In balancing the system, we used to talk mostly about narrowing capacity margins and the need to ensure ‘headroom’. But suddenly there’s a greater need for greater consumption and the provision of ‘footroom’ during COVID-19, and potentially and also in the future. The ESO will need to procure more and different products associated with a low-demand, high renewables system. This conundrum will present an opportunity for flexible assets that can meet these system needs.
Footroom is something that ESO used to procure with the product Demand Turn Up (DTU), but they haven’t procured this since 2018. While bringing DTU back would be a welcome change, I think there are other changes that we could consider to make sure we have the right market frameworks in place for the future we are moving towards.
Pivotal to this could be a central flexibility platform for all balancing services, complete with clear and understandable commercial and technical parameters. This will allow both market participants and the ESO to respond rapidly to changing system and market needs with maximum efficiency and greatest certainty.
Woo Hah!! Got You All In Check
DTU was a service procured by National Grid to manage the system with high renewable output and low demand in 2016-2018. It was focused on overnights and weekends in windy conditions to reduce the cost of managing constraints on the system. The service would provide an additional option for National Grid and was potentially beneficial for new participants providing demand led sources of response. The ESO traditionally manages footroom through the Balancing Mechanism through part-loading of plants on the system to provide the response needed.
The product would turn demand up or reduce generation, rather than turn renewable generation down. The cost of constraining renewables is usually the cost of the lost subsidy (priced into negatively priced bids in the BM), whereas the DTU has other considerations for being part of the service, such as business ability to increase demand and their ability to actually increase production or output when required by the ESO.
The service was intended to encourage large energy users and flexible generators to increase demand or reduce generation at times of high renewable output and low national demand. Providers could be ‘true’ demand turn up, CHP, other generation, storage and other technologies.
However, it felt like DTU was ahead of its time and was relatively short-lived as a result. It did though provide the opportunity to gather information and learn from moving between theory to practice, and this learning could be really useful today. The table below shows how it was used between 2016 and 2018, showing an overall reduction in the service from generation turn down and demand turn up.
The service was put on hold for 2019 for a number of reasons:
- ESO control room feedback is that the offline dispatch process, long notice period for delivery and small volume procured are key barriers to increased utilisation of DTU in its current form.
- Service revenues were found to be inadequate for providers of the service.
- Low levels of participation were expected in 2019.
Personally, it would have been good to see it brought back to life – albeit with changes such as:
- Shorter term procurement timeframes, as with the short-term auctions used in frequency response trials.
- Using the Platform for Ancillary Services or Application Programming Interface (API) from the changes to Balancing Mechanism Wider Access for easier communication between the ESO and participants.
- Removing the caps on utilisation pricing for limited periods to enable better access to the market appetite.
All these changes are easier to identify as desirable with hindsight and maybe the service will be tendered again with some of these changes incorporated.
Gimmie some more
COVID-19 has caused a dramatic change in electricity demand with a 19% reduction against an average Tuesday in April 2019. The change in demand is the result of the non-domestic sector reducing demand, which also reduces the availability of ‘true’ demand turn-up opportunities for National Grid.
The changes have mean there is less flexible thermal generation on the system to provide flexibility through Balancing Services or the Balancing Mechanism. CCGT generation, that could provide footroom, continues to decline in loads due to the reduction in the level of demand, while nuclear -which is very limited in flexibility – continues to generate with no change making it harder for ESO to manage the system.
The ESO has stated in its weekly COVID-19 webinars that it is looking at resurrecting the DTU service, especially as we continue to see record low demand periods. This means the ESO will look to increase inertia and footroom to be able to operate the system safely and securely.
Put Your Hands Where My Eyes Could See
For me the interesting thing is not about suddenly restarting the DTU scheme to meet the changes on the system, but establishing an approach or set of tools to enable the ESO to respond regardless of what the short term issue is, be it COVID-19, serial generation defects or other unknowns.
At the moment when tendering for Balancing Services you need to go through a qualification, testing, and tendering exercise for each Balancing Service. Such services could vary between a few month and years. The question is whether this could be better standardised and centralised and should we now look at applying the approach of having a central register or platform for all Balancing Services?
Such an approach would mean that regardless of the asset, be it a group of domestic batteries or a large-scale thermal generator, existing or new build, you would provide technical and commercial data into a single platform. This platform would not be service specific, but instead allows you to register your asset and say which services you can participate in, with the necessary supporting technical and commercial data included.
The benefits to the flexibility provider are clear:
- One central source of qualification and engagement.
- Enter all technical parameters for ESO to identify source and potential market sizes.
- Regularly update technical and commercial data in one place for all services.
- Allow secondary trading of services with other participants for future periods.
- Allows participants to register an asset that could provide value but not within current service limitation
The benefits of this for the ESO could be the following:
- See all providers willing to get involved in flexibility regardless of current services.
- Understand the market size and ability for assets to offer alternative service.
- Create new services or respond quickly based on known parameters.
- Minimise procurement efforts.
- Link in with other services or registers such as the Capacity Market.
- Create open and transparent system and ensure competition – lowering costs to the consumer.
What’s it gonna be?
It would be great if the ESO was already in a position to have an understanding about the assets out there that could provide DTU allowing rapid respond, without having to go out to market, but the information is not available currently.
The System Needs and Product Strategy was a start of a long road for developments to managing the system. It looked at creating a products strategy around different balancing service functions across reserve and response to simplify the marketplaces. Arguably a single register or platform would be the next logical step, meeting a number of additional objectives including greater efficiencies in procurement and greater optionality for both the ESO and market participants, deconstructing unnecessary complexity along the way. Similar solutions are already provided by platforms such as Piclo for other types of services.
At a time of seemingly regular “black swan” events, and heightened uncertainty about the what the electricity market will look like post-COVID-19, these objectives are more important than ever.
If you are interested in our consultancy work, please contact Tom Palmer on t.palmer@cornwall-insight.com for more information.
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