Electricity demand in Britain has fallen very significantly in the last couple of months as a result of the response to COVID-19. The lack of demand from commercial and industrial premises has not been fully offset by additional residential sector demands as the country remains in lockdown. Additionally, the shape of electricity demand has changed somewhat over this period, with the weekday morning peak having flattened out as a result of people working from home and being less governed by commutes and school runs. Over the first May bank holiday weekend (8 to 10 May 2020) UK electricity demand fell to 15.347 GW early on the Sunday morning, 12.3% below last year's minimum demand and close to a record low, initial out-turn figures from National Grid show. Additionally, Britain’s lockdown has coincided with weather patterns ideal for renewable energy generation such as solar and wind which have flooded the system with cheap electricity just as demand is low. The renewables share of overall electricity generation reached a peak of 60.5% at one point in March 2020.
As such, National Grid Electricity System Operator (“NG ESO”) has announced the following additional measures to maintain grid stability and avoid blackouts. NG ESO has:
- introduced the Optional Downward Flexibility Management Service (“ODFM”) for renewables, offering small scale renewable generators additional commercial agreements to reduce their output;
- put forward an urgent modification to the Grid Code, which has now been approved by Ofgem, that gives NG ESO the right to issue Distribution Network Operators (“DNOs”) instructions requiring them to disconnect embedded generators that are not Balancing Market participants in exceptional circumstances; and
- signed a deal with EDF to reduce the output of Sizewell B nuclear power station, halving its output for at least six weeks.
These measures aim to give NG ESO additional flexibility in balancing supply and demand during the current period.
The Optional Downward Flexibility Management Service
NG ESO has outlined a new footroom service to tackle the exceptionally low demand on the transmission system, providing for payments to generators on the distribution network to stop exporting when demand is low and renewable generation is high.
The ODFM service requires a minimum 1MW commitment and the ability to deliver for three hours. Providers cannot be separately registered as BMUs, or otherwise active in the Balancing Mechanism, and they cannot be participating in or contracted to any other balancing / flexibility or related services during periods when the ODFM service is offered. They also cannot be signed up to any DNO active network management schemes. Unlike the original Demand Turn Up service that was launched in 2016, providers will not be exposed to imbalance price risk, as NG ESO have specifically amended the Applicable Balancing Services Volume Data (ABSVD) Methodology Statement.
NG ESO has emphasised that it is important that participants understand that these contractual arrangements sit entirely separate from the existing connection agreements established between each embedded generator and its host DNO, which remain unchanged.
NG ESO first utilised the ODFM service on 10 May 2020 between 4am and 7am when 238MW of embedded generation was requested to shut down.
For guidance on this new service please see National Grid ESO Guidance Document on the ODFM.
Modifying the Grid Code
On 30 April 2020, NG ESO put forward an urgent modification to the Grid Code which was approved by Ofgem in their decision dated 7 May 2020 (the “Decision”). The modification allows NG ESO to disconnect embedded generation for no compensation in an emergency situation, after having exhausted all other commercially available options. The modification is a temporary arrangement that will run until 25 October 2020 and aims to clarify that NG ESO could request plant disconnection in the form of a total capacity or percentage of capacity rather than by specific plant.
In its Decision, Ofgem concluded that the implementation of the modification proposal will better facilitate the achievement of the objectives of the Grid Code and is consistent with their principal objective and statutory duties. Ofgem considered the impact of the COVID-19 lockdown and societal changes resulting in a significant fall in demand for electricity, and agreed that there was an (admittedly low) risk that a period of very low demand could result in frequency on the transmission system breaching the upper limit despite commercial measures being taken.
Ofgem emphasised that the issuing of emergency instructions to DNOs on disconnection of embedded generation is a last resort and only to be used once all other commercially available options have been exhausted by NG ESO. Ofgem noted that DNOs when implementing NG ESO’s emergency instructions should take a considered approach taking into account the operational requirements of their users, particularly where this raises safety or environmental issues.
Ofgem and NG ESO agree that this issue would ideally have been dealt with in a more detailed consultation, a point a number of stakeholders have raised, but the urgency of the issue was the overriding consideration. Ofgem strongly encouraged NG ESO to review the current commercial tools available for manging low levels of demand and work with industry to develop a market-based enduring solution, such as further opening up balancing service markets to a broader range of participants.
Ofgem acknowledged stakeholder concerns that the modification may have a negative impact on competition in the generation sector, most notably between distribution and transmission connected generators. Ofgem noted, however, that any potential negative impact on competition is outweighed by the importance of ensuring security of supply and will be mitigated by the limited extent of when this instruction might be used and by its limited duration. Further, Ofgem required NG ESO to consider the stakeholder consultation responses and provide a detailed report within 2 weeks from issue of the Decision, in order to inform the work on an enduring solution.
Following Ofgem’s approval, NG ESO issued a clarification letter to the industry dated 7 May 2020, “Grid Code modification GC0143: Last resort disconnection of Embedded Generation”, clarifying that this measure remained a “last resort measure”. They stated that whilst the measure forms an important final way of maintaining system security, it is unlikely that it will be used over the coming months particularly given the work that NG ESO has been doing in establishing new commercial tools to manage low demand situations that have arisen as a result of the COVID-19 pandemic. NG ESO also confirmed that following expiry of the measure in October 2020, there will be a consultation on an enduring measure including a compensation mechanism.
Sizewell B reduced output
NG ESO has also agreed a one off, fixed term contract with EDF to reduce output from its Sizewell B nuclear plant in Suffolk to help manage lower demand and balance the grid. The contract is instead of making daily payments to reduce output via the Balancing Market. NG ESO note that the agreement is a more cost efficient and secure outcome for consumers, and gives additional options to manage the stability, frequency and voltage of the electricity system. At the time of writing, the EDF nuclear plant status update shows that Turbine Generator 2 of the Sizewell B plant is expected to return to service on the 19 June 2020.
The measures outlined above will give NG ESO additional flexibility in balancing supply and demand during the current period of low demand and ensure grid stability.
The lockdown is accelerating some of the products and strategies that are likely to be needed in the future as part of the drive to reach GB’s 2050 Net-Zero target (which will require the electrification of transport and heat), when managing significant renewable generation output, particularly at times of low demand, will become increasingly important.