Demand side response with Alastair Martin (CSO at Flexitricity)

What we are saying is if you are a customer or a small generator, then you should be able to use the flexibility that you've got in order to help balance supply and demand in the electricity industry. The problem we're all solving is that electricity is an event not a commodity. In its native form, you can't store it. And so something has to flex so that it could have electricity when they when they want it.

And that are the best thing to flex is the thing that doesn't create a cost and emissions cost. You you you can't bring anything from the merchants to the industrial, to the domestics into the market, unless you're prepared to have revenue agility to move between the different sources of revenue that those assets could have access to and move around as the market moves around. So that's what optimization is, whether you're moving around every half hour, or cleverly posting your bids and offers in the balancing mechanism till you're seen differently every minute or if you're, setting things up on a slightly longer time scale, you're still optimizing.

Hello, everybody. And welcome back for another episode of transmission.

Today, Quentin is talking to Alastair Martin, chief strategy officer at Flexatricity.

If you're enjoying the podcast, please consider hitting scribe and giving us a rating, it really helps us reach a wider audience. And with that, let's jump in.

Alister, I wanna say a massive thank you for coming on the podcast. Doing the research for this. I found that you've been doing DSR for pretty much twenty years. You're you're an o g in this game.

And before we get stuck into flexatricity and all the work, that you're doing in batteries and optimization and power trading and and all of that. I wanna ask you a little bit about what the last twenty years has been like. So could we just go back twenty years to when you started doing demand side response? What was the, what was the situation then?

What was the state of the market? And then we're gonna talk through maybe each half decade about what's changed. So, yeah, twenty years ago, you had this idea before Flexatristi was even a thing. What what what was the problem that you're solving and what was the situation?

Well, the the situation was that large power stations dominated the market and the idea of large renewables growth was a little bit of a pipe dream. Coal gas nuclear. That was your mix. It was one third, one third, one third, and the idea was that Third call.

A third call. Yeah. It was it was about that. Yeah. Yeah. And and and giving nukes a third is perhaps an exaggeration.

They were a bit below that. But broadly speaking, that's that's that's the market is big generators.

What I learned in previous work was that if you're using heat to create energy in a large scale generator of some sort, then you're probably going to have to make a choice between flexibility and efficiency. You can't do both. Nukes aren't flexible.

Coal and gas could both be flexible, but they had to sacrifice efficiency to do it. So if the customer could be flexible, then the thermal industry could be more efficient. That was the challenge that the electricity initially set out to solve. Obviously, we're in a completely different world now. That is no longer the question were who were asking ourselves, but that was it at the at the time. And was the words demand side response or DSL?

Where where did that come from? Did you guys invent that? Did someone else invent that? I think I think I'm there's been a few different names for the same thing, demand response, demand side flexibility.

People tend to ascribe definitions to these things that are too precise. Actually, everyone has a different view of of what those words mean. What we are saying is if you are a customer or a small generator, then you should be able to use the flexibility that you've got in order to help balance supply and demand in the electricity industry. The problem we're all solving is that electricity is an event, not a commodity.

It's in its native form. You can't store it. And so something has to flex so that people can have electricity when they when they want it. And the and the best thing to flex is the thing that doesn't create a cost and emissions cost when you're flexing it.

And so you you started the company. If I'm got this right, the company was originally very R and D focused.

How how do you make this thing work? Is that right?

We did some r and d. We did a a we worked with a a couple of organizations. We worked with with how what was econects at the time. And I p a now IP economics worked on on the the market and what the effect would be. And I was actually quite surprised on even in that market what the effect would be in terms of national scale electricity sector emissions from from doing this, and it's not a long jump to go from emissions to economics.

Because if you're burning something, you're paying for it. So that that that research really laid the foundation for for why this is a good thing to do. But at the same time, we were developing the software, developing the systems in order to launch, and the contracts in order to launch, and acquiring the capacity in order to launch. Now when we went live in in two thousand and eight, we were still pretty small.

The market environment then was still very much as I've characterized it. We were playing against big power stations. Our our our main game in our first winter was catch a falling nuke. The the the the the nuclear generators had a bad winter that year for whatever reason.

And we were regularly called upon when they when they when they sat down. Probably worth mentioning. So, but many moons ago, I was working at Kiwi Power. And Kiwi, there was Kiwi and Flexatristi and Limjump and Open Energy.

There are a few of these companies doing similar things. And, yeah, it felt like David versus Goliath. He had the national grid to deal with who, for for many rational reasons, still stuck in the mindset that have changed a great deal now. It's taken a mindset of big, you know, thermal things, spinning things, and then trying to force flexibility into a market that didn't really want it there.

It was hard, hard going. What what about the two thousand and tens? So, DSL becomes a thing, and what's Flex Christie doing in the market then? We we were developing the next thing.

So we'd we'd already got our heads around short term operating reserve. The store. Yeah. Store.

Which still exists. Some of these some of these services are still still running it when you actually look at National Grid's roster of things they pay for is a remarkable range of odd things that Most people are forgotten about still being still charging a bill to national grid. National Grid were okay. To be fair, they were all right.

They they they they have they have raised their game. They've picked it up, but they've encountered new challenges. They've they've they've solved them, but they were all right then. They weren't they weren't enemies.

They were they were they were helpful. Actually, I would say when you guys in in in Kiwi Power came along, that actually helped as well. Because then if we were knocking on somebody's door, They either had already heard the message or we're about to hear it again from a different voice, which meant that we were cross validating each other, and I'm sure in in in in in QA, you felt the same thing. From the point of view, the energy managers, it it it it lifted things then.

But then what we what we then realized was that the types of capacity that we were coming into contact with was becoming more diverse. So more in terms of combining power, which previously I hadn't really thought of in flexible terms, and also more in terms of the frequency response of, capable industrial load.

And so developing that, and then when we brought the frequency response capability in, we had to go twenty four hours. Because frequency response is a is is a twenty four hour activity and we had promised our customers that we could always we would always know what was going on and they could always call us up. What does that mean? To you had to go twenty four hours.

I said you had to build a twenty four hour desk that ran three six five. Yeah. Yeah. Yep.

Yep. And it's always the the short straw, is it the long straw for who covers hogmanay and who covers Christmas Day. They they actually they like it because, well, they get paid more. So we've we've never had any difficulty covering the the the the the difficult slots.

And, yeah, we've we've been twenty four seven since then, without the break even in lockdown. Can we just talk about word words for a second? So demand side response, There's the the term aggregator for a while because a lot of contracts with natural grid were ten ten meg or above, so you get to put a lot of different sites together. And then then we have optimizer, the idea of being an optimizer, and then who knows what the trader, what do you think about the verbiage or the words that are used to describe these kind of activities?

What's your take on it as someone who's seen it all before? Right. So you could say an aggregator is is an optimizer that optimizes capacity, some of which is not big enough to work on its own, and you can say an optimizer is a grown up aggregator.

You you you can't really separate the the the two activities.

You you you can't bring anything from the merchants to the industrials to the domestics into the market unless you're prepared to have revenue agility. To move between the different sources of revenue that those assets could, have access to and move around as the market moves around. So that's what optimization is. Whether you're moving around every half hour or cleverly posting your bids and offers in the balancing mechanism till you're seen differently every minute, or if you're setting things up on a slightly longer time scale, you're still optimizing.

And you're doing that with quite a lot of variety. Your your control room has to be able to cope with all of the optimal optimization decisions that your traders and your that under data people have come up with. All of those decisions have to match what the customers can and can't do. We've got plenty of capacity that can't do frequency response.

For example, we would be, fools if we tried to put that into frequency response play. And and and likewise, if if one of the frequency response markets is a bit on the on the low side, in a particular period, which could be just a half hour long in in the near future, then it's four hours long now. It's a short period. You've got to be able to go after the revenue that is on the table for that that type of asset.

So we all optimize, or you're not in the game.

And so what about Flexristi's portfolio right now? What you guys started off doing? You talked about combined heat of power, and I know you had some other behind the meter assets, lots of lots of different types of assets, d s typical DSL assets. So generators and, you know, backup generators, all sorts What's the portfolio look like right now?

And I'm not it'd be good to if you could put some numbers around it, but don't worry if if that's too much. Because I know that there's a lot of There's a lot of double counting in these things, and there's a there's a lot of bragga wats around the place. So I'm not I'm not gonna I'm not gonna accuse you of doing that before you've even done it. But, yeah, can you give us an idea about what Fekest is portfolio looks like right now?

Yeah. So it splits right now between two different categories of merchants, which is there's obviously the batteries in in in quite large quantity and peakers in quite large quantity. So these are assets that exist for for for power purposes.

And maybe two different categories of industrial commercial. One of which is companies doing the day job who have some flexibility in there who could interrupt production. Or who could interrupt chilling or or pumping and the combinedient power and the combinedient power tend to sit. The the the behavior of CHP tends to be just it leans a little bit more in the kind of merchant direction.

That's the split just now. We've also got obviously As we've said, a few times, we got into involvement with the domestic side not directly, but through partners who are specialists in domestic customers and domestic side flexibility.

And that that I think is gonna open up a a big new stream of activity alongside those two major groups. So a range of different asset types from behind the meter DSR to big gas peak of range of sizes, but gas peakers and CHP, and then also it's been difficult to ignore flexibility in the market with grid scale batteries. That's clearly been an important part of your strategy.

How are you thinking about that? And, you know, what is the strategy for you guys in in grid scale front of the meter, utility scale batteries?

Well, look, first thing is batteries in the future of the GB grid are extremely important. We have seen massive growth growth beyond, I think, most people's expectations, but there's absolutely strong fundamentals behind that growth. So we're going to see more of it. And we absolutely intend to be in the forefront of that in terms of developing that that capacity bringing it on, I should say we are not developers.

We don't own the assets. We work for other people who do own the assets. That's always been our position. And we, we we we practice a form of revenue agility that is quite automated, quite IT driven.

There's there's a lot going on behind the scenes to make those choices in between the the different services at the at the at the tendering stage in making use of the new auction capabilities that National Grid's bringing in. And pricing and placing optimally, I wouldn't say aggressively. It is aggressive, but it's it's it's not necessarily chasing the highest price all the time. That isn't necessarily the the the the commercially aggressive strategy because that with with with with battery developers, These are a big investments.

A lot of money's gone down. You have to meet their return requirements. That's fundamental. And that actually makes for a very It's a very good asset class to be working with because you're focused and you you you're absolutely available to develop the tools you need to to to optimize that.

And I have to say, so Andy lower chief exec, I I I really enjoyed the the look on his face when he saw the modal deep dive on flexatricities.

Battery optimization techniques, which, is a great surprise to be seen in that, absolutely delighted, and, reveals a lot of what we've been getting up to there. Yeah. We'll put the we'll put the link in the show notes. Yeah.

We sometimes see things that are very unusual and write about them. And, yeah, there's a lot going on. It's actually quite a long piece, but we'll put we'll put a link in the show notes. You wanna have a look.

So I wanna talk a little bit more about Flex Trusti before we move on to things like your wish list, which is a blog post that I enjoyed very much, last year, and I wanna talk about that, and your view on the market in general.

You guys recently got acquired. First thing to say is massive, congratulations on, you're now part of a bigger group. Do you wanna just talk a little bit about that and and how that works and what that means for you and your customers? We we we've we've actually been acquired twice. Quinnbrook acquired us from from from from from Malpic.

So Quinnbrook has a they obviously, they're they're Australia and they're the US, and they're also in in in GB, but their their their involvement in GB is pretty strong. And quite diverse. And that makes them, actually an extremely good owner for flexibility because there there's no market that's too technical to talk to Glenbrook about.

They're they're they're they're they're they're they're moving in with, this sort of inertia provision. They're, on the front foot with the solar storage collocation piece, which is a big part of, I think a lot of people's business plans, and we can't baffle them with anything.

Because they've already thought about it. And if they if they haven't thought about it for GB, they've encountered it in Texas or they've counted it in in in in in Australia, and and they understand the concepts. And and I think also the the the the involvement of Quinnbrook. It's enabled us to trade in a very positive front footed way you cannot optimize if you can't do that.

And that's one of the things that's some it's it's the nature of the market. It is there is the case that we spend most of our time thinking about that period from the last day to the last second, but nevertheless, we have activity prior to that in in the curve, and you can't do that unless you have critical mass. So quinnberg gives us critical mass. It's extremely important for us.

And there's there's what there's one other question I need to ask, which is that your that that flesstristy is it also is part of Kimberbrook, and so is Habitat part of Kimberbrook. You guys operate in very similar spheres. Right? You're both through optimization stuff.

You both have a very trading focus. Your your wholesale market and merchant experts. That's that's of things you both push. So how does a relationship between Flex Justine and Habitat as part of Quinnbrook work?

We are within the Windbrook, overall operation. We are owned by different funds, and that means that there isn't. We don't have any operational relationship with with with habitat. We meet them at the same shows that we would meet you.

And I think once or twice, we, there was a there was one I forget exactly when, but we we did a on a podcast with print Quinnbrook being interviewed as, you know, two separate companies talking about similar aspects of the market. That they have their own, emphasis in in in habitat, the electricity operates entirely in the GB market. So we specialize in this in the market arrangements here. But we're diverse in our in our asset types.

Habitat would probably describe themselves differently, but I'll I'll let them do that. Yeah. Yeah. Yeah.

Perilous to describe someone else's business on their behalf. Oh, yeah. Alright. So I wanna talk about your wish list.

You wrote a piece. I wanna talk about two bits of it. But for the the the guys who are listening, you've you've written a lot in general about the market of the last decade or so, but you did you wrote a piece about just under a year ago, about a wish list, and there was five bits in there. And I can't remember all the five, but there's two that I want to talk about.

And this is what you wanted for the market to change in a way that was good for for decarbonization, lower cost to consumer, all the good stuff. The two that I wanna pick up on is the end of mandatory frequency response. This is a bit of a controversial topic, so I really wanna get your thoughts on that. And also, dear, does it a bit of a know about DNOs.

So do you wanna just riff for a second on MFR? What's the problem with MFR? Actually, well, firstly, what is it? And then what's the problem with it?

It's a licensed condition that is applied or not applied according to the technology type when when you build a power station of any sort, you may or may not be required you apply for your generation license to incorporate the capability to deliver mandatory frequency response. And it's in the the connection documents you signed, the bilateral connection agreement, the the the Bella if you got one of those or, or or or whatever applies to the station that that that you've got. And it says that you must deliver a particular set of modes of frequency response and, it's required. And the only thing that's not mandated about it is the price.

Now mandatory frequency response. So there's the price that you can you can post your mandatory frequency response price continuously every half hour. It's quite a different number, but that that's That's not what makes the difference in terms of the economics of mandatory response. It's designed around thermal power stations.

So you got a gas station that can generate seven hundred megawatts. And grid needs two hundred megawatts worth of frequency response. They have to turn you down to five hundred megawatts. So you may have maybe a forward sold seven hundred.

And you're getting a mandatory instruction to turn down to five hundred in order to be able to go up and down to two hundred. That means the grid has to bid you down, which comes at a cost, And so that creates a kind of a very opaque market where it's very, very difficult to know what Xela is that you're competing against. On the other hand, the types of, frequency response that your your typical battery will be providing, you you sign up and you offer a price to do the response, and that's it. It's as simple as that.

You're doing response, and it's this number, and it's this period of time.

So okay. Different different approaches for different technologies what's the problem and the problem is that mandatory frequency response was a a an opaque market that merchant developers couldn't get into. So you build a battery, you you you would really struggle to get into the mandatory market. And it's it's big.

Right? It's a few hundred megawatts. It's not like a little side side hustle. It is a a third to a half of the frequency response market, something Not used to be all of it, really.

So, the the my mandatory response existed before firm frequency response, FFR, which is now is now coming to an end in the dynamic form. So You're gonna have an FFR, a funeral for FFR, I don't know, though. It's it's it's finished. We're gonna have a, like, a wake.

But when does the color missing from your chart's name? Yeah. Yeah. It's a big problem.

It's a big problem. I actually got a I've got a lot of time for So it was a fantastic service, but it meant it meant a need. And and but it also it was it was fascinating price discovery. You see things going up and down depending on on on on on on provision.

The month ahead contracts are a little bit tight in terms of the procurement time scale. You're you're you're not really seeing clearly what you actually need. The the matters of the market was it was held on. I think the management market is now less important, and I think we are beginning to see the end of it.

And I I think really you've got batteries to thank for that because that's the technology that's come in with the capability and crucially the firmness to to be able to to answer that need. And the firm the firm part of firm frequency response is something that people don't often think about, but it's the most important part of it when a frequency event occurs, the grid is sliding towards a cliff. And you have to be able to catch it. If you signed up to catch it, you have to achieve that delivery.

And so that that is why I have never really been been bothered by the fact that the dynamic frequency products that we now are familiar with look very much like battery products. That's because batteries are good at this. And I'm cool with that.

It's a real it's a real problem. Right? That so that the the approach from the the approach in designing these services is you have to be agnostic, technology agnostic because you want, a highly competitive market and you want everyone to be able to play. Would you actually, I get.

Right? That's exactly what we're talking about with the mandatory frequency response. Yeah. In that it was designed for thermal stations, we want batteries to be able to play in it.

So we we if we're gonna you can't have our cake and eat it too. So if you want it to be designed around f being agnostic, that's one thing. But then if batteries come along and they can essentially do all of it, Anyway, whatever you design, they're gonna be able to do it unless it's like a ten hour service, which no one's gonna procure. It does make things look like they've been designed for batteries even though they may have been, I they would have been designed agnostically.

Okay. MFR, we've covered what it is. But what do you what do you want? What do you want to happen in your wish list? So I think it's fading now and I think National Grid has seen the exit door for it and I'm quite content for them to gently ease it out. The fact is we're going to be losing the the gas stations over the next few years because, that's what net zero means. And if we the ones that we don't lose are gonna have to go c c s, c c u s, and the economics of c c u s in my mind are going to favor base load operation.

Rather than constantly shifting the dial. So it it is it is on it is on the way out, and I'm I'm quite content with that. And the the second one I wanted to ask you about in your wish list was there's a bit about DNOs. Do you wanna just talk about that for a second?

Yeah. I think the the the interesting. Some of the DNOs, this so DNOs DSOs, I'm not sure what we're supposed to call them now. Some of them have been great.

They're they're really picking up from from from that. That was in my Christmas list, I think, if if I remember right. And I I I was looking for the distribution networks to pick this up and start developing demand response, options to to help with managing the network and to potentially be a be a a way of deferring network build or even avoiding network build and to make best use of renewable energy where it's generated so that you're not curtailing solar and and and and and that they are doing piecemeal. They're not all the same.

They have a program going called Open Networks, which is seeking to standardize things, and and that as it goes is is good. But it's not through open networks. They're they're they're making the achievements that count as individually.

Certain d n o's are are absolutely stepping forward and bringing bringing capacity up there we're regularly seeing. I think a lot of people are are are are are are are seeing these announcements of new procurement rounds for flexibility I was actually particularly taken with the, the business separation concept that, UK Power Networks came up with. Bit like what FSO is is is is is doing with national grid. And I think that that separation of function from owning the wires and operating the system is a is a good model. It's not the only model. I I I wouldn't be to Doctorinal about it, but it is a good model for giving flexibility a fair shout at, being a system management tool.

I wanna ask you about a couple couple of more hot topics while I've got you. So virtual lead party, VLP, When it first I I can't remember when it first, when we first started talking about it being a bay VLP. I think it was about twenty seventeen, twenty eighteen, and it actually happened some twenty nineteen, I think, And what was the plan for VLP and has it delivered on that? So, yeah, we took, What's what's a VLP first?

A lead party is somebody who presents volume into the balancing and settlement code like a supplier. That's a lead party. You've got a whole bunch of meters. You're the lead party for them.

That means you're responsible for A virtually party takes responsibility for the Delta for the small changes for the occasional ups and downs of consumption and generation that you would deliberately instruct in order to deliver flexibility. The VLP concept as introduced is purely for the balancing mechanism.

Is a way for national grid to access capacity fast without having to go through the sort of supplier processes. So it used to be that in order to answer to take part in the balancing mechanism, you had to get supply license. And that getting supply licenses is is tricky because it's highly regulated. You need this this credit cover, caps all you need, and all of the stuff that is designed for big suppliers. Then for a small, medium sized company to do that was in was almost but it was very onerous, and it was almost punitive. And so the virtually party came out as a way for smaller companies and smaller actors to enter the balance mechanism. So what ended what happened?

Just can I clarify one point, which is the flexibility is also a supplier? So we did go through all of that complexity. And in fact, becoming a supplier is now harder than it was, not easier. Because of the supplier attrition that happened last year, whichever one's aware of, I think.

I'll just draw one distinction between, suppliers and aggregators optimizers virtual league parties. Even when they're the same company, there is if you're a supplier and you're a conventional supplier whose job is to either supply to to to to customers so they can run their business or or keep their fridge going or whatever or buy their solar output as they pay off their investment in a big solar farm or whatever. If you're a supplier in that respect, your board meetings are taken up with the long term, with the hedges, with the collateral, with the exposure to risk in the market. With the

way various different financial instruments that you need to have in place in order to deal with the physical flows. And that's huge, and it will take up most of your time. If you're an aggregator or a virtually party, you spend all your time thinking about the last day to the last second. You're you're you're all all your optimization decisions are taken in that time scale.

And your your focus is on performance. How well did we do? What did we achieve? What what what money do we do believe on the table today or in the last half hour?

And so that the style of your board meetings is utterly different and that the the nature of your teams is utterly different. And and if you want to do aggregation and optimization inside a conventional supplier, you're always going to fall into that that that huge problem of how do you move something that has to be necessarily so, so it's so large and cumbersome into such a nimble market. It's very, very hard to do. So the reason virtual lead parties needed to be created was because in the main suppliers can talk it but can't do it.

They they can think about it and they can imagine it, but they can't organize, the the types of businesses that do achieve it. Now there's one major supplier that's had free goes at this. And in in in each of those occasions, what they've done is they've taken a small team of people, quite intellectual people, and quite dedicated people, given them this one task. And they've done actually quite a good job But in each of those occasions, that team has folded back into the mothership and ultimately that the thing the thing fades a virtually worthy allows you not to do that, allows you to get around that problem.

So just for for in layman's term, what what what we're talking about here is if you are a if if you have a power desk and you're a supplier, or you have a big fleet of assets, for example, and you're trading a lot of power. Then to then create an optimizer on the side for smaller smaller batteries or smaller DSR. You need to be a lot more nimble. You need to sync you need to think like a virtual lead party.

And what you're saying is there's there's a there's a utility in your mind that's done that three times. And each time the the nimble agile bit of the business has been folded back into the risk averse hedging massive volumes power trading desk. To be fair twice.

Twice.

Can we say who it is? I've got no idea. No.

Okay.

They know who they are. Okay. Okay. So so that that of course that happens now as I say, Flexrophy is a supplier, but actually we only supply to particular types of sites. So CHPs and batteries and peekers are the main ones right now. Now if we, for example, as as electricity was to we're to try and get into the the supermarket space and sell electricity to supermarkets.

What is that? That's that's a billion pound a year market. That's what the electricity that they consume. And how large and how complex and how cumbersome would we have to be to collateralize a good price for electricity over two years if it's a billion pounds a year.

And would we still have any bandwidth at all to talk about flexing their fridges? Flicks in the freezers at the back of the store, working on the HVAC, none whatsoever is the answer. So we only supply specialists where where energy is a big part of what they do. And where this this this optimization approach is actually what they need to make their their their their businesses run well.

It's a tricky conundrum, isn't it? You almost don't almost wanna be one or the other. It sounds like the no man's land in between is where you can get unstuck and lose a lot of night's sleep. Well, I'd I'd nobody stays there very long while we have a supply license, we have it.

We're an aggregator in the balancing, mechanism of as as a as a virtually party and as a supplier. We're both in the BM, and you'll see us as both in the balancing mechanism, but we also supply balancing services through separate contracts, and we work with DNOs as well. So we really sit at that that end of the of the of the spectrum there. And we do not attempt to go after.

We're not trying to chase for for energy accounts of Tesco or Astra or Sainsbury's. That's that's not our model. Okay. Last couple of hot potatoes, capacity market.

What do you think of it?

That's a Just gonna love a grenade. Yeah. So See see what happens. Well, I I I I sat in the as it was the deck dungeon in, it was fifty five Whitehall or something like that.

At least these grim old rooms in in the various committees that we're trying to build the capacity market. And I I I I sat there going going through all the details with everybody else. And and and with with with some demand response companies, competitors sitting alongside me, and we were all lining up trying to get the capacity market into a way that would really work for for for flexibility and for for demand response. And we only just about succeeded.

So it was good enough for us to go in the front door. We didn't take the the side route, the transitional arrangements. We went straight at it from from from from year one. So we we were we were first in terms of bringing industrial commercial capacity into the c m.

And at the time, we've said, well, two cheers for the capacity market. It isn't perfect, but we can work it. And and we have I think a lot of the things that we said at time were wrong with the capacity market have now been changed, and that's pretty much exactly ten years ago. The famous Christmas Eve consultation was I think Christmas Eve twenty thirteen.

And so many of the things that we we we had problems with then have now been changed. And I think that's a that's the nature of the industry, it does take about ten years to win an argument, in in this game. But if you knew you were right then, you're probably right now, unless what's changed is the nature of generation and low carbon power because that part has shifted. Is it the right instrument going forward?

Yeah. I'm not so sure because the capacity market is a one trick pony. And as we all said at the time, to we had we had access to to to to quite high level decision makers at the time. We we all from the demand response side of the business.

Said you are you're you're baking in something that is not gonna meet your environmental, objectives going forward. And and and so it is. So is the c m the right uh-uh product going forward? That is absolutely worth questioning right now. And in the context of Rima, perhaps we'll see something that comes forward and makes more sense for the low carbon future. I'm actually totally conflicted on it because some of the outcomes capacity market have been terrific for getting assets built and is active like a subsidy for lots of technologies which are essential for decarbonization.

So the thing that I really care about is that. And so that I think is a good thing. And a a lot of the original assets that were built just don't run. Right?

So they're only comparable to runs. They sit there and take the payment. I'd like to see a lot of those sites repurposed. Yeah.

And that's for us over time. They they they they they may well be. I do think and I know I have brought this back to batteries a few times in in in this discussion. And and I'll do that again because it is significant here.

I think the capacity market was quite snooty about batteries.

I I I think it it it so it has this concept of four hours.

The idea is a system stress event is four hours long. It's not true. A system stress event is a a zero duration event. It never happens.

It's never happened. There are a hundred and one reasons why the capacity market is set up in a way to make sure that an actual systems stress event, is astonishingly unlikely to actually occur. You may well get blackouts and we have had a blackout in that period as as as as as but you won't get the the defined term of system stress event without an awful lot of very unlikely things lining up together. So the capacity market doesn't work because it delivers four hours.

It works because it because it takes test capacity on a semi regular basis. That's why it works. And the the the whole thing about duration was a bit of a red herring.

I've never thought about that before, that that essentially what you're paying for is those three tests a year. To to know that it's there that that you can switch them on if you need them, which is a I've I've I've never thought about that before, but you're absolutely right. If you if you think about that a little bit further, and you look at the beast from the east, which as well know was it was a was a was a difficult time. And it actually there was actually gas supply issues as well as gas consumption issues during that period.

In in in the beast from the east, it was also very windy. That was a record breaking day for wind generation. And at at that time, Foyers, crew, and feeder head, any thermal generation, even even torn s and possibly hundred percent if it was still there. None of that could have done anything beyond what it was doing and possibly was even squeezed there because the cross border constraint made that capacity not terribly helpful in meeting the gross demand of g b overall because If you were to turn up Peter head, you would have to turn down some wind. Yep. So so that that is that contributing capacity in relation to the definition of a system stress event kinda not really, but in terms of the defect definition of of of tests, yeah.

And I think that if you look at it in in in that light, the capacity market could have been a bit kinder to batteries. Alright. So now two old blokes talking to the pub being miserable. Let's move on to what's gonna happen in the future.

So we've just had AR four, and unfortunately, the the the the global macroeconomic situation has made that very difficult. So we didn't get the offshore wind that we wanted. And we've got some nukes coming into retirement, in the next decade. So what do you what are you guys?

What's your what's your base thesis in the medium term in the power market?

In the medium term. So what we're going to see is a growth and flexible consumption on the domestic consumer side along with a reopening of flexibility on the INC side that is going to enter into the market on the basis of large growth in low carbon power. Now AR four, yeah, that was problem. No government's gonna repeat that, but just step back a little bit and think about what has been achieved in that period, multi gigawatt.

The the the the sizes of the blobs on the map are astonishing now compared to to what we're expecting. We have an awful lot of renewable generation, and we've got an awful lot that we're building that we're committed to building now. Therefore, on the consumption side, the flexibility that that's required is huge, and it's of longer duration than than the first gen one error and the the the the this sort of current gen to our batteries that that that we've seen. So we're going to see, a confluence of complimentary technologies, coming along EV charging, for example, for the average EV driver is about ten hours a week, something like that.

And that is deferrable demand. You can shift that around quite bit. And if you say you got a two hour battery that's that's fixed, well, you've got potentially you've got the ten hour battery and that's in that deferrable consumption that you could move around. And that's I think what we're gonna see come forward to try to get into that space that that opens up as you as you create longer term or longer duration needs for flexibility.

As that happens, there is also opening up a a a place for more explicit long duration storage technologies to have their first decent chance at establishing a market position. Now now how, how how how well will they do or is is anybody genuinely ready with a long duration story tech that's economically viable? I think I think now there may be. And we don't hold a position in that.

We don't hold IP in that. But the last three to come into the office, have been absolutely viable too with a an with an industrial link up and and and, lots of earnest thoughts about industrial heat. And one that's independent of that, I think there are technologies now waiting in the wind wings that can come forward and deliver low carbon. And long duration, storage options.

So you're bullish on long duration storage? Well, I'm I'm far more bullish than I was this time last year. I was seeing nothing this time last year that was ready to step up and and and get involved. The best bet was hydrogen and we're not gonna see that without, without a a proper policy.

Yeah. It's gonna be really interesting to see the policy frameworks in the next five years or so that make all this stuff happen. And whatever they do, they got they have to go so fast that there is not gonna be perfect. So we have to live with that.

It's it's an impossible it's an impossible challenge, really. To essentially to to design policy and pick winning technologies within the same brushstroke is because of the the urgency of the situation. It's it's a very it's a catch twenty two. It's it it's tough.

You also said pick pick pick winners though, didn't you? Which is a a famous trigger point for for for government. And I suppose the point that most of us Yes. Those of us who sat through the capacity market made at the time and everybody's made in every other context is when you design something, you do pick winners you can't avoid doing it to some extent.

Now for the the best two questions. Well, the last one's my favorite. But firstly, your chance to plug is anything that you want to say to our audience, which is mainly people involved in the battery world in Great Britain and the US. So now's your chance to talk to them.

And then the last one I wanna ask you is your contrarian view. What do you believe, as, that most of the world doesn't. But, yeah, the first one's the plug. You go for it.

Well, to be fair, I've been trying hard to do that a little bit as we've as as we've we've gone on. I I I that that whole business of of optimizing across the the whole revenue spectrum is is at core of what we do.

We are you will see a couple of big announcements coming out from us quite soon. I'm not in charge of the timing of those, but both of them are imminent. And, they they will have an effect on, I think, not just the battery market, but they industrial commercial and domestic flexibility market as well. So I I suppose I would also plug the concept of going through the front door, if I may put it in in in in that sense.

I'm not really in favor of workarounds of little special places for very small trials of this and that. In general. There can be value in doing those things, but, people entering this space need to look at the market and say, and look at themselves and say, I'm big enough to be here. I don't have to cower in front of a giant nuclear station.

You don't you shouldn't be thinking like that. Anybody with flexibility should treat themselves as a grown up in the market and basically insist on their place in it. And I think that by ourselves and and a few others doing that over the years, over recent years, We've seen a fairly large shift in the way National Grid designs its own systems and processes.

And I am really quite hopeful that this new platform that they're they're introducing into the control room in in in in Wokingham is actually gonna make a difference over time. The OB open balancing platform sorry, open balancing program, I think they call it. Make sure I'm not actually sure now, but the LVP is a big change and presence in that market, which we have, we were the first to bring industrial commercial into the balancing mechanism. We were the first active virtually party in our first assets.

Where a front and a meter battery and a behind the meter battery. We're absolutely there, and we're hungry for it. And it's that continuous expression of intent and determination from the part of the people developing the megawatts that I think has been a big part of moving National Grid's own IT such that they can contemplate, this sort of a change. Twelfth of December.

Twelfth of December. Looking at. Watch this space. Last thing to ask you. What's your contrarian view, Alastair?

I've actually to the extent I've already given it, it's that suppliers and aggregators are are are are are are are different.

And and in fact, the the I I do find that I'm much less con contrary than it than it used to be, not because it's we've all learned, but not because I think my opinions have changed. I think it's just because I find myself lining up with a lot of people saying the same thing.

The flexible customer distribution connected energy storage, the the use of flexibility that is beyond the thermal generators to secure networks to deal with local issues, to deal with constraints, and to deal with shortfalls and energy markets is established now. And I'd and I said before, it takes ten years to win an argument in in this business. Well, I've been in it for twenty years. So I've won a few. I'm quite pleased with that. And it's, obviously, it's it's been other people in the market as well saying the same things that's helped to move it to the stage.

So the contrarian view is actually flexibility is essentially a established thing now, and times take it seriously and use it to its full advantage. It's not to deal with all of it. It's not a fringe. It's the issues are in in the the details. All the problems, I think, flexibility providers face are a little detailed, little, twidly little things that didn't have to be a problem, and you just have to deal with them one by one. The concepts are absolutely supported by everyone that that needs to support them.

So that's what we've got time for Allister. I wanna say a massive thank you. We're both doing this from dreary parts of the world. Dreary Austin and Dreary Scotland today by looks of things.

We got raised everywhere. Yes. Thanks for taking the time to speak to us. It's been great.

And I would love we went into quite a lot of detail there and a few things. So if you're listening to this and you want to learn more, please do head to the Energy Academy on on Modo and you can learn more about all these things. And once again, thanks for joining Salister, and we will see you soon. Thanks very much.