Navigating the P415 Grid Code Change: Opportunities and Challenges for the UK Water Industry

November 2024 was a pivotal moment for consumer led flexibility within the electricity grid in Great Britian with the acceptance of the P415 grid code change marking a significant shift in how flexibility is traded in wholesale electricity markets. 

Consumer flexibility is critical for NESO’s efforts to decarbonise the GB grid, as it enables a more responsive and efficient energy system. NESO has emphasised that consumer led flexibility is essential for achieving clean power and estimates that flexibility needs to grow 4-5 times by 2030, reaching 10-12 GW.

The water industry has already played a significant part in consumer led flexibility supporting Ancillary Services and the Capacity Market. 

Electricity typically accounts for around 10% of the total costs for UK water companies. Given the energy-intensive nature of water treatment and distribution, fluctuations in electricity prices can significantly impact operational expenses.

The ability to enter wholesale markets easily without affecting existing supplier agreements, presents exciting new opportunities for the water industry, it also introduces new challenges that utilities must navigate.

The electricity wholesale market is a system where electricity is bought and sold by various participants before it is delivered to consumers.  The P415 modification to the Balancing and Settlement Code (BSC) in the UK is designed to facilitate access to wholesale electricity markets for flexibility dispatched by Virtual Lead Parties (VLPs). It allows independent aggregators to trade energy flexibility, enabling consumers to benefit from demand-side response without relying solely on their energy suppliers.

This modification was initiated by Enel X UK Ltd, which proposed the change on 30 September 2020 to enable VLPs to participate in the GB wholesale electricity markets.

• New access to wholesale energy markets: Previously, water utilities had limited participation in flexibility markets. The P415 code change now allows Virtual Lead Parties (VLPs) such as Enel X to trade flexible capacity in intra day energy markets giving water companies the chance to optimise energy use and benefit financially.
• Monetising operational flexibility: The new framework gives production or treatment sites the opportunity to make small adjustments to schedules within operational parameters based on positive market signals. These results generating additional revenue while supporting grid stability. Importantly participation is always within agreed operational parameters set by site needs first.
• Supporting decarbonisation: Water utilities play an important part in supporting the energy transition and have been at the forefront on embracing renewable generation that is making a positive impact on the environment. National Electricity System Operator (NESO) are working to allow participants in flexibility services to see the carbon savings directly attributed to their flexible energy usage.
• Enhanced operational efficiency: By responding to market pricing and grid needs, water utilities can streamline their energy-intensive processes, ensuring cost-effective and sustainable operations.

While the opportunities are clear, entering Wholesale Markets, like other Flexibility services needs careful evaluation.  While water utilities have a degree of flexibility in their operations it still has a “day job” so hence participation must be based on weighing the challenges that doing so presents.

• Complex market participation: Engaging in wholesale energy markets requires new expertise and regulatory understanding, which may be challenging for water utilities so selecting the right partner with complimentary experience is critical for success.
• Infrastructure investments: Companies may need to upgrade technology to monitor and control flexible energy use efficiently something that a partner such as Enel X can facilitate.
• Financial risk & market volatility: Wholesale pricing fluctuations could create uncertainty so working with a partner that can manage risk to minimise client risk if essential.
• Operational adjustments: Aligning energy consumption with market signals in a regulated environment presents challenges, but the key lies in strategic, low-impact adjustments that preserve service reliability. Wholesale monetisation strategies can unlock cost-saving and revenue generating opportunities while ensuring uninterrupted operations.

With a changing grid and rising energy costs it’s vital that water companies continue to think strategically about energy. With the right strategies, the UK water industry can leverage the recent P415 change to drive cost efficiency and sustainability. While challenges exist, those who proactively adapt will be well-positioned to benefit from the evolving energy landscape.

Enel X has played a significant role in helping the water industry improve energy efficiency, sustainability, and cost management.

Enel X has been a global leader in demand-side flexibility since 2009, managing 9.8 GW of capacity worldwide and working closely with utilities to embed resilience, efficiency, and sustainability into their operations.

We’re here to help water utilities navigate this transition. To learn more about how we can support your flexibility strategy, talk to our team today.