Demand Side Innovation: The Flexitricity Story
Flexitricity was registered as a company in 2004 with just one employee, founder Alastair Martin. With hard work and grit, the business went operationally live in 2008, helping its clients generate revenue from distributed energy assets. Headquartered in Scotland, the company now employs 130 people and is continuing to grow.
GridDuck spoke to Alastair about how demand-side energy can help keep escalating costs down and his ambitions of getting into the nascent domestic market, which would significantly broaden the company’s scope.
Alastair Martin, Founder at Flexitricity
GridDuck: Flexitricity is a pioneer in demand-side energy. What made you decide to start the company when you did?
Alastair Martin: Not long before we were founded, California went through a famous electricity crisis [2000-01] that caused rolling blackouts. At the time I was working in the water industry, a big energy user, and it became obvious to me that energy users are better at being flexible than large power stations. These were used as the main source of reserve energy in those days. I took the view that what was needed to close the gap was a means of aggregating the monitoring and the control of demand-side energy. If you could control the flexibility and deliver that in large, manageable chunks to the system operator, the grid, you’d be onto something. So that's where Flexitricity came from.
We started off working with industrial and commercial users and it's still an important part of what we do. We help National Grid manage peaks and high demand and take off discretionary demand on a commercial basis. Our portfolio has grown substantially and now also includes larger assets such as utility-scale battery storage. We aggregate the assets in our ‘virtual power plant’ into sizeable chunks for the grid, distribution networks and the energy markets, to maximise revenue for our customers.
G: You are now looking at getting into the domestic market. What opportunity do you see there?
AM: When Flexitricity began, the idea that electric vehicles would become a major energy user was not credible, but domestic customers will soon have their hands on large flexible electricity loads, such as EV charge points and heat pumps. It creates an opportunity to monetise this in flexibility markets and there’s a need to do so, because the grid can't really cope without that type of demand response.
For example, if someone is charging their EV and you pause the charging because the grid has a problem, they won’t be aware of it. But if you were to pause someone’s shower instead, they’ll definitely know about it and they won’t be very happy. Some things are flexible, and some aren’t. Our job is to find the things that are flexible or monetisable for the homeowner, and to get value out of it.
G: Your scope has broadened since you started – what else has changed?
AM: We started in the days of big power when we were dealing with large coal, large gas and large nuclear; those were the main sources of electricity. Now, the latest record for wind generation is twice as much as the whole nuclear fleet has ever achieved in this country. Even at peak, they’ve never beaten those numbers. So we’re working with varying renewable generation and we've got a high injection of ambient energy. It makes the business of managing supply and demand very different than it used to be.
G: Given that so much has changed in the last 20 years, what are your priorities today?
AM: The portfolio and the rules need to change to bring domestics into the balancing of supply and demand. We trade in the wholesale markets, where our main focus is on the day ahead and up to the last second. That's where we're active. But for 23 out of those 24 hours, we can only trade certain types of assets. We're currently engaged with others in the industry, trying to crack open a set of rules that would allow us to trade all capacity in the wholesale market, which makes it far more liquid. Currently we’re also focusing onboarding a number of large battery storage assets.
G: You work with a range of clients, from Asda and cold store companies to agricultural sites, hospitals, water companies, merchant battery owners, recycling and data centres.
AM: We are in multiple sectors. For our clients, it’s all about figuring out what they have that's flexible and not getting distracted by the things that aren't. In Asda, for instance, we’ll be active on in-store fridges, but we won’t be turning off the lights, so that's a version of that distinction. We discuss what’s flexible with the owner of the site, and you have to respect the outcome of that because they know their business better than anybody else.
I think our clients understand that an electricity market full of flexible customers will be greener than one that isn’t, and that the emissions they save are good for everyone. They also understand that when wind energy and solar are available, they should put them to work doing something useful. But making the energy industry more efficient doesn’t go on your ESG report. So, it comes down to saving revenue and if it's not working for them commercially, they'll stop doing it. Thankfully, for many businesses, it’s a lucrative undertaking.
G: Do you think the demand-side market is changing fast enough?
AM: It's not going fast enough, but it is growing and changing, and there are some breakthroughs. I think what this winter has done is thrown into focus the value of ad hoc demand response. For example, National Grid has instituted an ad hoc product called the Demand Flexibility Service.
DFS works on the basis that if you’re consuming, then that's when you're flexible, and if you're not consuming it doesn't matter because you weren't loading at the peak anyway. So it's looking at things pragmatically. It's the first time National Grid has had a proper goal of procuring ad hoc flexibility from customers, and we’re keen on that because that is the next big breakthrough.
G: We’re in the middle of one of the worst energy crises in at least 50 years. Do you see demand-side energy helping to mitigate some of the effects of that?
AM: Cost is cataclysmic. Going back to California’s electricity crisis, it was estimated that had peak demand been lowered by 5%, it would have taken 50% off the price and this was backed up by studies at the time. Now, whether 50% off the price makes its way onto customers’ bills is about market structure. Many of the benefits of demand response get shoved into a pot and stirred long before the customer actually sees them, so these can be hard to discern. But we know that demand response has been keeping the price down and we know that it can continue to do so.
G: What’s your advice to others looking to innovate in this space?
AM: I tend to concentrate on problems that I can solve. I prefer to sit in the land of the possible and adapt regulations, rather than throwing everything away and replacing it with something new. It's an evolutionary approach that will deliver a revolutionary result. Let's not delay making changes because you've got a fantasy about how much better things can be in some idealistic world. So just go and get on with the big stuff. Don't sit worrying about the doomsday scenario that’s in your head. Get those offshore wind farms or whatever it might be out there, just do it.
Alastair Martin is the founder and chief strategy officer of Flexitricity, a leader in demand-side energy for business users.
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