Ofgem issued its decision on BSC P415 modification Facilitating Access to Wholesale Electricity Markets for Flexibility Dispatched by Virtual Lead Partners (VLPs) on the 6th October 2023. This is a significant development and will open the wholesale market to a wider range of participants, including aggregators of distributed energy resources (DER) such as battery storage, demand response, and renewable energy generators.
The current arrangements only allow VLPs to participate in the wholesale electricity market indirectly, by trading through a Trading Party (typically an Energy Supplier). This does mean that VLPs have limited ability to compete in the market, and P415 will remove these barriers.
We see three key benefits from this change:
- An Increase in competition in the wholesale electricity market: More VLPs should be incentivised to enter this market which will increase competition, increase the amount of flexibility available and drive down prices for consumers.
- Improved flexibility in the grid: VLPs aggregate and dispatch DERs in response to market signals, and this will allow consumers to adjust their demand or generation in response to price signals. This demand-side response will then improve the flexibility of the grid and reduce the need for costly peak time generation capacity.
- Support the UKs transition to Net Zero targets: VLPs can help to integrate renewable energy into the grid and support the transition to a Net Zero future.
P415 is scheduled to be implemented in November 2024, and VLPs will then be able to register with Elexon and participate in the wholesale electricity market on the same terms as other Trading Parties.
This decision provides a number of opportunities:
- Existing aggregators: Companies already aggregating distributed energy resources (DERs) like batteries, heat pumps, and electric vehicles are prime candidates. They have the technical expertise and established relationships with DER owners, giving them a head start in forming VLPs.
- Energy retailers: Retailers have direct access to customer data and control over appliances like smart meters. This knowledge of energy use patterns could prove valuable in optimising flexibility portfolios.
- Technology companies: Tech giants with data analytics and platform expertise could play a role in developing VLP platforms and managing flexibility trades.
- Independent VLP developers: New players specializing in VLP services could emerge, potentially focusing on specific niches or leveraging innovative approaches to aggregation and optimization.
It will be interesting who outside our traditional VLPs (Data Aggregators appointed by Energy Suppliers) will enter this market. Is this now the time for some of the big names like Amazon, Apple, Google and Tesla to invest and propel the digitilisation change and progress to Net Zero?
At Engage, we have a team of experienced consultants with extensive experience of the energy sector Market Arrangements and the challenges that changes in these have on your business. We have the experience, expertise, and commitment to help you succeed.
Contact us today to learn more about how we can help you manage the changes or unlock the benefits from P415 within your business.
The full Ofgem decision can be found here