Notice

Flex Markets Unlocked Innovation Programme: questions with responses (added 28 July 2023)

Updated 21 November 2023

Aims and objectives

1. Given previous investment in innovation in this space, what are the gaps that require further innovation, what requirement gaps do you believe exist that new functionality might close?

This innovation programme seeks to build on and take learnings from previous innovation programmes and other relevant work in this space as noted in the competition guidance. Progress has been made to unlock flexibility, and this work will remain critical to achieving ambitions in this space. This competition seeks a technical solution which could deliver further benefits to addressing the barriers or gaps observed in the market, as outlined in the competition guidance, in addition to existing work. The requirement gap is therefore a technical solution that can meet at minimum the four outcomes in a cohesive way to scale up flexibility markets and provide system-wide coordination and access across at least a local market, national market and wholesale market/balancing mechanism- representing a greater number of markets across which integration and coordination has been attempted before.

2. Given the close work between the Department for Energy Security and Net Zero and Ofgem - how should we view the thinking contained in the Ofgem ‘The Future of Distributed Flexibility’ call for input (CFI) and Technical Annex?

Following on from the joint 2021 Smart Systems and Flexibility Plan, the Department for Energy Security and Net Zero and Ofgem are working closely to remove barriers and reform markets to unlock the value of flexibility, including on this innovation programme. Ofgem’s CFI sought views on what common infrastructure and enablers might be needed to deliver outcomes of transparency, coordination, and trust across flexibility markets. A common digital energy infrastructure as described in the CFI is one technical solution, and there could be different forms of technical solution which deliver these outcomes. Further consideration is needed through ongoing policy work, and this innovation competition seeks to support this by exploring the innovative technical solutions that may come forward.

The 4 outcomes in this competition guidance align closely with what was set out in the CFI but the CFI proposals are just one way these outcomes could be met, other ways exist too. This innovation competition is a good opportunity for industry to come together, develop thinking and create solutions. Innovation findings and outputs are one of many inputs into the wider policy evidence base.

Scope

3. With regards to demonstrating value, does this Innovation Programme need to articulate a commercialised (stands on its own two feet) solution, or is there an expectation that the solution will be centrally funded or integrated into existing commercial structures in the long term (if it were subsequently deployed)?

As set out in the competition requirements Section 4, the feasibility study should describe and specify the technical solution, and explore its dependencies, enablers, context, value, and potential funding and governance. It is therefore a requirement in Phase 1 for successful projects to assess and outline the funding and governance models, and long-term delivery routes, for their proposed technical solution. This programme will not undertake decision making on commercial or regulatory models in this area but will be providing evidence base for policy development.

4. With regards to the wider market design being out of scope, if products need modification to enable, for example, better than day-ahead clearing, is it new functionality or market design? Can projects propose new trading arrangements and/or services that are not available today, as this starts to touch on market design?

The purpose of the programme is to explore and test possible technical solutions to address the problem statement, providing an evidence base and informing future policy. This competition is about technical solutions which focus on the markets of today but are future proofed, modular and scalable- of a modular design that permits functionality and use cases to be added/removed on a case-by-case basis. As outlined in the competition guidance, this programme will not undertake decision making on questions such as institutional arrangement models for network and system operators, or on commercial or regulatory models in this area; this includes work on modifications to arrangements or regulatory models of existing markets. In addition, as Phase 2 requires projects to use either simulated or live market data to demonstrate a proof-of-concept technical solution, this would require use of data from the existing market arrangements.

However, should projects find challenges in current market design to delivery of their technical solutions in the longer term, they are able to outline such challenges (the competition guidance includes a requirement to assess key constraints, dependencies, and enablers for the proposed solution to meet the 4 key outcomes).

5. What do you mean by value stacking? Is it to allow assets to access multiple markets at same time, or is it to allow assets to access multiple markets at different times?

We recognise that Flexibility assets can stack revenue across markets, either by delivering multiple services at the same time or by delivering multiple services in adjacent time periods. Both of these instances could be regarded as value stacking, and it is up to projects to set out how their technical solution would facilitate revenue stacking.

6. We note that power exchanges are specifically mentioned as stakeholders to engage with. What is their expected role for power exchanges to collaborate? Can power exchanges lead a project or are they expected to join project projects as part of a consortium or through letters of support?

Where proposed technical solutions include the wholesale market, applicants should consider the most appropriate form of engagement with the power exchanges. Any organisation can lead, be part of, or support a project as long as the project meets the eligibility criteria outlined in Section 8 of the competition guidance. Applicants should detail how their organisation(s) and proposed project team can offer the relevant skills, capabilities and expertise required to meet the Competition requirements.

Please see the competition guidance Section 2 for more detail on scope with regards to markets, and Section 3 for detail on expected project team and expertise for this innovation competition.

7. Do the proposals need to deliver against all 4 outcomes or are you considering proposals that deliver 1 or 2 of them only?

Projects in scope are those which address at minimum the 4 outcomes in a cohesive way (for example considering the various dependencies between each outcome, that is, ‘market coordination’ is not possible without ‘information transparency’).

8. Would you qualify the “demand flexibility service” (DFS) as a balancing tool or a national tool?

For the delivery of this innovation competition, we consider the demand flexibility service to be in the category of National Market and would expect applicants to consider how integration would be achieved if it is one of the markets/mechanisms their project is proposing to cover.

9. Who are the intended users of this?

As per the competition guidance glossary, users in the context of this innovation competition are defined as asset owners, asset operators, aggregators, market owners/operators (including independent market platforms) and other Third Parties who exchange data in flexibility markets.

10. Are technical solutions based on and building on existing non-energy solutions out of scope?

Technical solutions based on and building on existing non-energy solutions are in scope as long as they are introducing net new functionality.

11. If we are basing the solution on an existing product, what new functionality would be acceptable to qualify for “net new”?

Projects in scope should introduce net new functionality, avoiding duplication of existing work (both innovation projects and desk-based studies), existing market participant systems and other innovation-funded work. Projects that build on existing solutions are in scope as long as are addressing the outcomes through introducing services or functions not previously available- they are introducing net new functionality that satisfies the outcomes. Applicants should set out in the proposals how they believe their technical solutions represent net new functionality. Please see competition guidance Section 2 for further detail with regards to net new functionality.

Outputs

12. Will Phase 1 results and knowledge be published as interim outputs before Phase 2 commences?

Yes, as per the requirements in Section 4 of the competition guidance it is expected that projects supported in Phase 1 publish a Feasibility Study Final Report public version (published on the lead organisation webpage following approval by the Department for Energy Security and Net Zero) in the final month of Phase 1. This should include a publicly published Technical Specification.

13. What are the provisions on background and foreground Intellectual property (IP). Do we need to put any existing code open source?

See Section 11 of the competition guidance for information on IP. Please note as per the requirements in Section 4 of the competition guidance it is expected that projects supported in Phase 1 publish a Feasibility Study Final Report public version (published on the lead organisation webpage following approval by the Department for Energy Security and Net Zero) in the final month of Phase 1. This should include a publicly published Technical Specification. There are no requirements to publish any code (existing or new) open source, however, with regards to Phase 2 Projects are encouraged to publish open-source code, open data licences and open standards to maximise the utility of the sector investment and increase the likelihood of future adoption.

14. What format do you expect the “Publicly published specifications” to be in?

As per the competition guidance glossary, Technical Specification in the context of this innovation competition is defined as documentation which describes (through text and diagrams) the scope, functionality, and technical requirements of a technical solution. This includes data requirements (including interoperability and privacy), application requirements (functionality, performance, interfaces and user experience), technology requirements (hardware, software and network infrastructure), technical architecture, and security requirements. Regarding format, a preference has not been specified in the competition guidance, but it would be sensible to produce this in pdf format.

15. Would the Department for Energy Security and Net Zero provide the simulated data needed for phase 2?

Projects supported in Phase 1 are expected to set out how they would demonstrate the proof-of-concept technical solution using simulated market data in a contained trial in their proposals for Phase 2, including how they would acquire necessary data. As per the requirements for Phase 1, projects will be expected to provide a statement of intent that outlines how any necessary data sharing agreements (satisfying privacy, access and other relevant requirements) between relevant entities will be established by the supplier in a timely fashion, to support the ambition of Phase 2.

16. Do you want a plan for phase 2 to be included into the bid for phase 1?

Please see Section 6.3 of the competition guidance for the Assessment process and assessment criteria which will be used for the Phase 1 contract award.

17. Are you expecting us to estimate or quantify projected benefits as part of phase 1?

Please see Section 4 of the competition guidance, which includes an assessment of the value of the technical solution in the requirements for the Phase 1 feasibility study.

Other work of relevance to this Programme

18. What is the digital spine and what outputs are you expecting from the digital spine feasibility study?

The Digital Spine is a concept for a secure, energy system-wide data standardising and sharing mechanism, and the government is exploring the concept through a feasibility study as part of the Net Zero Innovation Portfolio. The completed study will include considerations on technical feasibility, delivery and potential governance roles. Government will review recommendations once complete and determine appropriate next steps.

Application process

19. Did you mention a consortium collaboration tool?

There is an innovation collaboration platform which potential applicants can join to find collaboration partners to support your application. This is a match-making platform that enables you to view other individuals interested in applying to innovation activity under the Flexibility Innovation Programme and request virtual meetings with potential collaboration partners. Please see the innovation programme webpage for the link to this online platform.

20. The costing proforma request a level of detail about staff salaries and overheads that is classified as personal information and cannot be easily shared without consent from the named individuals (under GDPR etc). The consortium would also need assurances that the Department for Energy Security and Net Zero would correctly control and handle this confidential information. It is likely that the consortium will not be able to share this information as it contradicts our internal policies and wider legislation. If this information is not provided for phase 1, are we excluded from the tender?

As per Section 6 of the competition guidance, applicants are required to complete the project Cost Breakdown form as part of the value for money assessment outlined in Assessment Criteria 6. It is mandatory to include the detail requested on labour and overhead costs in the project cost breakdown form as part of the application process, and detail should be included for all project team members for whom the Applicant wishes to recover costs for. If necessary, applicants may exclude names (column C of the project cost breakdown form) from the completion of the cost breakdown form and refer to titles and/or roles of those individuals. However, this detail may be requested as part of the due diligence process should applicants be successful and would be expected to be provided in order for the Department to conduct appropriate due diligence. Please refer to the Privacy Notice included at the front of the competition guidance with regards to the Department for Energy Security and Net Zero handling of confidential information submitted through the application process.

Applicants should also pay close attention to the eligible and ineligible costs under SBRI funding outlined in Appendix 2. The Authority reserves the right to exclude Applicants from the Competition where they cannot satisfactorily evidence the eligibility of costs and overheads in line with guidance provided at Appendix 2.

21. Will an extension to the application submission deadline be considered?

The department is not considering extending the competition deadline at this time, and the Flex Markets Unlocked competition closes to applications at 2pm, 7 August 2023.