For the first time anywhere in the world, the local Distribution System Operator (Western Power Distribution) and the Transmission System Operator (National Grid ESO) are both procuring flexibility simultaneously via a single third-party platform (LEM) – Centrica’s pioneering auction-based marketplace.
The LEM platform seeks to benefit each of these participants, and the grid more widely, by providing a mechanism for the system operators to indicate when they will need an increase or decrease in generation or consumption to balance the grid or manage a local network constraint. These needs can then be met by the homes and businesses on the LEM, in return for a financial reward – creating significant opportunities for energy users who are able to be flexible with their usage or call upon smart energy storage solutions.
“…This is a milestone moment for the energy network and comes as the result of several years of hard work by the team at Centrica and as well as our partners at National Grid ESO, WPD, N-SIDE, Exeter University and Imperial College London…”
Pieter-Jan Mermans, Director of Optimisation at Centrica Business Solutions
Centrica’s ground-breaking LEM platform allows buyers (Western Power Distribution and National Grid ESO) to place bids for flexibility services, which are then matched with offers by sellers (homes and businesses) through auctions that run from months ahead all the way to intraday. The platform manages the process for both sides from contract creation all the way to baselining and settlement, making it easy to trade flexibility.
At the heart of these auctions is a clearing engine built by N-SIDE, the Belgian advanced analytics company that provides the matching algorithm for the European Day-Ahead power markets. The engine takes bids and offers and finds the optimal clearing solution, taking into account grid and asset constraints to ensure feasible contracts.
“At N-SIDE we believe that the valorization of distributed flexibility is a key enabler of the energy transition. At the same time, it presents quite a lot of challenges in terms of market design, liquidity and T/D coordination. N-SIDE is proud to contribute to the pioneering Cornwall LEM project who brings together TSO, DSOs and flexibility providers on a common flexibility platform. Contributing to this objective our clearing engine technology allows them to optimally match flexibility needs and offers in a grid secured way across different voltage levels. We are really excited to bring our algorithmic and market expertise into this groundbreaking project and we look forward to the next steps!”
Olivier Devolder, Energy Director, N-SIDE
Critically, the LEM portal and clearing engine enables the transmission and distribution (T/D) networks to co-ordinate their procurement to avoid conflicting signals. This combination of T/D co-ordination and grid-secure contracts will be key to unlocking flexibility from Distributed Energy Resources in the future.
By reducing grid constraints and offering a means to dynamically manage the network, the LEM is helping to make energy markets more efficient and reduce the costs of accommodating further distributed renewable generation across the network.