Emergent Energy Systems Limited is a UK-based systems developer which implements net zero technologies in local communities, primarily microgrids for social housing providers in Gateshead, Nottingham, and Brighton.

Emergent partnered with Northern Powergrid (NPG) as part of a DCUSA Innovation Sandbox trial. With expertise from ElectraLink, the parties worked together using the DCUSA Innovation Sandbox to assess and understand the regulatory environment and consider derogations from specific code clauses. Ultimately, this enabled the partners to explore a pathway to optimise regulatory requirements and facilitate competition in supply to customers connected to microgrids, specifically small non-domestic customers and households, some with vulnerable customers.

Challenge – Emergent needed to optimise regulatory arrangements

Microgrids in retrofit settings are an essential way of ensuring that the Net Zero transition is delivered fairly for all customers, enabling otherwise excluded customers access to the benefits of net zero technologies. Emergent is conducting an ongoing trial called The Courts with Nottingham City Council, where tenants in participating apartment blocks would share the cost benefits of on-site solar PV with the housing provider. The Courts trial has resulted in bill savings of over 20% for flat tenants, but the scheme faced significant commercial challenges due to required levels of compliance with the Balancing and Settlement Code (BSC) and DCUSA.

Tenants participating in The Courts were restricted in their ability to switch energy suppliers, meaning tenants who chose not to be microgrid operator-supplied incurred a loss for the scheme.

Solution – The DCUSA Sandbox and support from ElectraLink paved a way around code barriers

As the Secretariat and Code Administrator for DCUSA, ElectraLink provides expert advice and support to anyone wishing to enter the DCUSA Innovation Sandbox – a component of Ofgem’s Innovation Link. The Sandbox allows innovators to receive special permission from Ofgem to trial new products, services, and business models in a real-world environment with temporary derogations from industry obligations.

The DCUSA Panel engaged ElectraLink’s Advisory Services team to guide Emergent and NPG as joint Sandbox applicants through the Sandbox process and provided a conduit between the applicants, the DCUSA Code Manager and the Ofgem Sandbox team.

Emergent used ElectraLink’s expertise to understand the process and coordinate the required documentation. The Advisory Services team hosted regular engagement meetings and updated the applicants and other parties frequently, as well as establishing scope, drafting assessments, and setting out regulatory context and next steps.

Emergent and NPG were supported through the various regulatory steps to review the application in line with the Sandbox processes, ensuring compliance and improving the chances of a successful application.

Results – Emergent’s trial can expand microgrid users’ benefits with Ofgem’s blessing

The DCUSA Panel approved the Sandbox application and associated assessments, whereafter the application and recommendations were submitted to Ofgem for the final decision. Ofgem approved Emergent’s application at the first time of asking in January 2023.

Emergent’s Sandbox trial will now run for two years, and over this period Emergent and NPG will continue to report to DCUSA on the trial’s progress. This is the first project of its kind and, provided a solution can be demonstrated to make microgrids cost-effective in retrofit settings, this could become an industry standard process.

Long-term, this means that Emergent can introduce supplier competition and potential cost savings for domestic customers living in trial sites, as tenants are free to switch supplier and opt out of the scheme if desired, which wouldn’t have been possible without Ofgem’s approval and the work of the Sandbox teams. From an innovation perspective, the learnings from the trial will create knowledge around operational considerations and enrich code and regulatory opportunities for the wider energy market.

Ultimately, this could provide a proven roadmap for many housing providers to use microgrids to decarbonise their building stock and contribute to the UK’s Net Zero journey.