The Energy Transition | Demand Flexibility Service To Become Year-Round Commercial Service

National Grid's Demand Flexibility Service (DFS) will operate year-round. Ofgem reduces cancellation charges for generators requiring upgrades. Freeport East secures funding for a green hydrogen pilot. Highview Power invests £300 million in liquid air energy storage.
UK Energy and Natural Resources
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This week we look at the Demand Flexibility Service being upgraded to a year-round commercial service, Ofgem green-lighting a reduction in cancellation charges for generators requiring transmission system upgrades, Freeport East securing multi-million pound funding for a green hydrogen shipping pilot, and more.

DFS to become year-round commercial service

The National Grid Electricity System Operator (ESO) has confirmed its intention to enhance the Demand Flexibility Service (DFS) so it can be used across the year as a normal commercial service, instead of as a winter contingency service only.

The DFS was developed to balance electricity supply and demand to stabilise the grid. It initially provided a package of winter contingency options to ensure the secure operation of the electricity system for winter 2022/23. During that period, the service saw 1.6 million households and businesses participants and saved more than 3,300MwH. This increased to over 2.6 million participants with a saving of more than 3,700MWh in winter 2023/2024.

As we reported last week, the ESO's early view of winter 2024/25 suggested that the de-rated margin is forecast to be 5.6GW (9.4%), which is higher than the 4.4 GW (7.4%) last winter. As such, the ESO has stated that the need for the DFS to be used as a winter contingency service to support the electricity network at peak times has been reduced.

Instead, the service will be expanded to have the capability to support high demand periods on the system year-round, and it is hoped that the DFS will be able to compete against other commercial tools available to the ESO to ensure greater value for money for consumers. Currently at the initial design stage, the revised DFS will be the subject of an industry consultation over the summer before being submitted to Ofgem for approval.

Kayte O'Neill, Chief Operating Officer at ESO, commented that the DFS has, "been a national first in empowering households and businesses to embrace energy flexibility and to be rewarded in the process." She states that the ESO, "look[s] forward to working closely with industry over the coming months to deliver a service that makes flexibility part of everyday life and that can unlock the benefits for participating consumers and society at large."

Ofgem gives the green light to reduced cancellation charges for grid users requiring upgrades

Ofgem has approved a modification to the Connection and Use of System Code which will reduce the cancellation charges that generators may face if they have required grid reinforcement works for their connection, and then proceed to terminate or downsize their project's capacity. The change, known as CMP428, was proposed by the ESO and will take effect from 14 June.

Currently, when a generator seeks a grid connection, User Commitment Arrangements place liabilities on those who trigger specific reinforcement works in order to connect to the grid in the event they terminate or reduce their project's capacity either before or after the relevant trigger date. This aims to financially secure the network reinforcement and investment that is required to connect that particular generator. Such arrangements will typically contain a generic, post trigger date liability relating to "wider works" which includes assets built for the benefit of all users, as well as a specific liability in place both before and after a trigger date to cover generator-driven investment in the form of "attributable works".

This latter specific liability (and in turn the related cancellation charges) will be limited by the CMP428 modification so that any works designated as onshore transmission reinforcement within the ESO's Holistic Design Network will no longer be included in the definition of "attributable works". Such works will now be categorised as "excepted", and generators will not incur commitment liabilities in respect of those works. Ofgem noted that this modification is necessary to ensure that "users that choose to connect to circuits that deliver wider system benefit are not treated unfairly".

However, Ofgem did suggest that the ESO should propose a further modification to address the cancellation charges relating to wider works. Ofgem recognised that some generators will have fixed their securities prior to contracting and will not benefit from CMP428, so encouraged the ESO to consider whether further modifications were required or if users' existing arrangements could be reviewed.

Freeport East's green hydrogen shipping pilot secures multi-million pound funding

Freeport East, a major shipping terminal in Felixstowe, has announced a green hydrogen shipping pilot which will be funded by a £1.44m grant from Innovate UK and a "similar sum" from Australia's department of climate. The announcement is the latest in a series of green initiatives implemented by the port, adding to its existing offshore wind power hub and electric vehicle fleet, to trial and promote the use of green hydrogen technologies in nautical contexts and assist the UK in meeting its net zero targets.

The site's current renewable energy generation will be used to power the electrolysis process needed to create hydrogen, boosting its green credentials ahead of other sites which are reliant on natural gas for their power inputs.

The project is particularly notable for its use of hydrogen technology in a maritime application. Despite accounting for the same proportion of emissions as flying, the shipping industry has been slow to decarbonise, in part because of the difficulty applying renewable technology to the nautical sector. The project aims to demonstrate the practical opportunities of green hydrogen which will be used to power port equipment and its fleet of vessels.

The project also sits within a wider international effort focusing on innovation in hydrogen storage at sea and propulsion technologies, with a parallel enterprise in Australia currently being led by hydrogen outfit Rux Energy Australia.

Joseph Hewitt, a key project engineer at ORE Catapult, highlighted that "demonstrating the potential of innovative technologies such as hydrogen-storage and hydrogen-fuelled turbines to decarbonise the world's marine fleet could pave the way for future cost savings and risk reduction benefits for the entire industry, minimising environmental impact and moving us closer to achieving our net zero ambitions".

£300m investment secured to build UK's first commercial scale liquid air energy storage plant

In a recent funding round, Highview Power has secured £300 million of debt and equity investment to build the first commercial-scale liquid air energy storage (LAES) plant in the UK. Based in Manchester, the long duration energy storage facility (LDES) is expected to have a storage capacity of 300MWh and output power of 50MW.The project aims to reduce the UK's curtailment costs (stated to have reached £800 million in 2023 alone, as we reported here), contribute to the UK's energy security by reducing the intermittency of renewables, and help new technologies support the UK's transition to net zero.

Funding for the project was led by the UK Infrastructure Bank and Centrica, each contributing £165 million and £70 million respectively, and supported by other investors, including Goldman Sachs, Rio Tinto, Kirkbi and Mosaic Capital.

LAES technology utilises excess electricity to liquidate air and store it in low-pressure insulated containers. When electricity is required, the same air will be reheated, with the expanding air driving a turbine to generate power.

Highview Power intends to commence planning its next four large scale 2.5GWh plants at strategic sites across the UK (with a total anticipated investment of £3 billion) to ensure fast rollout of the technology in line with UK LDES support mechanisms and to support the ESO's Future Energy Scenario plans. The rollout is also in line with The National Grid's target scenario forecast of a 2GW requirement for LAES by 2035 (20% of UK's long duration energy storage needs).

Richard Butland, Co-Founder & CEO of Highview Power, states that the project will "bring renewable energy storage into the UK economy at scale, liberating the potential of what is both the greenest and by far the cheapest energy source for the UK economy."

Worthy Farm's Eco-Innovation: Carbon-Negative Hydrogen derived from cows

A world first example of carbon negative hydrogen production from biomethane has been announced at Worthy Farm, home to Glastonbury Festival, as part of a partnership between British climate tech firm, Levidian, and clean hydrogen developer, Hexla.

Tens of thousands of tonnes of slurry are produced every year by cows at Worthy Farm and this slurry is currently combined with waste silage and run through an on-site anaerobic digester to generate biomethane, which is used to power the farm. Levidian's pioneering LOOP technology will enable carbon to be captured from the biomethane produced in this process, and then transformed into graphene and clean hydrogen which will be used to run Worthy Farm's existing combined heat and power plant.

The use of hydrogen saves up to 25 tonnes of carbon dioxide equivalent each year. The high quality graphene produced as a by-product will be sold by Levidian. Described as a 'super-material', the graphite will be utilised in numerous industries, ranging from consumer electronics, rubber products like tyres and energy distribution technologies.

Hexla is also providing funding to support the development of LOOP1000, an industrial-scale version of the technology which will aim to deliver the lowest cost clean hydrogen in the world over the lifetime of the plant, due to the high-quality graphene which will be produced. Under a collaboration agreement between Hexla and Levidian, Hexla will be the global deployment partner of the LOOP technology, with up to 300 LOOP1000 units planned for delivery, driving down hundreds of thousands of tonnes of carbon dioxide equivalent emissions each year.

Levidian CEO John Hartley stated, "The Worthy Farm project is a great example of innovation within the agricultural sector and an important showcase of the vast flexibility and potential of our technology in decarbonising hard-to-abate industries, while unlocking new revenue streams."

This article was written with the assistance of Khushal Thobhani, Jessica Sawford, Charlotte D'Arcy, Luke Hopper and Hannah Bradley, trainee solicitors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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