The Evolving Role of Aggregators and New Market Entrants

Introduction

The GB energy market is in the midst of a profound transformation. As the system decentralizes and flexibility becomes a core value, the traditional boundaries between generators, suppliers, and consumers are blurring. At the heart of this change are aggregators and a new wave of market entrants—innovators who are unlocking the value of distributed energy resources (DERs), enabling demand-side response (DSR), and challenging the dominance of legacy business models. In this article, I’ll explore the rise of aggregators, the regulatory and commercial frameworks shaping their participation, the challenges and opportunities they face, and their growing impact on the energy transition.

1. What is an Aggregator?

1.1. Definition and Function

An aggregator is an entity that pools the flexibility of multiple distributed assets—such as batteries, electric vehicles (EVs), industrial loads, or even domestic appliances—and offers this aggregated capacity into energy, capacity, or ancillary service markets. By acting as an intermediary, aggregators enable smaller or less sophisticated participants to access value streams that would otherwise be out of reach.

1.2. Types of Aggregation

Commercial and Industrial (C&I) Aggregation: Large energy users (factories, data centres, supermarkets) provide DSR or flexibility services.
Residential Aggregation: Households with smart meters, EVs, or smart appliances participate via digital platforms.
Virtual Power Plants (VPPs): Aggregators combine diverse DERs to operate as a single, dispatchable resource.

2. The Policy and Regulatory Context

2.1. Ofgem and BEIS Support

Recognising the importance of flexibility, Ofgem and BEIS have prioritised the removal of barriers to aggregation. The Smart Systems and Flexibility Plan (2021) sets out a roadmap for unlocking flexibility, including DSR and aggregation.

2.2. Code and Market Reforms

Balancing and Settlement Code (BSC): The introduction of the Virtual Lead Party (VLP) model allows independent aggregators to participate directly in the Balancing Mechanism (BM), without needing to be a licensed supplier.
Capacity Market (CM): Aggregators can secure capacity agreements for aggregated DSR and storage, competing alongside generators (National Grid ESO: Capacity Market).
DSO Flexibility Markets: Distribution Network Operators (DNOs) are running local flexibility tenders, with aggregators as key participants (ENA: Open Networks).

2.3. Settlement and Data

Market-wide Half-Hourly Settlement (MHHS): The move to half-hourly settlement for all customers will make it easier for aggregators to measure, verify, and settle flexibility actions (Ofgem: MHHS).
Data Access: The Smart Energy Code (SEC) and Retail Energy Code (REC) govern data flows and access for aggregators.

3. How Aggregators Participate in the Market

3.1. Balancing Mechanism (BM)

The BM is the ESO’s primary tool for balancing supply and demand in real time. Aggregators, as VLPs, can now offer flexibility from distributed assets directly into the BM, responding to system needs and earning revenue.

3.2. Ancillary Services

Aggregators provide frequency response, reserve, and other ancillary services. Products like Dynamic Containment, Fast Frequency Response, and Short Term Operating Reserve (STOR) are increasingly open to aggregated DERs (National Grid ESO: Balancing Services).

3.3. Local Flexibility Markets

DNOs procure flexibility to manage local constraints, defer network upgrades, and integrate renewables. Aggregators bid into these tenders, offering services from batteries, DSR, and other assets (UKPN: Flexibility).

3.4. Capacity Market

Aggregators can secure long-term capacity agreements, providing reliability and investment signals for flexible assets.

4. Case Studies

4.1. Flexitricity: Pioneering Aggregation

Flexitricity, founded in 2004, was the UK’s first commercial aggregator. It aggregates C&I loads, batteries, and distributed generation, participating in the BM, CM, and DSO tenders. In 2020, Flexitricity became the first VLP to trade in the BM, dispatching a portfolio of batteries and DSR in response to system needs (Flexitricity).

4.2. Kiwi Power: Global Flexibility

Kiwi Power aggregates assets across the UK and Europe, providing DSR, frequency response, and local flexibility. Its digital platform enables real-time optimisation and market participation for a diverse portfolio of assets (Kiwi Power).

4.3. Domestic Aggregation: Octopus Energy’s Agile Outgoing

Octopus Energy’s “Agile Outgoing” tariff allows households with solar panels or batteries to export power at dynamic prices, effectively aggregating domestic flexibility and rewarding consumers for supporting the grid (Octopus Energy: Agile Outgoing).

5. Challenges and Barriers

5.1. Baseline and Settlement Complexity

Measurement and Verification: Accurately determining the “baseline” (what a customer would have used without DSR) is complex, especially for residential and small business customers.
Settlement Systems: Legacy systems and code complexity can make it difficult to settle aggregated actions accurately and promptly.

5.2. Revenue Stacking and Market Access

Value Stacking: Aggregators often rely on multiple revenue streams (BM, CM, ancillary services, DSO tenders), but market rules and contract structures can limit the ability to “stack” revenues or participate in multiple markets simultaneously.
Supplier-Aggregator Relationships: Tensions can arise between suppliers and independent aggregators over customer relationships, data access, and settlement.

5.3. Regulatory and Commercial Uncertainty

Code Evolution: Ongoing changes to the BSC, SEC, and other codes create uncertainty and require constant adaptation.
Market Liquidity: Some flexibility markets remain illiquid or fragmented, limiting opportunities for aggregators.

5.4. Consumer Engagement and Trust

Awareness: Many consumers are unaware of aggregation or the value of their flexibility.
Trust and Data Privacy: Ensuring robust data protection and clear consent is essential for consumer participation.

6. Opportunities and the Road Ahead

6.1. Growth of DERs and Flexibility

The rapid growth of DERs—solar, batteries, EVs, heat pumps—creates a vast pool of potential flexibility. Aggregators are uniquely positioned to unlock this value, supporting system balancing, decarbonisation, and consumer empowerment.

6.2. Digital Platforms and AI

Advanced digital platforms, AI, and automation are enabling real-time optimisation, predictive analytics, and seamless market participation for aggregators and their customers.

6.3. Regulatory Evolution

Ofgem and BEIS are committed to removing barriers, standardising processes, and ensuring a level playing field for aggregators. The Flexibility Markets Consultation (2022) is shaping the next phase of market design.

6.4. International Expansion

UK aggregators are exporting their expertise and platforms to Europe, North America, and beyond, as global markets embrace flexibility and DSR.

7. Lessons Learned

Aggregation is Foundational: The energy transition depends on unlocking flexibility from millions of distributed assets.
Regulation Must Keep Pace: Agile, adaptive regulation is essential to support innovation and protect consumers.
Collaboration is Key: Success depends on collaboration between aggregators, suppliers, networks, and consumers.

Conclusion

Aggregators and new market entrants are at the forefront of the GB energy transition. By unlocking flexibility, enabling innovation, and empowering consumers, they are reshaping the market for a net zero future. The journey is complex, but the opportunities—for the system, for consumers, and for the climate—are immense.

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