NEWS

The UK’s Demand Flexibility Service helps energy suppliers manage loads and helps consumers save money. But how does it work?

In the winter of 2022, when electricity prices were at their peak, the National Grid came up with an innovative idea to avoid energy shortages and help consumers save money on their bills. The Demand Flexibility Service (DFS)—the first of its type in the world—was considered such a success that it was repeated in the winter of 2023. Now, it could be here to stay. 

But what is the DFS? How does it help suppliers manage energy loads? How can consumers save money? And if you’re not already participating, how can you get involved? In this article, we’ll explain everything. Let’s get started.

What is the DFS?

The Demand Flexibility Service is an incentive scheme designed to help shift electricity demand away from peak hours, spreading energy usage throughout the day instead. This is important when energy supplies are low, as they were in the winter of 2022, and suppliers need to level out energy loads.

Here’s how it works:

• The Electricity Systems Operator (ESO) tells the market on the day (or the day before) how much energy suppliers can use that day
• Suppliers notify their customers who have signed up for the scheme to reduce energy consumption to a specific amount during peak hours in order to receive reward payments
• Customers receive payment on the following day from their supplier

Customers participating in DFS events might choose to run their washing machine, immersion heater, or dishwasher outside peak hours to reduce their usage and qualify for rewards. If they achieve the target, they receive their prize—typically money off their bill or a voucher—the next day. There’s no penalty for not taking part, only upside for those who do it correctly.

Does the DFS work?

Since beginning in the winter of 2022, the Demand Flexibility Service has been deemed a huge success, creating desirable outcomes for the National Grid, suppliers and consumers alike. 

Most energy suppliers, including major firms like British Gas, have signed up for the scheme and are contacting their customers when a low energy use event comes up. Rewards offered include up to £100 credit on energy bills (from EDF), while British Gas said its customers saved around £30 per year through incentives. 

Octopus Energy is among the power suppliers most involved with the DFS scheme. When the DFS was first announced, 700,000 Octopus customers signed up (compared to 250,000 British Gas and 76,000 EDF customers). Octopus credits the DFS with helping it shift 50% of demand out of peak hours.

Overall, the DFS has worked, which is why it was repeated in the winter of 2023.

Here to stay?

After two years of Demand Flexibility, is it something customers should expect every winter?

While energy prices have fallen slightly from their peak in the winter of 2022, bills are still relatively high, alongside inflation in other areas of the economy. No one is saying the cost of living crisis is over. At the same time, volatility in the Middle East and Russia’s ongoing invasion of Ukraine mean energy prices are always on a knife edge. So, it’s likely the National Grid and suppliers will continue to try and shift demand away from peak times to manage loads better – and they’ll continue to offer incentives for customers to help them.

From the customer’s point of view, as more people learn about the DFS and what they can earn simply by running their dishwasher later or showering earlier, expect more DFS sign-ups. 

On the other side, industry experts see the DFS as a necessary mechanism for load balancing. In the past, if they needed more power to the grid to supplement energy from renewables, they’d have to pay a coal plant to provide it. Now, they pay their customers to spread out the load. Everybody wins.

The impact of smart meters on the DFS

One of the key points not mentioned so far is that if you want to join the Demand Flexibility Service and start earning rewards for shifting your electricity usage, you need to have a smart meter. As long as you have one and your supplier is participating, you can sign up and start saving.

When you sign up, you must give consent for your supplier to remotely access your smart meter every half-hour while a DFS event is running. This is how your supplier reads your usage data and calculates how much you’ve saved and how much you can earn.

So, if you don’t have a smart meter, there’s a new tangible reason to get one. And if you’re not signed up to the DFS with your energy supplier, now’s the time to get started.

Creative thinking

The DFS has been a great success because it creates winners on all sides. It helps the National Grid and the suppliers balance energy loads while giving customers much-needed help with their bills for very little effort. It’s an example of the innovative thinking the energy sector so badly needs in order to adapt to an unpredictable future. Let’s help to see more of it moving forward.