Demand Flexibility Service expands to open up new opportunities for consumer flexibility

We’ve outlined plans to expand the capabilities of our Demand Flexibility Service (DFS) and progressively transition the Local Constraints Market (LCM) into a single, scalable flexibility service.

Launched in 2023 the LCM delivered flexibility on the network boundary between England and Scotland, providing opportunities for consumers and businesses to be rewarded for increasing their electricity demand when electricity supplies are abundant reducing network constraints and the payments made to generation assets to stop producing electricity.

LCM has demonstrated that flexibility can provide operational value when deployed effectively to manage network constraints and can reduce costs for both participating consumers and the nation as a whole.

Building on the success of LCM, we will now for the first time, roll out this approach nationwide, creating additional opportunities for participating consumers and businesses to be rewarded for flexibly using electricity and helping to address network constraints across Great Britain.

The within day merit design of DFS will also improve the effectiveness of using flexibility to manage constraints, by providing NESO with more options closer to real time, enabling more flexibility to be used effectively. By consolidating flexibility services this update will also simplify the options available to consumers, making it easier to participate.

Since the launch of its enhanced capabilities in April 2026 to enable consumers and businesses to be rewarded for both increasing and reducing their electricity usage, DFS has published 73 service requirements across 68 days. Over this period, we’ve forecast consumer savings of approximately £391,000 compared with alternative actions, such as using power stations and other generation. We also estimate that the new zonal procurement arrangements alone have generated around an additional £70,000 in savings by enabling more targeted flexibility procurement.

Significant untapped opportunity still remains. Between April and July 2026, published service requirements represented a potential flexibility opportunity worth £23.3 million, significantly exceeding the volume currently being contracted and highlighting the scope for further market growth.

Expanding DFS to support constraint management is intended to help unlock greater participation and create additional opportunities for flexibility providers to support the electricity system, while reducing costs for consumers. Looking ahead, we forecast constraint costs of £3.2 billion over the next 12 months, with average monthly constraint costs of £335 million expected across autumn 2026.

Under the new approach, DFS will become the enduring route to market for consumer-led flexibility, bringing together margin and constraint actions within a single framework. We believe this will simplify participation, provide clearer market signals and strengthen competition by creating a larger pool of providers able to respond to system needs.

Rebecca Beresford, Director of Markets, NESO:

The Local Constraints Market has provided valuable evidence that consumer-led flexibility can help address network constraints and support the electricity system. We thank Piclo for their support in delivering this service and look forward to continue working closely with them to manage the transition.

DFS has evolved significantly over the last few years and now provides many of the capabilities needed to support a wider range of flexibility requirements. By bringing LCM and DFS together into a single route to market, we can create a clearer framework for providers, unlock greater participation and deliver better value for consumers.