Demand Flexibility Service: could your business benefit?

The DFS scheme is a potential revenue stream for your business. Here’s what you need to know.

The Demand Flexibility Service (DFS) is a scheme that rewards businesses and households for taking pressure off the grid by reducing their peak-time consumption. This means that your business could get paid for using energy differently.

What is demand flexibility?

Demand flexibility is a way for the National Energy System Operator (NESO) to manage the highs and lows of electricity demand in Great Britain. The Demand Flexibility Scheme works by giving energy users a financial incentive to consume energy at quieter times, which smooths out the peaks and troughs of demand. So if it’s possible for your business to reschedule its energy-intensive activities, you could receive payments through the DFS.

What’s the point of the Demand Flexibility Scheme?

The old National Grid response to peaks in demand was to simply try to bring more power online. This means using more expensive, dirtier fuel sources and spending more on infrastructure.

Today’s energy system needs a different approach: managing demand rather than simply responding to it. Paying people and businesses to change their consumption patterns is an effective way to do this.

DFS success

The Demand Flexibility Scheme was introduced in November 2022 as a scheme for the winter months. It ran over the winter of 2022/23 and was an immediate success, with 1.6 million businesses and homes taking part. The 2023/24 winter DFS was even more successful.

By summer 2024, the electricity system operator had more generation capacity available for winter emergencies. So rather than continuing to treat it as a winter scheme, it decided to ‘evolve’ the DFS into a year-round service.

In industry terms, it’s now an ‘in-merit margin tool’ and just one of several NESO has to cover demand spikes. NESO will pick whichever of these tools is the most cost-effective close to the time of requiring it. This might not necessarily be the DFS. So rather than issuing requests the day before, it sends them out the morning of the same day. (Most DFS events happen during the early evening peak.)

Which businesses can take part in the Demand Flexibility Service?

Businesses of any size can take part in the DFS. Larger businesses and those in energy-intensive sectors are likely to get the most benefit from it, because their energy consumption will be higher.

To take part in the Demand Flexibility Service, your business must:

• Have access to half-hourly metering
• Have the ability to reduce consumption for a given period (minimum 30 minutes) when requested

Reducing consumption on request can be tricky for businesses. Your business needs to be flexible enough to shift planned energy usage to a different time of day without it causing problems.

You’ll usually get a few hours’ notice of each energy ‘event’ (period where NESO wants users to cut consumption).

How to take part in the DFS

Most businesses take part in the DFS through a registered provider, which could be an electricity supplier or an aggregator.

Registered providers are listed on the NESO website. Microbusinesses should use the list of providers for domestic households. All other sizes of business should use the Industrial and Commercial list.

Your business can go with whatever Demand Flexibility Service provider it chooses. Contact a provider directly to find out what its terms are.

If your business is a heavy enough energy user that it could provide 1MW or more of flexible capacity, you can make arrangements directly with NESO rather than through a provider: demandflexibility@nationalenergyso.com 

Many businesses use a trusted third party to help them find the right provider or deal with NESO on their behalf. Sustainable Energy First have successfully brokered Demand Flexibility Scheme participation for many of our clients.

Payment

How much your business gets paid depends on:

• market energy pricing for the date and time of the energy event;
• which provider you’re signed up with (if any).

So the payment can vary a lot, but you’ll typically get between £1 and £5 for each kWh of reduced consumption. NESO pays the provider and they choose how much of the payment to pass on to users.

What’s a DFS event?

‘Event’ is the name for the period of time when the Demand Flexibility Service will pay participants to cut their energy consumption. It’s always at least half an hour long and it usually falls in the late afternoon or early evening, which is typically a peak time for energy use.  

Businesses will usually find out on the morning of the event when it will start, how long it will last and how much energy consumption needs to be cut. You get an hour to confirm whether or not you want to join the event. If selected to join, you have to take steps to reduce demand during that period – for example, pausing a production line from 4pm to 5pm and moving production later into the evening.

Your business gets paid if it delivers the expected reduction in demand. You usually won’t get penalised if you fail to do this. But you also won’t get paid extra for a reduction that’s bigger than expected.

Demand flexibility can help energy-intensive business save significant sums on their energy bills. To find out what it could do for your business, get in touch with our experts.

Changes in 2026

April 2026 saw various changes to the Demand Flexibility Service. These are:

• Wider eligibility: now your business only needs to offer 0.1MW (100KW) of flexibility capacity to join the DFS.
• Zonal procurement: NESO can set a maximum capacity requirement for different electricity regions, although overall the requirement is still calculated at a national level.
• Self-nominated baselines: the option for industrial and commercial participants to calculate their own baseline consumption, following NESO’s methodology, rather than having it set for them.
• Bi-directional flexibility: allowing businesses with on-site generation assets to provide the grid with energy as well as reducing their consumption.
• Primacy rules: handling any potential conflict in priorities between NESO and the Distribution Network Operator.

As of October 2026, there are further changes: the Demand Flexibility Service is taking over constraint management. This means the actions taken to reduce congestion on the network – a bit like how variable speed limits on the motorways help to manage traffic flow. Constraint management was previously run by the Local Constraint Market as a separate body, but this is now being integrated into the DFS.

To find out more about whether the Demand Flexibility Service could be a useful income stream for your business, talk to our experts.