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Chart of the Week

2018

FFR tender results surprises

Joe Camish Analyst

On 16 October, National Grid ESO published its monthly tender results for the Firm Frequency Response (FFR) service. Stiff competition from participants, including battery storage projects and the influx of aggregators, have led to an oversupplied service that has seen the prices realised fall and stagnate. Year-to-date, prices for accepted tenders offering dynamic response have averaged £7.6/MW/hr; this 46.2% below the £14.2/MW/hr seen to October 17. It was therefore surprising to market participants when a tender from First Hydro was accepted this month at £17.7/MW/hr. The tender from the company’s Dinorwig hydro pumped storage asset (capacity 1.8GW) became the most expensive accepted tender since January 2018. All the while, seemingly cheaper alternatives where rejected. This bucking of recent trends can be explained by the new approach to FFR tendering, which is a consequence of the ESO’s wider efforts to simplify and standardise the letting of balancing services. Changes made in May introduced standard FFR contract durations. This meant parties could only tender 30-month into the future every three months. Requirements for the months in-between are provided for via month-ahead only tender rounds. These changes appear to indicate that in the most recent tender round the ESO was unable to satisfy a large volume requirement prior to the month-head. With only two opportunities in July and September to acquire long-term requirement this left National Grid with a shortfall of 294MW of secondary requirement in EFA block 5 (15:00-19:00) to be obtained in the month-ahead tender round. ...

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