When was the Demand Flexibility Service introduced?
Due to the energy market uncertainties during 2022, the National Energy System Operator (NESO) introduced the Demand Flexibility Service (DFS) in November 2022. It formed part of an enhanced action, as part of a package of winter contingency measures.
How does the Demand Flexibility Service work?
The DFS works by incentivising energy consumers to shift their electricity usage to off-peak periods. The ‘pay-to-shift’ scheme has been designed by NESO to ease pressure on the grid during high demand times. Rather than activating costly backup power stations, NESO compensates households and businesses for adjusting their electricity consumption away from high-demand periods (typically between 4-8pm), particularly in winter when heating and lighting needs are higher. Your baseline is key, as your provider will compare how much energy you have used during the DFS occurrence in comparison to your baseline usage – measured in kWh.
The concept is straightforward: by shifting your energy use to off-peak hours you can get rewarded for saving money whilst also supporting grid stability.
DFS events typically last an hour, though they may run for just 30 minutes or extend beyond that. Participation is entirely voluntary, and you are not required to take part even if your registered DFS provider invites you. However, to qualify for an incentive from your provider, you must reduce your energy consumption during the designated DFS event periods. When enrolling in DFS, you will need to grant your provider permission to access your smart meter, allowing them to collect half-hourly data for the duration of the service.
How has the DFS performed so far?
During the first winter period in 2022/23, the positive impacts of the DFS scheme demonstrated a £11m spend on DFS, as opposed to the £340m cost on coal the previous winter.
Again, during the 2023/24 winter season, DFS demonstrated its value:
- 16 DFS events activated
- 2.6 million homes and businesses participated
- 3.6 GWh of electricity was shifted by businesses alone – enough to power over 1 million homes for an hour
The future of demand flexibility service
As of 2025, DFS events are no longer limited to winter months, now operating throughout the year. This change presents increased opportunities to earn financial incentives for adjusting electricity usage, though events will be less predictable and entirely dependent on real-time grid conditions.
Key changes to DFS:
- Pre-scheduled events – Previously, DFS events were planned in advance, often with “day-ahead” notifications. This system has been discontinued
- Real-time dispatching – Requests for energy shifts will now be issued on the same day, requiring participants to respond with little notice
This transition to an entirely responsive DFS system reflects the growing adaptability of the electricity grid. For those who can adjust their energy consumption when needed, these developments present new financial opportunities while contributing to a more efficient and resilient energy system.
What is the difference between Demand Flexibility Services and Local Flexibility Services (LFS)?
Although there are some similarities between both DFS and LFS, the DFS is focused on national and regional peak load management, whereas the LFS deals with much more localised grid limitations.
How much can you earn from Demand Flexibility Services?
When DFS was initially introduced, participants received a guaranteed acceptance price of £3,000 per MWh (£3 per kWh). However, as of November 2024, the scheme has shifted to an in-merit mechanism, leading to a more uncertain pricing structure.
With DFS events now occurring less predictably and pricing varying, estimating annual earnings has become increasingly challenging.
That said, earnings are contingent on several factors, such as:
- The amount of energy usage reduced
- The duration and frequency of DFS events
- The compensation rates set by energy providers
- Competing Capacity Market assets
Factors that influence your potential earnings
Baseline consumption
Higher typical energy usage during peak times can lead to greater potential reductions and, consequently, higher earnings.
Reduction capability
The extent to which you can decrease or shift your energy use during DFS events directly impacts your compensation.
Event frequency and duration
The number and length of DFS occurrences, which are determined by real-time grid conditions, affect total earnings.
Provider rates
Compensation rates vary among energy suppliers and may fluctuate based on market dynamics.
How to sign up to the DFS
If you would like to register your interest in joining the programme, and your businesses has half-hourly metering, simply get in touch with the Consultiv team today.
We’re partnered with Perse Technology to provide our customers with access to the DFS. Having passed rigorous ESO checks, Perse Technology were one of the first DFS “aggregators” accredited by the National Grid.
Can we help with your business energy?
If you require advice and support on your business’s energy contract(s) and optimising your energy efficiency, our team have extensive experience in providing strategic guidance for organisations of all sizes. We aim to take the pressure off you and provide a seamless service that will ultimately benefit your organisation.
If you would like to arrange a free consultation with one of our energy specialists to discuss how we can assist you with your energy contract(s), please contact us.
We hope you have found this blog both interesting and valuable. Feel free to share your thoughts or questions on this via email at info@consultivutilities.com.
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