Richard Sarti on why grid flexibility must be higher up the global agenda for the green recovery

Ahead of the Energy Transition Summit, taking place on the 25 & 27 May, Climate Action caught up with Richard Sarti, Director, Marketing and Sales at NODES AS, to discuss why grid flexibility must be higher up the global agenda for the green recovery and how to encourage grid operators to engage with flexible markets.

Richard, thank you for joining us again, a lot has changed since you spoke with us last year.  NODES have moved into their second phase here in the UK, could you tell us what’s coming up? 

NODES has just opened Phase II of the Intraflex project for trading. This is an NIA funded project run by Western Power Distribution and in partnership with NODES and Smart Grid Consultancy. The purpose of the project is to look at how flexibility can be traded in a near term continuous market. Phase 1 finished in October last year, where we saw 50MW’s of flexibility being bought via the NODES marketplace, up to 90mins before the operating hour.

Phase II intends to build on the success of phase 1 and develop the concept further by working with more flexibility service providers. As part of this second phase the parties will also try different bidding strategies to draw in more flexibility. So far, the results have been very encouraging. The second phase is expected to run until the end of August.

You’re speaking as part of our Roadmap to COP26 energy transition summit.  Many people feel our energy grids do not get the attention or investment they need, how can we bring grid flexibility higher up the global agenda? 

I think over the past 12 months there has been a lot of coverage over the challenges grid operators are having because of the energy transition. A mixture of the impact of COVID on the energy demand profile, the high penetration of renewable in the energy system and adverse weather conditions have highlighted the challenges around maintaining a stable network as large-scale conventional generation is decommissioned.

The cost of balancing the system is increasing at a time when overall electricity prices are decreasing. The need to act and address these escalating costs in order to protect consumers is clearly on a lot of government agenda’s.

 

COVID-19 has disrupted our energy systems, creating challenges for grid stability.  What can we learn from this and how do you think a green recovery change will change how our energy systems operate?  

From an energy systems perspective, COVID perhaps provided the wake up call we needed as an industry or as a society in order to accelerate the energy transition.  The dramatic change in energy demand profiles due to the need for society to isolate, and the increasing penetration of intermittent generation has had a huge impact on grid stability. In the UK alone, National grid saw a 40% increase in system costs between March and June in 2020.

The fact that, for the first time, renewables had a higher percentage share of the generation mix than fossil fuels in 2020 means that renewables have shown greater resilience to price shocks in the market, mainly due to their lower operating costs, compared to fossil fuels generation, such as coal, where the market has all but collapsed.

In my opinion, what we have learnt is that renewables can form the basis of a robust energy system and through the green recovery we now need to focus on accelerating the energy transition. By moving away from taking incremental steps we can be bolder in our adoption of new technologies and innovation which will help facilitate this paradigm shift to a different energy system than we have today, one which has sustainability at its core. Let’s not waste this opportunity! 

Many think there needs to be a fundamental change in how our grids are operated and managed.  How would you like to see things changing to create greater flexibility in the market and ensure resilience across the entire system as we integrate more renewable energy into the mix? 

As we move away from a centralised energy system, we see the need to change the way we manage the energy system and start looking at a more bottom-up approach.

With the majority of DERs, Renewables and DSR connected to the distribution network, the need to provide the right tools to allow grid operators to manage their own local networks and identify and isolate congestion issues will become increasingly important.

At NODES we believe this is best managed by utilising a marketplace which can give price signals within the distribution network on where there is flexibility availability and scarcity. Any unused flexibility can be sold up through the different layers of the grid and ultimately to the High Voltage network and the TSO.

By changing the market design in this way, we are enabling better coordination between the distribution system and the transmission system, allowing the transmission system to procure flexibility in areas where there is a surplus availability and not inadvertently negatively impacting the DSO by securing flexibility in already constrained areas of the distribution grid. By enabling flexibility to be sold up through the different layers of the grid we are giving the DSOs the ability to buy flexibility in the right area at the right price to address a constraint issue, the price of this flexibility will provide better insight on where to reinforce the network and where to procure the flexibility, making for a more efficient and cost-effective network.

These price signals will also draw in different forms of renewables based on time of need, as well as provide signals as where assets could be located in the future. Furthermore, different forms of renewable and flexibility assets could be used to provide services to both the DSOs and the TSOs allowing new revenue streams and greater optimisation of these assets across both the vertical and horizontal layers of the grid.

What do you see the role of DSOs being in the future?  How can we encourage grid operators to engage with flexible markets? 

We see DSOs taking a much more proactive role in the future market design. With better access to technology and information, DSOs have better forecasting and monitoring tools to understand how their networks are being used, where the constraints lie and where they can buy flexibility.

The availability of flexibility markets, like NODES, gives the DSO a possibility to use price signals to communicate with their needs to the market.

There is a common understanding across the industry that flexibility markets are a key component in increasing the overall efficiency in the energy system. We see some DSOs in various member states taking the initiate and being forward leaning in this area, this is largely due to the signals the regulator is giving on how they would like to see the future market design.

However, without the guidance of the regulator, DSOs are reluctant to engage with flexibility markets. We see this in Germany for instance where the focus is on redispatch and grid reinforcement, compared to the UK where the regulator has implemented a flexibility first principle and has tasked the DNOs with establishing flexibility markets.

As a company with reach in many countries, where are NODES seeing the greatest uptake/drive for energy decentralisation at the moment, and do you anticipate this changing? (any case studies/examples would be great) 

At NODES we see the UK as having the strongest drive to encourage the purchase of flexibility in support the energy transition. The UK Governments bold climate change targets shows the UKs commitment to addressing the energy transition. The regulators flexibility first principle has seen a clear mandate be developed for the distribution network operators transition to becoming DSOs and as part of that mandate they are to develop and implement flexibility markets. This is perhaps the clearest signal in the market as to what needs to happen.

An example of this can be seen in our Intraflex project with Western Power Distribution. We’ve recently commenced phase II of our innovation project, which looks to establish a marketplace for trading flexibility in a near-term continuous market. Since we commenced trading, we have already seen over 100 trades done over the past 2 weeks. We have also seen different types of flexibility competing against each other on price in order to offer this flexibility to the Distribution Network Operator. This shows that flexibility providers value the ability to offer their flexibility through a marketplace and the DSO can by flexibility at the lowest price offered.

But the UK is not the only country leading the charge on decentralisation, in Sweden we have been working with the TSO SvK and two of the regional DSOs in the Stockholm area to address constraint issues during periods of extreme cold during the winter months. By using the NODES marketplace, flexibility providers where able to sell their flexibility to the regional DSOs in the Stockholm area to help alleviate congestion issues. As a result, we were able to facilitate the trading of 350MW of flexibility to avoid potential black outs. This project is now expected to be extended to build on these learnings.

In Norway, there is a national project which is looking at how flexibility can be used to address constraint issues across all levels of the grid and be offered in to the TSOs mFRR market. Again NODES is being used as the market operator to facilitate the transactions between the flexibility service providers, the DSOs and the TSO. 

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Richard Sarti is speaking at the Energy Transition Summit on 25 May! Register now to connect with key players in the energy sector to further drive this net-zero transition through policy and regulation, to innovation, technology and investment.