An arcane Ofgem decision is bearing fruit. The regulator’s move to carve out space for demand-side response in the UK market has triggered a significant £1 billion investment from French energy technology company Voltalis.
Demand-side response is often overlooked as a tool to drive decarbonisation. But the reality, according to Voltalis’ CEO Pierre Bivas, is that technology can drive energy savings to balance the grid and bring down prices.
UK industry minister Sarah Jones, speaking at an event in London on Wednesday, said demand-side response is the “sweet spot” between two of the eight growth clusters the government seeks to “turbocharge”. Voltalis’ demand-flexibility technology links green energy and AI digital technologies, she said.
“We have to grasp the new technologies of the future and that has to be at the forefront of everything we do if we’re going to transform the economy in the way that voters have told us we must do,” she said.
“Freeing up that demand at those peak periods of time, using digital technology and AI to do that is exactly where we want to be.”
© Supplied by VoltalisTackling fluctuations
Demand flexibility can also help combat so-called dunkelflaute, the German term for the absence of wind or sun. It can reduce customers’ energy consumption during periods of low generation.
“There needs to be a way to balance supply and demand when renewable generation fluctuates,” Bivas said at Voltalis’ UK launch event at the Royal Society of Arts in London.
When energy is scarce and expensive, he said, it “will often be necessary to reduce or delay part of electricity demand until times when solar and wind generation is abundant and cheap”.
Bivas quoted the National Energy System Operator (NESO) as saying that to achieve a clean power system, the UK would need flexible resources equivalent to 20% of electricity demand.
Voltalis provides verified demand flexibility services in Europe. It has revealed plans to invest £1bn billion into the UK market by 2030. The company’s investment aims to enable up to 5GW of peak demand-response capacity across UK homes and businesses.
“As much as possible, new flexibility resources must be decarbonised, low-cost, and able to scale up quickly,” Bivas said.
Voltalis UK managing director Randall Bowen said the greatest challenge the company was facing with its investment plan was the speed.
“We can’t employ quick enough, we can’t install quick enough. The demand is there,” he told Energy Voice. “We know we have some skills gaps in the UK… but any electrician can install our technology in an hour or two.”
Flexibility payments
Benjamin Bailly, head of markets and innovation at Voltalis, said the company would provide power flexibility services to NESO in return for demand-side flexibility payments.
Those flexibility payments will cost less than the money spent on wind curtailment each year, Voltalis claims. The UK spends millions of pounds each week on grid balancing services, and in December, Elexon Insights said producers had spent £1bn for the year on payments to wind power operators to stop operating.
In its first year, in 2022, NESO paid out £11m to participants of the demand flexibility service over the winter.
Voltalis has so far rolled out its technology in Europe to operate across more than 1.5 million appliances, according to Bivas. Its partners include energy companies such as TotalEnergies.
The company’s investors include global infrastructure investment firm Meridiam, which became a majority shareholder in 2020.
“Accelerating investments in renewables is one part of the solution,” Bivas said. “Another crucial part is to ensure there are sufficient flexible resources to integrate such large shares of valuable renewable electricity into the power system.”
Bailly, speaking on the sidelines of the event on Wednesday, said Voltalis will partner with UK energy suppliers and cities. This would replicate its existing relationship business model in France.
Voltalis could provide white-label technology to install in smart meters rolled out by energy suppliers in customers’ and businesses’ homes, he said.
It has partnered with Grampian Housing Association in Aberdeen to provide demand-side response directly to social housing customers using smart thermostats a spokesperson said.
This would include thermostats and devices that can be controlled remotely to produce savings in return for demand flexibility payments.
New law
New rules introduced in October 2023 were “a turning point towards a clean energy system and a decarbonised economy”, according to Bivas.
Company executives attributed the decision to invest in the UK to Ofgem’s approval of the P415 modification, which paves the way for access to the GB wholesale energy market which can be lucrative for “aggregators” of service such as Voltalis.
Bowen said: “That enabled us to invest, to create jobs, to help us to tackle fuel poverty. These things seem like small decisions but the impact of this is huge.”
The regulator’s move put demand response on a level footing with generation. This “may appear just a small step, but it is in fact a major advance to a long demand-side participation in the market”, Bivas added.
“What is important in Ofgem’s decision is that it makes it free for consumers to install automated and remotely operated DSR [demand-side response] technology, like that which is offered by Voltalis.”
“A free solution makes it much easier to quickly engage hundreds of thousands of consumers, and thus build gigawatt-scale virtual power plants needed to deliver those tens of terawatt hours per year of flexibility in the system,” he said.
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