- National Grid has decided to exercise its option to tender for Supplemental Balancing Reserve (SBR) for winter 2014/15. This is supported by Ofgem and DECC
- “A sensible precaution” to take due to uncertainty about generation plant on outage
- Positive industry response to Demand Side Balancing Reserve (DSBR) tender.
National Grid is today opening a tender for the Supplemental Balancing Reserve service to meet requirements for Winter 2014/15. This is one of two services designed to provide additional reserves for the next few winters as capacity margins tighten.
National Grid will tender for generation plant that would not otherwise be available in the market to make themselves available to be held in reserve outside the market during this winter.
This follows a number of recent developments since June 2014, when National Grid set out its initial proposals for balancing services over the coming winters. These developments include fires at the Ironbridge and Ferrybridge power stations and a closure announcement regarding the power station at Barking. The outcome of investigations currently underway at the Heysham and Hartlepool nuclear power plants may also have an impact. As a result, there is an increased level of uncertainly over the volume of plant that may be available in the market this winter.
To help manage this uncertainty, National Grid has decided to take the precautionary step of inviting tenders to provide SBR for this winter to complement the DSBR being procured under a pilot. The actual volumes of SBR contracted, if any, will depend on how the situation evolves over the next two months, how the market responds, and whether prices offered in the tender offer value for money to consumers.
The new balancing services are designed so that National Grid can take account of major developments in the market, including possible changes in generation availability.
Cordi O’Hara, National Grid’s Director of UK Market Operation, said:
“This is a sensible precaution to take while the picture for this winter remains uncertain. At this stage we don’t know if these reserve services will be needed, but they could provide an additional safeguard.”
National Grid proposed two services to be available in the mid-decade until the Capacity Market - established in the Energy Act 2013 - takes effect.
Supplemental Balancing Reserve providers would be required to be available between 0600hrs and 2000hrs between November and February, and would be held under the direct control of National Grid in its role as System Operator.
The Demand Side Balancing Reserve (DSBR) service will allow large energy users to reduce their demand or run other sources of generation during peak winter periods. The service will be available for short periods between 1600hrs and 2000hrs on weekday evenings between November and February.
Cordi O’Hara added:
“We have had a very positive response to the DSBR pilot and plan to offer contracts to the successful parties in September. Tendering for Supplemental Balancing Reserve will enable us to see what additional reserves can be provided by generators at a competitive cost”.
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Notes for Editors:
- For more information about Supplemental Balancing Reserve and Demand Side Balancing Reserve, see http://www.nationalgrid.com/uk/electricity/additionalmeasures
- These services would only be used as a last resort to balance the system in the very unlikely event that there is not sufficient generating capacity available in the market. This would act as a safety net to safeguard consumer interests against the risk of tightening margins. These measures are expected to add less than £1 per year to the average domestic consumer bill.
- Read Cordi O’Hara’s Open Letter to UK Electricity Market Participants and Industry Stakeholders and Large Energy Consumers http://www.nationalgrid.com/uk/electricity/additionalmeasures
- In June 2014, National Grid set out its initial proposals for balancing services - http://www2.nationalgrid.com/Media/UK-Press-releases/2014/National-Grid-to-contract-for-new-balancing-services/. Our requirements for Winter 2015/16 have not changed materially in light of these developments and we still intend to procure the 2015/16 requirement across two tender events, with up to 75% of the total requirement being tendered in Autumn 2014 and the remainder in the spring of 2015. Tenders will be invited for both DSBR and SBR in accordance with the approved DSBR and SBR Procurement Methodologies, with the most competitive tenders offered a contract.