Update on the future of Balancing Services

United Kingdom

The publication of the System Needs and Product Strategy (“SNAPS”) consultation in June 2017 was the first National Grid deliverable as system operator (“SO”) of its ambition to improve balancing services and markets by providing greater clarity and investor certainty. SNAPS summarised future UK electricity transmission system needs into five key products: (1) Inertia, (2) Frequency Response, (3) Reserve, (4) Reactive Power and (5) Black Start, and asked how these and associated information provided could be improved. Following the SNAPS consultation, the SO has published four out of five product roadmaps of actions, providing a detailed plan showing milestones for how the SO’s proposed strategy will be implemented in relation to Frequency Response/Reserve (December 2017), Reactive Power (May 2018) and Black Start (May 2018). We draw out some of the key points from these Product Roadmaps below.

Background

The number of providers of balancing services to the SO has recently grown dramatically from 20 just a few years ago to over 350 in 2017. The market has also seen the transformation of the providers, from large transmission-connected thermal plant to small distribution-connected conventional and renewable generation, aggregation and storage. These developments and associated challenges have prompted the SO to launch the SNAPS process.

The SNAPS consultation revealed issues around accessibility, complexity and transparency which the Product Roadmaps seek to address. A detailed overview of the responses from market participants can be viewed here: Future of Balancing Services web page.

The SO sees a solution of these issues as a three-stage process of changes to the balancing services products:

  1. Rationalisation of the existing product suite through removal of obsolete products;
  2. Simplification of remaining services through standardisation and greater transparency of T&Cs, procurement windows and assessment methods; and
  3. Improvement of services in conjunction with industry.

Product Roadmaps of Actions

Product

Rationalisation

Simplification

Improvement

 

Frequency response

 

• Removing (procuring through alternative market based routes) the following frequency response products from active procurement:

 

  • Firm Frequency Response (“FFR”) Bridging;
  • Frequency Control by Demand Management; and
  • Enhanced Frequency Response.

 

 

• Standardising duration of contract (front month, front quarter and seasons going out 30 months).

 

• Standardising daily windows to align with Electricity Forward Agreement’s blocks.

• Delivering new simplified FFR Standard Contract Terms.

• Reviewing and simplifying exclusivity clauses.

• Testing and compliance/performance monitoring policy for both BM and non-BM parties

 

 

• Carrying out FFR trial of closer to real-time procurement using a pay as clear mechanism.

 

• Including faster-acting response in the frequency response market.

Timeline

Q4 of 2017

Q1-Q3 of 2018

Q2-Q4 of 2018;

H2 of 2019

 

Reserve

 

• Removing (procuring through alternative market based routes) the following reserve products from active procurement:

  • Short Term Operating Reserve (“STOR”) Runway; and
  • Enhanced Optional STOR.

 

• Reviewing and simplifying STOR and Fast Reserve Contracts, as well as reviewing exclusivity clauses.

• Standardising the initiation speed for STOR and the term of the Fast Reserve Contracts.

• Introducing a Platform for Ancillary Services (a web-service based solution that will aggregate and summarise the reserve volumes available to the control room, coordinate despatch across a large number of connected assets and providers, and then provide a route for automated monitoring of delivery).

• Testing and compliance/performance monitoring policy.


 

• Reviewing the results of FFR trial and assessing the applicability of an auction approach for reserve products.

• Implementing European Standard Products for Reserve (Project MARI) and Replacement Reserve (Project TERRE) pursuant to the European Electricity Balancing Guideline.

Timeline

Q4 of 2017

Q1-Q3 of 2018

Q3 of 2018; H2 of 2019 (TERRE); 2021 (MARI)

 

Reactive Power

 

• Raising a CUSC Modification for removal of Enhanced Reactive Power Service.

• Raising Obligatory Reactive Power Service concerns with CUSC Issues Standing Group.

 

• Delivering changes to the Monthly Balancing Services

Summary (“MBSS”) that provide greater transparency of costs and actions by separating out the costs within the MBSS and making it clear when active power is procured to access Reactive Power.

• Improving BSUoS charges information and the MBSS.

 

• Publishing an invitation for Expressions of Interest for provision of Reactive Power service in South Wales.

• Working with network owners to design an approach for efficient Reactive Power flows between networks.

• Working with industry to determine the future role for Reactive Power and design more competitive commercial services.

• Working with network owners to implement previously designed approach for efficient Reactive Power flows between networks.

• Rolling-out of new approach to Reactive Power services.

Timeline

Q3 of 2018

Q4 of 2018

Q3-Q4 of 2018 - 2022

 

Black Start

 

Next steps:

1. Improving transparency (on costs and capacity requirements) around Black Start services.

2. Opening up Black Start to a broader range of participants:

- developing arrangements for combined services and contract structure; and

- increasing participation by different technologies (e.g. Black Start capable interconnectors, wind and storage).

3. Applying alternative approaches for procuring Black Start services:

- standardising and publishing a value assessment in competitive approaches; and

- designating timeframes for the procurement of services.

4. Carrying out a trial of market approach for Black Start procurement in one region.


Timeline

Q2 of 2018 - 2022

 

 

 

Inertia

 

A Product Roadmap on Inertia has not been published yet.

 

In the Q&A, the SO has indicated that because inertia is fundamentally connected to other system needs, the creation of a standalone market for inertia would not be beneficial. The SO has confirmed that they are exploring options to consider valuable characteristics of inertia within the design of other balancing services markets.


What next?

The implementation of the proposals set out in the Product Roadmaps will largely be complete by 2021. However, further changes are likely depending on the outcome of the various trials set out in the Product Roadmaps and further development of the GB and wider electricity markets. Nevertheless, the SNAPS process should enable new participants to enter the balancing services market and provide new revenue opportunities to electricity generators.