P415: How to Wholesale

There are two types of grid flexibility: grid services, and load shifting.

Grid services are all about keeping the grid in balance, at the local or national level.

Load shifting, on the other hand, is about responding to price signals: buying energy when prices are cheap, and selling energy when prices are expensive.

Until recently, distributed devices, like EVs and heat pumps, could only participate in grid services in Great Britain. It was something, but was a bit like eating a burger without the burger (The Guardian would approve).

A recent change to Great Britain’s grid rules has fixed this. P415 (named after the code modification) allows approved flexibility providers like Axle to sell flexibility on the wholesale electricity market, unlocking load shifting. Axle was the first to participate in the GB wholesale market via P415, and is thus far the only participant with the ability to participate via smart metering and asset metering. Bring on the burger.

Context

Electricity can be bought and sold in two different contexts: the retail market, and the wholesale market.

The retail market is where consumers buy electricity: consumers pick an energy supplier, and agree to a tariff. It may be split into a day (peak) and night (off-peak) rate, but it’s typically simple and predictable.

The wholesale market is where the energy supplier buys the power that they then sell on to the consumer. Prices change every 30 minutes. Price fluctuations are a feature, not a bug, of this market: they signal to participants (e.g., a gas power plant, or grid-scale battery) when to provide or consume more, or less, energy.

Consumers are intentionally shielded from this volatility, because most of us are unable or unwilling to handle potentially large spikes in our energy bill (this is what happens when it goes wrong). This is broadly good, but comes with a downside: we don’t have an incentive to, say, dynamically adjust when we do the wash, because our tariff rates are fixed far in advance.

The solution

P415 is an elegant solution. Consumers can continue to pick the energy supplier, and tariff, of their choice, with the resultant predictability. P415 then allows consumers to sell flexibility on the wholesale market, via an approved market participant. Have your burger and eat it too.

This unlocks an important route to market for demand flexibility, while ushering in new competition. Energy suppliers no longer have a monopoly on accessing the wholesale market on behalf of consumers, who are now free to sell their flexibility to the market participant of their choosing.

How it works

P415 incentivises participants to shift energy consumption from expensive to cheap periods. It does this via Deviation Volumes. A Deviation Volume is the difference between how much energy you were expected to consume in a given 30-minute period (your baseline), compared to how much you actually consumed. If you reduce your consumption during a high-cost time period, you create a Deviation Volume, measured in MWhs.

The VTP can sell this Deviation Volume on the wholesale market. The wholesale market comes in many different forms. In this case, the ‘market’ is typically the day-ahead or same day (intraday) as the time in which the Deviation Volume occurs. The Deviation Volume can be sold for the wholesale price of electricity at that time.

In summary, it looks something like this:

Unlike other markets, this isn’t centrally dispatched. VTPs can sell Deviation Volumes whenever they’d like; they’re not waiting around for the grid operator to trigger an event.

How does this work in practice? At Axle Energy, we already participate in in the wholesale market via P415 on behalf of our partners. We optimise devices - like EV chargers, batteries, and heat pumps - to minimise demand at times of high cost, generating Deviation Volumes. We sell these into the wholesale market, generating cash for our clients and their end users, who are now directly rewarded for shifting demand away from peak periods without any downside exposure.

The nitty gritty

P415 is operational, but it's not exactly user-friendly. To benefit from it, you'll need to work with a VTP who can jump through all the hoops to get your flexibility to market. Luckily, we're expert hoop jumpers.

• Eligibility: a meter must be ‘half-hourly settled’ to participate. This means that the supplier is actually using the half-hourly data from the smart meter to buy energy on behalf of the meter user, rather than a fixed daily profile. Today, most commercial & industrial meters are half-hourly settled, but most residential meters aren’t. Every smart meter is expected to be half-hourly settled by 2027; in the meantime, it’s at the discretion of the energy supplier. (Axle has raised a rule modification, P483, to remove this defect). We have the burger, but not yet the fries.
• Metering: metering is per 30-minute settlement period, and can use data from the smart meter or an asset meter. Asset meters must be COP11 compliant.
• Market access: market participants must be approved as VTPs and as trading parties with Epex and/or Nord Pool. If using asset metering, the market participant must be approved as an AMVLP, AMMOA, and (AM)HHDC.
• Supplier compensation: Suppliers are compensated for VTP activity, to ensure they’re ‘made whole’.
• Imbalance: if bought/sold volumes don’t equal delivered volumes, the VTP will pay (or get paid) the System Imbalance Price for the under/over-delivery. This process works the same as other types of market participants, like energy suppliers.

Takeaway

In the UK gov’s recently released ‘Clean Power 2030’ plan, distributed flexibility featured prominently, with a required 12 GW by the end of the decade. P415 is a critical enabler: for the first time, distributed flex has direct access to the largest and most valuable market for flexibility.

Axle is the market leader in distributed flexibility. We were the first to participate in the market, and thus far the only market participant fully qualified for both smart metering and asset metering. We’d love to chat about how we can help you participate.

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