Comment by Alex Buckman, Innovative Solutions Architect – Flexibility, at Energy Systems Catapult.

As the UK’s energy sector transforms to meet increasing electricity demand and the growth in renewables on the grid, it must pivot from a centralised, fossil fuel-heavy system to a decentralised model focused on low carbon energy sources. The fluctuating nature of renewables and the diverse energy needs across homes and non-domestic properties mean that achieving balance in this new system will be both a huge challenge and a great opportunity.

Flexibility is the bridge that can make this transition smooth, reliable, and cost-effective, helping to unlock the potential of distributed assets to meet demand without overburdening the grid.

What is distributed flexibility, and why is it needed?

Flexibility is the ability to dynamically balance supply and demand, adjusting in real-time to fluctuations in demand. A flexible energy system can integrate renewable energy sources – like offshore wind and solar – which depend on natural conditions and therefore aren’t always readily abundant. Flexibility enables these renewables to be managed effectively, ensuring a consistent supply of energy.

Traditionally, flexibility has come from the supply side, where fossil-fuel power plants could be ramped up or down to meet demand. However, as we transition to a renewables-based energy system, this centralised model must change. Future flexibility will rely on ‘demand-side’ assets. These systems provide decentralised, distributed flexibility and can adjust demand to match renewable supply. These ‘demand-side’ assets could be EV charge points, hot water storage, or even a heat pump in our homes and work buildings – all of which we need to meet Net Zero.

Distributed flexibility is valuable in three main ways:

1. Delaying the need for network upgrades: Reducing demand at peak times helps us to reduce the upfront costs of network reinforcement and help us coordinate it with the uptake of low carbon technologies.
2. Reducing the cost of generation and grid-scale storage: Distributed flexibility uses technologies that we would already have in our Net Zero system. Using them flexibly ensures that we can maximise the use of low carbon, cheap wind and solar, avoiding expensive ‘peaking’ electricity generation and reducing investments in dedicated grid storage.
3. Enhancing system resilience and reliability: The methods that we use to deliver distributed flexibility will also be vital for managing high-impact, low-probability events like if we need to re-boot the system after a black out without placing too much sudden demand on our networks.

Distributed flexibility offers tremendous opportunities for consumers to be rewarded for playing a role in reducing system costs, by creating a cheaper Net Zero energy system and through more direct financial remuneration.

Getting distributed flexibility to work for everyone

Distributed flexibility is clearly valuable, but to unlock the true potential of it, we’ve got to make sure that it works for everyone, from consumers and system operators to those delivering flexibility within our markets. There are three steps that we need to think about:

1. Get the flexible technologies installed – buying EVs other flexible technologies is an important step in achieving distributed flexibility.
2. Make it available to the energy system – ensuring that technologies are both capable and available to be used as much of the time as possible.
3. Make it commercial – making sure that we can incentivise the right technologies to participate at the right times in the right places to benefit the whole system.

We can break down how to make this happen into four areas:

1. Start with the consumer

Consumers must be at the centre of a fair, affordable transition to Net Zero. They are the only stakeholders with a veto, so the system must provide outcomes they value. This needs us to change the way we sell energy – from selling kWhs to selling things that people value – like warmth, mobility and convenience. We must make flexibility from consumer assets almost invisible, with a competitive landscape where service providers compete to provide the best outcomes.

Investment in consumer research is critical to understanding what consumers value in energy services. Our Living Lab of over 4,000 real world homes has been instrumental in testing propositions that make flexibility attractive and effortless for consumers, ensuring that adoption is accessible and widespread across demographics.

2. Build out digital infrastructure

We cannot build an affordable, reliable and flexible Net Zero energy system without a robust underpinning digital infrastructure. Digital solutions must be developed for real-time communication, data sharing, and automation of flexibility services. The Catapult has been working with industry, government and Ofgem for many of these. For example, a centralised data-sharing infrastructure, a better way to register assets and a way to make it easier to access all available markets.

3. Build a Net Zero electricity system

In our recent ‘Innovating to Net Zero 2024’ report, we showed that electricity will need to be the backbone of a low-cost Net Zero energy system. Distributed flexibility can be a tool to both reduce the upfront cost and help to deliver the reinforcement that we will need to build. To do this, they need to know that the distributed flexibility that they need will be available at the time and place in the network that they need it. This involves forecasting demand accurately, understanding the spatial needs of flexibility, and enabling digital controls to manage peak load demands in real-time.

4. Create an outcome-focused market, policy and regulatory environment

We need a revolution in energy retail to deliver the full potential of distributed flexibility. We want an energy system that delights consumers whilst reaching Net Zero. Creating a competitive and innovative market that uses distributed flexibility to unlock profitable business models is a key tool in achieving this. A supportive regulatory environment is indispensable for unlocking new propositions that consumers love, and flexibility providers can prosper from. Increasing spatial and temporal granularity of market signals whilst lowering regulatory barriers to innovators are examples of how to make this happen.

2030 and beyond

Right now, there are some amazing innovators, big and small, working in distributed flexibility. They are fantastic, working hard to navigate the landscape to create profitable business models.

Within our new Enabling Distributed Flexibility for Net Zero report we look further ahead to make sure that they can continue to grow and deliver the outcomes that consumers and the system need. Immediate actions required include establishing interoperability standards for flexibility markets, rolling out a digital asset register, and accelerating access to smart meter data to enable real-time flexibility services. Medium-term priorities involve network reinforcement strategies and revisiting energy market structures to ensure flexibility is rewarded. By 2030, this new ‘frontier’ of flexibility needs to be fully operational across the UK, with millions of distributed assets able to automatically respond to system demands.

Looking beyond 2030, the focus will shift towards enhancing system resilience and expanding flexibility markets to accommodate an even more diversified energy landscape. This will include mechanisms for handling rare, high-impact events like extreme weather. The ultimate vision is a seamless, consumer-centred energy system where flexibility is embedded across all layers, from individual homes to national grids, enabling a cost-effective, reliable, and resilient pathway to Net Zero.