Flexibility Visibility Must Work Both Ways

We already know that for flexibility to play a bigger role in New Zealand’s electricity system, networks need to see what flexible resources are available, where they are and what they can do.

But that is only half of the visibility challenge.

Flexibility suppliers also need to see where flexibility might be needed, when it could be valuable, and what response may be required. Without those signals, it is harder to decide where to invest, which assets to aggregate and what capability to build.

A functioning flexibility market needs both sides to become easier to see.

Making supply visible is an important first step

Much of the early work around flexibility visibility has understandably focused on supply.

Batteries, EV chargers, commercial loads and other distributed resources may already be capable of changing when they consume or supply electricity. But unless that capability is visible and connected, networks have limited ability to include it in planning or call on it when needed.

This has been central to Cortexo’s work with Flexviz, which gives flexibility suppliers a way to make available capability visible to networks and the System Operator.

As Terry Paddy has previously put it:

“We’re showing that there is flexibility around that we can corral into one place and access in the future.”

Making supply visible matters. But asking suppliers to show what they can provide without giving them clearer visibility of potential demand leaves the market only partly connected.

Suppliers need to see the opportunity too

The Electricity Authority’s recent flexibility and non-traditional solutions workshops highlighted this directly.

Participants identified uncertainty around where and when flexibility will be needed, as well as the need for clearer signals. They also pointed to the difficulty of achieving investment certainty when signals are short-term, uncertain or fragmented.

That matters because flexibility does not simply appear when a network needs it.

A supplier may need to connect assets, develop APIs, aggregate hundreds or thousands of devices, establish customer agreements and build the systems needed to measure and respond to a request.

Those decisions become easier when there is some visibility of the opportunity ahead.

For example, an EV charging provider deciding whether to aggregate more chargers needs to understand where and when that capability could become valuable. A battery operator may make different investment decisions if an emerging network constraint is visible. Commercial and industrial users need to understand what type of response networks may value before deciding whether changing their load is commercially worthwhile.

The signal does not need to be a guaranteed purchase. But it does need to be clear enough to help suppliers prepare.

Better network visibility supports better investment

This is increasingly being recognised in the wider regulatory discussion.

In its consultation on improving information on high-voltage network capacity, the Electricity Authority specifically links better network information with reducing information asymmetry between distributors and those seeking access to networks.

Importantly for flexibility, the Authority says greater visibility could allow flexibility service providers to identify locations where their services may provide the greatest benefit to distributors and make more informed investment decisions.

That creates two related forms of visibility.

Networks need to understand:

• what flexibility exists
• where it is located
• how much is available
• what it can do
• how reliably it can respond.

Flexibility suppliers need to understand:

• where network needs may emerge
• when flexibility may be valuable
• how much response could be required
• how long that response may need to last
• what commercial opportunity may exist.

Neither side needs perfect information. Both need enough information to make better decisions.

H2: The signals do not have to be perfect

Networks cannot predict every constraint years in advance. Demand changes. New generation and load connect. EV uptake grows. Batteries appear in different locations. Network investment plans evolve.

Greater visibility should not mean asking EDBs to promise exactly what they will procure years from now.

It means making useful information about emerging constraints and potential flexibility opportunities easier to find and act on.

The Electricity Authority’s guidance on distributor involvement in the flexibility services market points in the same direction. Its guidance says relevant network information should be shared even-handedly and notes that ease of access is just as important as making information available.

Better information gives suppliers a chance to prepare before the need becomes urgent. In turn, that can help more flexibility emerge where networks need it.

Visibility needs a commercial signal

Information alone will not create a flexibility market. Suppliers also need a reason to invest the time and money required to make capability available.

This is the other side of the same problem. If networks want larger and more dependable portfolios of flexibility to emerge, suppliers need evidence that useful capability has a path to commercial value.

As Terry has said:

“If networks want certainty, they have to start rewarding or putting money on the table to entice flex out of the woodwork.”

That does not mean early flexibility procurement needs to solve every network constraint. Starting with smaller opportunities creates a signal. It gives suppliers a reason to connect more resources, generates performance data and helps both sides understand what works.

Over time, clearer demand and real procurement can support larger and more dependable portfolios.

Connecting both sides of the market

We are beginning to see the pieces required for this two-way visibility coming together.

Flexviz gives flexibility suppliers a way to make real-time capability visible and provides the technical pathway through which connected resources can respond.

At the same time, local flexibility markets such as Our Energy’s Local Flex Market give networks a way to signal their needs and procure flexibility from service providers. Its marketplace is designed to take that process through onboarding, procurement, verification and settlement.

The two capabilities work hand in hand. Flexviz helps answer: what flexibility is available? A local flexibility market helps answer: where is flexibility wanted and what is someone prepared to procure?

That is what a more mature flexibility market starts to look like: capability becoming visible from one direction and network need becoming visible from the other.

Make the need visible, then let the market respond

New Zealand does not need perfect forecasts of every future flexibility requirement before suppliers begin investing. But suppliers do need enough information to understand where opportunities are emerging and what networks may value.

We have spent considerable effort making flexibility supply more visible. That work remains important. The next step is to make potential demand for that flexibility easier to see as well.

Networks need visibility of supply. Suppliers need visibility of demand. When both sides can see enough to make decisions, flexibility has a much better chance of moving from available capability to a functioning market.

Managing Director, Cortexo Limited