We are witnessing a sharp increase in the volumes of intermittent renewable generating capacity in electricity markets. The demand for flexible forms of generation to manage this intermittency is expected to grow. Whilst it is likely that Demand Side Response, interconnection, and storage technologies will all have important roles to play, flexibility from generation will remain essential. However, some of the most common forms of providing flexibility from generation may be increasingly inefficient. In particular, part-loading of conventional generation can unnecessarily drive up the cost of providing flexibility, adding to consumers’ bills.
In this paper, we set out analysis to demonstrate that using new forms of flexible generation (Smart Power Generation) can achieve significant savings over using traditional forms of flexibility from generation, particularly as the penetration of renewable generation technologies increases in the future.
Electricity market arrangements need to value this flexible energy explicitly in order for new technologies to be deployed. Regulators and/or market operators should review their markets to ensure that the signals for flexible energy are fit for purpose given the significant changes in the generation mix on the horizon. The key arrangements to focus on are market balancing and ancillary service arrangements, and the incentives that these place on market participants.