Heat pump owners are incentivised to shift their energy usage in line with flexibility events.
Resource
Business model: Heat pump flexibility
Under this model, heat pump owners are incentivised to shift their energy usage in line with flexibility events.
The Electricity System Operator (ESO) informs registered providers (e.g., energy suppliers) of upcoming flexibility events and pays them for the flexibility they provide to the power system.
Registered providers are responsible for informing participants (e.g., heat pump owners) of flexibility events and reward them if they shift their energy usage during these periods. Rewards may be money, points or prize-based.
Heat pump owners may use an optimisation provider to control heat pump performance during flexibility events on their behalf (at cost).
Primary benefits
- Consumers are incentivised for participating in flexibility events.
- Participation is voluntary, meaning households are not penalised if they do not participate in select events.
- Increases consumers’ awareness of energy usage patterns and may encourage other energy efficiency improvements.
- Generates system wide benefits such as reduction in grid balancing costs and decrease in demand for fossil fuel-based electricity generation *.
- If using the services of an optimisation provider, heat pump performance is optimised on behalf of consumers, reducing the need for manual control.
*National Grid. (2023). Second EQUINOX trial launches as first trial shows customers can use heat pump flexibility to save money and reduce network demand.
Key risks and considerations
- Domestic flexibility services are still being trialed, meaning the proposition is not yet commercially available.
- At the time of writing, trials have only run during winter months, meaning that customers can currently only benefit at certain time periods. However, the ESO is exploring the possibility of transforming domestic flexibility into a commercial service, available year-round*.
- Proposition only available to households with smart meters.
- Unless using an optimisation provider, customers will have to manually control heat pump performance in line with flexibility events.
- Does not reduce capital cost of heat pump installation, meaning proposition is primarily targeted at able to pay market.
- Consumers may need to achieve high savings to perceive participation as being worthwhile.
* National Energy System Operator. (2024). ESO sets out initial design for future of Demand Flexibility Service.
Case study: Equinox flexibility trial
Overview
The Equitable Novel Flexibility Exchange (EQUINOX) trial incentivises participants to turn down their heat pumps during peak times of energy demand (either through payments or energy bill reductions). The trial began in December 2022 and is planned to run until December 2025.
The first stage of the trial ran from December 2022 to April 2023, during which:
- 386 heat pump owners took part and provided a total turndown of 10.8 MWh.
- Heat pump owners turned off their heat pumps across 22x two-hour periods (from 5-7pm).
- The average participation rate across all EQUINOX events was 82%.
The second stage of the trial ran from 30th October 2023 to April 2024, with the following changes:
- Double the number of participants.
- Less regular timings of events — both in terms of intervals between events and timings of events (4-8pm).
- Notices of future events were issued ‘day ahead’, ‘morning of’ and ‘two-hours before’.
- Higher payments issued to participants who turned down at shorter notice.
- Payments based on each kWh of turndown (calculated using historical consumption data).
- National Grid. (2023). Second EQUINOX trial launches as first trial shows customers can use heat pump flexibility to save money and reduce network demand.
- Octopus Energy. (2024). The EQUINOX heat pump trial.
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