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Is P355 the Bright Dawn of a New Balancing Era?

Adam Boorman Adam Boorman Senior Regulatory Analyst
28th June 2017

Last week saw the raising of a modification with the potential to seriously shake up the current balancing mechanism (BM). P355 Introduction of a BM Lite Balancing Mechanism would allow smaller generators to offer energy to the system operator (SO) for use in the BM. It was brought forward by PeakGen, and this is a very welcome move.

If approved the modification would enable smaller generators to aggregate themselves into larger BMUs, suggested at between 5 and 200MW, which could be dispatched by the SO. The suggested change builds heavily on the proposed Trans European Replacement Reserves Exchange (TERRE) implementation concept to allow smaller plant a level playing field with existing BM Units (BMUs) so they can sell a wide variety of energy and system products to the SO via the BM. While it is building on TERRE it would still require extensive changes in the BSC, including a new registration system and process, new rules around non-standard BMUs and the metering of BMUs.

The ramifications of this are potentially wide-reaching, and alongside TERRE the change would represent potentially the largest shift to the BM since its introduction. By allowing these sites into the BM, it should significantly increase the pool of generation open to National Grid to use to manage the system. This will bring increased competition into the BM for the larger generators who currently provide this service. While the exact details of this proposal are still to be decided, it has the potential to provide a new source of revenue for smaller generators, which will be particularly welcome in light of the recent CMP264/265 decision, and should lower the costs of these services through increased competition.

It also relevant to National Grid’s desire to review how they balance the system more effectively in light of changing needs through their System Needs and Product Strategy (SNaPS). It also proposes an early possible answer to the question posed in the Towards a Smart, Flexible Energy System BEIS, Ofgem joint call for evidence regarding how to improve and widen access to the BM. So generally the change seems to ride on a momentum already present in the minds of industry stakeholders.

However, segments of the market notable by their absence are demand-side response(DSR) and DSR aggregators. Currently DSR has been excluded from the scope of P355 due to concerns around the compatibility data flows that the regulator has previously raised. It was suggested by PeakGen in their original proposal that measures to address these concerns  could be progressed alongside P355. The exclusion of demand side participation would prevent P355 being used as one platform for National Grid to achieve their objective of increasing the share of balancing actions met through DSR.

The modification will go to the BSC Panel for initial assessment on 13 July, and then it is expected the workgroup will report back to Panel in March 2018.

Identifying which policies, consultations and change proposals are of key importance to your business and ensuring that your staff understand potential impacts can be a challenge. Cornwall’s Alerts service provides a detailed but easy-to-understand overview of key industry developments that your staff should be aware of. Each alert provides the background on the issue, detail on the proposals being presented, likely next steps, and links to further information, ensuring you have the information needed to inform your wider team. For more information contact Adam Boorman on enquiries@cornwall-insight.com.

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