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First-of-a-kind neutral market platform trades flexibility between local and national markets in the Orkney islands

A first-of-a-kind, local flexibility market trial has delivered almost 24,000 peer-to-peer trades between local wind turbines and homes, as well as providing flexibility services into a national energy market.

The two-year trial, known as Project TraDER, aimed to demonstrate the value of flexibility exchanges – operated on a neutral market platform – allowing multiple assets (such as energy storage, demand-side response, and generation) to realise their full value to the energy system.

Orkney was chosen to trial the exchange, due to the high levels of curtailment of renewable generation on the island, a result of constraints in the capacity of the electricity grids between Orkney and the Scottish mainland, and the Active Network Management system already operating in the region.

The Climate Change Committee recommended that the electricity system needs to fully decarbonise by 2035 at the same time as electricity demand is increasing with the growth of electric vehicles and heat pumps. With balancing costs for decentralised generation increasing (from £506m in 2015 to £1.3bn in 2020[1]), local trading platforms have the potential to facilitate trade at the distribution level with the opportunity to bring wide benefits.

Project TraDER, led by Electron, was funded via the Department of Business Energy and Industrial Strategy’s FleX fund and supported by CGI, Community Energy Scotland, EDF, Elexon, Energy Systems Catapult and Kaluza, as well as National Grid ESO, and Scottish and Southern Electricity Networks.

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Project TraDER: Project summary and lessons learned

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It explored how a single energy source – in this case, local wind generation or electric heaters– could access multiple revenue streams by switching trading between local and national energy markets. The developed platform gave access to new revenue streams for local assets, coordinated local and national actions and improved asset availability for national markets.

Electron created a trading platform allowing multiple markets and market-players to interact and bid for services, including wind generators, aggregators of flexible customer demand, local distribution network operators and the national electricity system operator – with potential markets operating with different combinations of those players.

Jo-Jo Hubbard, chief executive of Electron said: “Orkney is one of the windiest places in the UK and wind farms connected to the local distribution network can be asked to turn off if there is too much generation and not enough grid capacity or consumer demand.

“Unlike generators connected to the national transmission network, they get no compensation. So not only do local generators miss out on revenue streams when curtailed, but clean energy is wasted.

“Electron set out to develop, integrate, and scale a flexibility market to level the playing field for distribution and transmission connected assets to participate in multiple markets.

“We wanted to create a price-driven market, enabled by a neutral market entity, that can accommodate a range of different technologies, including large and small-scale generation, while minimising administrative and technical barriers to participating in new markets.”

Trader concept

The concept of TraDER is based on a Distribution System Operator (DSO) enabled but not operated flexibility market. While other demonstrators are either single supplier led or DNO operated, Electron and the consortium of partners believed that achieving a DSO enabled flexibility market would be best accomplished by:

  • Facilitating a price-driven market, enabled by a neutral entity;
  • Enabling collaborative trading in which a single energy resource can access multiple revenue streams from multiple markets; and
  • Notifying relevant parties of commitments and self-dispatch actions, and keeping dispatch in the hands of existing customer-facing platforms, VPPs, assets, etc.

Two markets defined

Two products were developed for the Orkney flexibility market to demonstrate how the trading platform would operate:

  1. A local “demand turn up” (DTU) product was developed that enabled local generation – two community owned wind turbines run by Community Energy Scotland – to trade during times of high curtailment with 134 homes with electric storage heaters aggregated by Kaluza and two batteries that are part of a parallel project – Reflex Orkney. This provided either a revenue stream for these demand assets or provided them with low-cost electricity. This resulted in:
    • 23,660+ trades taking place
    • 26MWh of electricity dispatched.
  1. ANM Flex – was a national product allowing the distribution connected assets to provide downward flexibility to the national Energy System Operator (ESO), which is currently prohibited as they sit within an ANM zone. TraDER developed mechanisms for enabling these assets to access national ancillary services thereby improving asset revenues and increasing market efficiency and liquidity. This resulted in:
    • 74 assets participating.

The DTU market ran for a year, while the collaborative trading of the two markets was trialled for three weeks in March 2021.

Susanna Elks, policy advisor at Energy Systems Catapult, said: “Both these products were ‘first-of-their-kind’ in delivering distribution level price signals in real time to avoid curtailment of renewable generation and enabled them to participate in a national market.

“Including increasing the use of clean electricity, enabling lower cost local electricity to be accessed by fuel poor local people and should over-time encourage the use of other flexible demand assets – such as electric vehicles or even grid-scale energy storage.”

Sarah Keay-Bright, senior advisor at Energy Systems Catapult, said: “Both of these are considerable achievements with large potential for the platform in enabling a price-driven market moving forwards.

“We’re looking forward to witnessing next steps for Electron and this innovation as demonstration of the platform’s full capabilities will potentially unlock huge value for all GB consumers. Assets will be able to bid into multiple markets and choose the best price and multiple buyers will be coordinated. With this, flexibility providers, including households, will be able to access the full value that their resources can provide to the system”.

Stuart Fenner, Head of Energy Trading Services at EDF, said: “TraDER is leading the way when it comes to developing local markets to secure balance and stability for the transmission and distribution networks, creating value to customers and helping Britain achieve Net Zero. The achievements and learnings from this project are a big step forwards”.

Lessons Learnt

TraDER provided crucial learnings for future innovation projects, with the following key outcomes:

  • TraDER is a first working example of a DNO/DSO-enabled market that was operated by a neutral market facilitator and not a DNO/DSO.
  • The project provided a first example of a DNO operating an ANM system enabling a market by providing network security against flexibility non-delivery (as an alternative to prevention of market participation due to exclusion of ANM-located DER for some ESO products/markets).
  • Through the development of the local constraint product (DTU), TraDER has successfully demonstrated trialing of a trading platform hosting a real-time peer-to-peer market trading physical energy. This could be a world first and is certainly a major step forwards for transactive energy.
  • TraDER has proved that the alleviation of constraints can be handled by market solutions via trading platforms.
  • TraDER has shown that trading platforms can increase access to revenue streams for distributed energy resources, particularly those located in front of or behind transmission constraints. Such actions were largely not permissible before the project.
  • The TraDER project has increased the TRL of market platforms. The project has improved the knowledge and understanding of how these may operate in the future, the value they could add and the current barriers to their operation. This has started to have impact across the project partners. For example:
    • Elexon stated that their upgrades for settlement processes will be better future proofed due to the understanding they have gained from the project.
    • SSEN’s new ANM upgrade will be better suited to future trading platforms due to the work the project has done with them to create an ANM technical specification which fits their needs. This technical specification could be a starting point for other DNO ANM upgrades.

[1] Source: Elexon

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