You're So Demanding

How to be a 'provider of flexibility' for fun and profit

Is a dream a lie if it don’t come true, or is it something worse?

-Bruce Springsteen

In order to understand anything about public policy as the 21st century progresses, it is critically important to hone one’s ability to read esoterically. What is important is not what is said, but what is not said. There is the official, publicly acceptable, ‘exoteric’ line. And then there is the truth that lies underneath - often deliberately obscured.

I was thinking about this the other day when reading, as one tends to do over a nice lunch at the local Italian bistro with a pizza and a glass of red, a 2015 position paper on ‘Making the electricity system more flexible and delivering the benefits for consumers’. This was issued by Ofgem (the quango which regulates the energy market in the UK) at the start of the ongoing process to transform our energy market into one governed by ‘energy smart appliances’. These, for those who have been paying attention, are electric devices (your fridge, your washing machine, your EV charger, etc.) which are able to respond to ‘load control’ signals issued through the internet, and thereby reduce or delay energy consumption. Or, to put it more bluntly, appliances which can be controlled remotely so as to limit how much electricity households are able to use. Coming soon to a kitchen near you.

The last time I wrote about this issue in substance was in 2023, not long before the Energy Act 2023 was enacted. That statute created the legal framework within which the use of energy smart appliances could be mandated and regulated. We now find ourselves entering the next stage: gradual implementation. A draft set of regulations, the Energy Smart Appliances Regulations 2026, is currently making its way through Parliament. This, we are told, is the ‘first phase’. The regulations, among other things, provide for ‘minimum smart functionality, safety, grid stability requirements, and cyber and physical security requirements’, and ‘the creation of a single regulatory framework for smart appliances’. We can then look forward to a ‘second phase’ beginning in 2027, when presumably things will start to get more serious.

What is going on? Clearly, and I use this phrase advisedly, a Deep State project is afoot. 2015 is quite a long time ago now; there have been four general elections since then, not to mention five hundred or so Prime Ministers, and an awful lot of turmoil (Brexit, lockdowns, Ukraine, mini-budget, etc.). But the shift towards mandating the installation and use of energy smart appliances has continued regardless. It is almost as though it is not politicians who have been driving the policy, but Ofgem acting in cahoots with civil servants in the then-Department of Energy and Climate Change, who also issued a very similar policy paper in 2015 to Ofgem’s own. It is not our elected representatives who want us to use energy smart appliances, in other words. It is the regulators. And the policy is invincible to changes in government.

This makes it far more important, in getting to grips with the idea, to read what the regulators say over what politicians do. And what they say has to be parsed carefully. There is in fact a glossary of terms which of necessity have to be read esoterically - they are used not just to obfuscate but often actually to give the opposite impression to what is really going on. One has to grapple with the exoteric and often flip it upside down to find out what is underneath.

The Ofgem position paper which I mentioned earlier is a very good illustration. And this begins with the title: ‘Making the electricity system more flexible and delivering the benefits for consumers’. This sounds, on the face of it, like something benign. Indeed, if anything, it is suggestive of a free market approach - it looks to the naked eye as if the strategy is to liberalise the energy market in order to drive down prices at the supply side. But that is in fact more or less the exact opposite of what the position paper sets out. In fact, what it is focused on is something which it calls Demand Side Flexibility (DSF), or sometimes Demand Side Response (DSR) - better understood as precisely the reverse of supply-side reform.

What, then, is Demand Side Flexibility? Well, the position paper goes to great lengths to make clear what a good thing it is. Demand Side Flexibility, it says, is about ‘empowerment’ of consumers. It is about helping them to ‘better monitor and manage their energy use’ and ‘make informed choices about when they use electricity’. It us about giving them ‘opportunities to lower [their] bills by changing when and how [they]’ do so. Indeed, it is about giving them the space in which to ‘smarten’ their approach to energy use in the round.

Consumers, you see, are not just users or purchasers of electricity. They can also be thought of as ‘providers of flexibility’. They participate in the flexibilisation, let’s call it, of energy use in the UK by ‘modifying generation and/or consumption patterns’. They are actively engaged in making the energy system more efficient. And they do this by operationalising various ‘sources’ of flexibility. These include:

• Shifting consumption to different (off-peak) times, such as the middle of the night or the middle of the day

• Reducing demand at key times

• Increasing consumption only ‘when needed’

• Generating electricity themselves

This provision of flexibility, we are told, is necessary because it is so drattedly difficult to increase supply. Despite it being the case that green energy is cheaper, more efficient, and more stable, currently it is a challenge to meet demand with it. Ordinarily in a free market if a technology is very likely to be cheaper and better than what currently exists then people will invest in it safe in the knowledge that their investment will be profitable in the medium-long term. But for some reason we aren’t told, green energy is not like this. Green energy is cheap and good but for some unspecified reason ‘challenging’ to make effective.

Now, one way to increase supply in the relatively short term would just be to build more power plants and grid capacity. But this, we are told, would be ‘expensive and inefficient’, not to mention at odds with carbon emissions targets.

Another way to increase supply would be to use more renewables, but renewables suffer from intermittency - there are some days when the sun doesn’t shine or the wind doesn’t blow. And there are some days when it is very sunny or windy, but when demand is low and energy is wasted at a cost. For some reason this doesn’t make it ‘expensive and inefficient’ to rely on renewables. But nonetheless, they do pose ‘challenges’ while being, let me remind you, for the avoidance of doubt, cheap, efficient and stable.

Since increasing supply is off the table, then, the only way that an energy system that is reliant on renewables can be made to work is, therefore, on the demand side, through the aforementioned ‘flexibility’. Now, to be fair to Ofgem, it is not just consumers who are expected to ‘provide flexibility’. It is industry too, not least through the development of battery technology. But consumers are mentioned throughout the paper. Through being empowered to provide flexibility, you see, consumers can ‘save on their energy bills’. And, perhaps even better, they can have the warm fuzzy glow that comes from having helped realise ‘system benefits’ such as better infrastructure, and ‘environmental benefits’ by contributing to decarbonisation, and thus playing their part in ushering in a ‘more efficient, innovative market’.

You may have noticed the one thing, the one very important thing, that is heavily implied by all of this, but unstated: what they want is just for consumers to use less electricity. That’s what Demand-Side Flexibility really means: being flexible about your demand - i.e., not being as demanding as you currently are. You can ‘save on your energy bills’ alright, and you undoubtedly will, if your consumption goes down. And that will help with decarbonisation too. It will also help ensure that low and unreliable supply is ameliorated. Just use less.

This is the first esoteric message of the position paper, then: whereas in a free market supply meets demand, in the UK energy market, which is going to be more efficient and innovative, demand is going to be made to meet supply. When supply is low, demand will have to be too. You are just going to have to use less electricity when supply is low - either by directly being forced to do so, or by being cajoled to use your appliances at inconvenient times which naturally result in you using them less.

And this segues into the second esoteric message of the position paper: for all that the language used is all about voluntariness and the benefits of flexibility the option to be ‘flexible’ is going to disappear - you will end up being flexible whether you like it or not. You see, Ofgem defines ‘flexibility’ in an interesting way, that I think would be different to how you or I would define it; in Ofgemspeak, it means ‘modifying generation and/or consumption patterns in reaction to an external signal (such as a change in price or an electronic message [emphasis added])’.

And the ‘electronic message’ bit is the most important. We’ve already learned that the aim is lower energy bills - so changes in price, at that level, are presumably the carrot. At the same time, of course, changes in price can be a stick (if prices are increased at peak times to reduce consumption ‘provide flexibility’). But it is ‘electronic messages’ that really get Ofgem salivating, because while changes in price can influence consumer behaviour to a certain extent, electronic messages can influence it absolutely. All you need is for the consumer to be using an ‘energy smart device’ that can process said electronic messages, and the flexibility is provided automatically and without fail.

And, sure enough, Ofgem indeed identifies ‘lack of willingness to provide/use flexibility’ alongside various other ‘cultural barriers’ to implementation, including ‘lack of understanding’. This suggests a need for ‘raising awareness’ and ‘promoting the benefits’ of flexibility, it says. But Ofgem also suggests that ‘smart meters and other smart technologies’ will play a ‘crucial role’ in enabling ‘widespread domestic participation’.

And, again, what is not said here is what is blindingly obvious to the esoteric reader: there won’t be voluntary widespread domestic participation because people think the whole idea of ‘energy smart devices’ is creepy and weird. The ‘cultural barriers to implementation’ will only get stronger. So, sooner or later, either the entire plan will fail, or ‘electronic messages’ are going to have to be deployed rather more aggressively in the interests of enabling widespread domestic participation in the ‘smartening of energy use’, because the beauty of electronic messages is that cultural barriers are no real barriers whatsoever.

Fast-forward 11 years and here we are: with a fully-fledged statute, the aforementioned Energy Act 2023, which contains within it the legal infrastructure for the relevant Secretary of State - currently a certain Ed Miliband MP - to mandate the use of ‘energy smart appliances’ that are capable of responding to ‘load control signals’ sent through the internet, and to criminalise the sale of non-energy smart appliances and forcibly remove them where installed. And we are currently witnessing the ‘first phase’ of a regulatory elaboration of that Act, in which the preliminary ‘smart functionality, safety, grid stability requirements, and cyber and physical security requirements’ are laid out.

This would all have been entirely predictable to anybody reading Ofgem’s position paper in 2015, if they had been carefully peering beneath its exoteric messaging. And it is not difficult, from our current standpoint, to see the direction in which things will progress. Currently, the only noises being made are about voluntary choice. But have no doubt: we are going to be somewhat more forcefully made to ‘provide flexibility’ (i.e., use less electricity) if decarbonisation goes ahead, because that is the only way that decarbonisation can be made to work. And one way they are going to try to make us do it is through the gradually more compulsory use of ‘energy smart appliances’ that will regulate our energy consumption from a distance.

The current government likely does not have the political capital to pursue this with any vigour, and the technology is, as they say, probably ‘not there yet’. But remember what I said earlier on. All of this, indefensibly, is happening not because it was in any political party’s manifesto, at least that I can identify, but as the manifestation of a policy developed by the state’s regulatory apparatus. It is a wheeze of civil servants and quangocrats. They’ve pushed and developed the policy largely on a frolic of their own as various Secretaries of State for Green Things (the departments keep getting dissolved and reconstituted with different names) have come and gone.

But there is only so much civil servants can do; what is really necessary to happen is for a government to come to power whose ideas are truly fully aligned with the concept of Demand Side Flexibility and want to give it legs. Right now the results of the next general election are very unpredictable. But who would rule out as impossible a Labour-Liberal Democrat-Green coalition rather more minded to be robust about climate change even than a government with Ed Miliband as Energy Secretary? And who would rule out such a government actively pushing the ‘energy smart appliance’ agenda in the rush towards Net Zero?