- Exploring the commercial viability of the Low Carbon Hub’s community energy portfolio and its role in future energy markets￼
There are many facets to smart local energy systems covering technical, commercial and social innovation as well as the development of suitable governance and a fit for purpose regulatory framework. So organisations that are establishing themselves as the providers or facilitators of flexible energy use in the future need to put together a range of business models and test them for technical, commercial and social sustainability and viability.
Low Carbon Hub
One of the key partners in Project LEO (Local Energy Oxfordshire) is Low Carbon Hub, an Oxfordshire-based social enterprise that’s out to prove we can meet our energy needs in a way that’s good for people and good for the planet. They develop and run a portfolio of community-owned renewable energy installations across Oxfordshire.
Low Carbon Hub currently manages a portfolio of Distributed Energy Resources (DERs) that focuses mainly on solar PV projects. They own 45 rooftop solar PV projects; 1 run-of-river low-head hydro; and 1 battery storage facility. A new 19MW solar PV ground-mount project is also currently in development at Ray Valley Solar.
Identifying Routes To Market for Low Carbon Hub
At the end of last year, Low Carbon Hub and Project LEO published a report: Low Carbon Hub Portfolio Routes to Market that looks at ways the Low Carbon Hub can build on existing technical assessments and learn how their growing portfolio of DERs can operate flexibly, creating a collaborative scheme between energy system users who co-ordinate the way we consume, generate, and store electricity, and manage our allocated capacity in the system to maximise the benefit to the community, other customers, the network and the system.
Low Carbon Hub has been investigating the opportunities for delivering flexible energy services with its portfolio. The overall aim of this work is to understand the value proposition to Low Carbon Hub (or other similar portfolio owners) as the provider of flexible energy services and how these services can offer value, both in financial terms and as part of a flexible local energy system and how this can help them build a robust future business model.
This report describes the six-step process (diagram below) that the Low Carbon Hub is following to: understand the opportunity; make its operations and assets capable; deploy technical solutions and test them; and then assess the financial model and value to the Low Carbon Hub, its customers and community.
The report takes an in-depth look at the various options for Low Carbon Hub to take their DERs to market and the issues of technical capability this will present as well as the social desirability of creating a single ‘community of MPANS’ from their portfolio of DERs.
Exploring the potential roles of Low Carbon Hub in Energy Flexibility Markets
One of the areas of focus for the report is exploring the variety of roles Low Carbon Hub (or other community energy organisations) could play in the energy and flexibility markets.
The report outlines the possible groups of roles Low Carbon Hub might take as:
- A local, trusted partner.
A trusted bridge between customers and providers in energy and flexibility markets. This role is about how Low Carbon Hub can continue and broaden its existing support for communities to cover these areas and perhaps add to that a potential role in acquiring new customers for third-party service providers.
- Customer acquisition: marketing and sign-up of new customers
- Ongoing customer advice and support: advisory, interpretation, information provision for existing customers
- Intelligent customer: understanding what energy and flexibility services are available and how to tell what the best offers are from third party aggregators
- Project promoter: understanding how generation and demand-side DERs could be put together for new and existing developments where Low Carbon Hub does not own, and would have no ongoing role. This option isn’t expanded on or explored as part of the report.
- Electricity trader
- This option covers the current role of Low Carbon Hub in trading electricity that it generates, however it is felt this role could develop to include more complex contractual arrangements
- Seller or allocator of energy: mainly through different types of PPA (power purchase agreement), although this could also be a behind-the-meter time of use tariff or wholesale trading.
The exploration of this category mainly covers the role already played by Low Carbon Hub in developing its portfolio of generation DERs and sees an expansion of that role into developing and being the central actor in a local institutional VPPA (virtual power purchase agreements) arrangement. It was found that Low Carbon Hub should be well-placed to expand its role into the development of local PPA trading arrangements, such as a local VPPA.
- Flexibility service provider and aggregator
- Technical aggregator of DERs to provide flexibility services: integrating all the kit; characterising its operation; collecting it all into a coherent portfolio that can be taken to market
- Commercial aggregator of DERs: identifying the best market to take the portfolio to at any point in time and/or space and taking it there
- Social aggregator of small-scale and community-owned DERs on a ‘not for profit’ basis where the benefits are shared either with membership or with a community, and where co-benefits are probably as important as financial value.
The role of Low Carbon Hub in this category is less clear cut as they have no proven experience here. However, as these are areas they will be covering as part of Project LEO flexibility service trials, the report considers how this experience could lead them into a new aggregator area of business development. And concludes that there are three main routes open to them in moving into and scaling up the aggregator role:
- Building their own platform and software;
- entering into a ‘Software as a Service (SaaS) contract with a platform owner or developer; or,
- partnering with a platform owner or developer.
The report outlines the process the Low Carbon Hub expects to follow in order to fully understand each of the roles, the required competencies and, ultimately, the organisation’s suitability to fulfil them.
It concludes that there are many roles Low Carbon Hub might play in the emerging local energy and flex markets and that it is tempting to try and fulfil them all. Through the report, they have developed a process to explore and evaluate the landscape of potential roles and routes to market.
While it is still early days, it is hoped the learnings gained from this process will be useful to other community energy partners in the UK and internationally as we all work out how to move decisively and confidently into the zero-carbon energy transition.
As we mentioned above, the conclusions of the report can be framed around the six steps in the process that Low Carbon Hub have identified in accessing flexibility markets for their portfolio of DERs.
Organisations need to understand the end-to-end process for the deployment of a DER in a flexibility market, their ability and suitability to participate, the opportunity the marketplace offers and any of the wider costs and benefits.
Organisations need to develop the skills, characteristics and attributes to be capable to participate in a flexibility market. This includes the technical, digital, financial, commercial, legal as well as motivational and attitudinal readiness of the people involved. These can relate to the DER itself but also the site and people within the organisation who need to set up the processes to participate in a flex market.
There is a lot of potential in existing and new small-scale assets to deliver flex services and Low Carbon Hub’s experience in developing capability for this should give useful insights into how solutions could be developed so that everyone at the grid edge can (eventually) ‘plug and play’ to the benefit of the energy system and themselves. They acknowledge, however, that they system remains a long way off this.
The Low Carbon Hub is developing an online tool called the People’s Power Station 2.0 that will aid in the participation of flexibility trials. The aim of this digital tool is to aid interaction with the DER to instruct flexibility services.
Such a tool will improve the operations of the Low Carbon Hub portfolio by digitising some operations and flagging issues remotely, empowering them to deliver flexible operations as well as enabling other organisations to deliver flexibility.
By taking part in the LEO trials, Low Carbon Hub will improve their understanding of areas such as reducing the cost of participation and making it easier to participate, optimising the pricing strategy and identifying a fair price for flex services.
They are already well underway with testing and are at the end of their first trial period. Project LEO will be sharing the outcomes and conclusions from this, future trial periods and the Smart Fair Neighbourhood Trials as soon as we are able to, so watch this space.
Stack Revenue and Stack Value
These steps will be taking place in the future and will be reported on in due course.
One of the most important areas highlighted to us through the paper is finding ways to work out how individuals and communities can have real agency in proposing solutions and promoting dialogue and in this way, build a truly collaborative and inclusive approach to finding flexible energy solutions for the future.