexibility providers aim to bring their products to the electricity markets:
- The Balancing Mechanism
- Ancillary Services
- DSO markets
- The wholesale market
- The Capacity Market.
However, providers often face common barriers when currently bringing their products to these markets. Barriers can include:
- Insufficient visibility of where flexibility services are needed to resolve supply and demand bottlenecks
- Lack of coordination and common processes (e.g. providers have to register separately for each market, which is time consuming)
- Lack of transparency on decisions about which providers have been contracted to provide flexibility services.
In March 2023, Ofgem proposed that a Market Facilitator role is established, as a single, expert entity responsible for delivering standardised, transparent flexibility markets that encourage greater participation by flexibility providers.
This will help to address the barriers to market entry, that flexibility providers face. The Market Facilitator would also be responsible for aligning flexibility market arrangements at both a transmission and distribution level.
Respond to Ofgem’s consultation
Ofgem’s consultation on whether Elexon or the FSO should take on the Market Facilitator role was published on 13 December 2023, with a response deadline of 7 February 2024.
Ofgem will make its decision in spring 2024 and it expects the Market Facilitator role and supermarket place to be operating from late 2025 or early 2026.
The duties of the Market Facilitator
Ofgem has stated that the key functions that the Market Facilitator will perform are strategic leadership, market coordination, and implementation monitoring. The role would see the Market Facilitator managing:
- Data standards for flexibility products, asset and market data (and associated communication protocols)
- Standardised products, which are a basic first step to align product descriptions and attributes
- Stacking rules, which enable one asset to know if it can deliver multiple products
- Primacy rules for deciding who takes precedence when the same asset is called on
- Standardised contracts and pre-qualification, to reduce the friction of accessing markets.
- Demand flexibility and the Market Facilitator role – Elexon’s presentation slides from the Association for Decentralised Energy Conference (PDF) 21 September 2023
- Elexon’s Response to Ofgem’s Call for Input on the Future of Distributed Flexibility 16 May 2023
- Elexon’s response to Ofgem’s consultation on the Future of local energy institutions and governance 16 May 2023
- Ofgem Call for Input: The Future of Distributed Flexibility 1 March 2023
- Ofgem consultation: Future of local energy institutions and governance 1 March 2023