In recent years National Grid ESO has consulted and worked with industry to identify improvements to its range of balancing services, in order to make them more applicable to the future networks challenges and opportunities. This first formed the publication of the System Needs & Product Strategy (SNaPS) document in June 2017, which consulted upon the direction of travel for future reform in the ESOs balancing services.
The findings of this report spawned the ESOs first Product Roadmap concerning frequency response and reserve services six months later. One of the key pieces of work outlined in this document was the trial of a different method of procurement for frequency response.
A two-year-long trial was then announced back in August 2018 which outlined the process for weekly auction trials to start in June 2019 as opposed to the current monthly auction process
The project is procuring a small volume of frequency response, with the trial currently under a 100MW limit per EFA block – these being six four-hour blocks across a day. It’s the hope of the ESO that the scheme will open up the frequency response procurement process to a wider mix of technology types, with the move to closer to real-time procurement enabling less predictable technologies, such as wind, to participate. It is also anticipated to give demand-side response providers a clearer picture of what may be required of them and when – with the first delivery window at 23:00 hours the same day.
The ESO publishes its requirements for the following week ahead of the auctions and will procure a range of services; high-frequency dynamic response, low-frequency dynamic response, high-frequency static response, and low-frequency static response. However, the trial is currently in its first phase, which means the ESO is only procuring the low-frequency static response product. This will last until late summer, with phase 2 commencing in September 2019 with the ESO’s partner EPEX SPOT, which will see all four services procured.
The trial is also aiming to help drive down prices for services by testing the use of a pay as a clear mechanism with bids accepted in price order regardless of size.
Phase 1 of the weekly trial went live on 13 June, with results published the following day. At the time of writing, there have been six completed auctions. The project has seen one cancelled auction, on 18 July on the grounds of “exceptional circumstances”.
The auction opened with three successful parties, Grid Beyond, Limejump and BESS Claredown. The 100MW buy order set for each EFA block across the week wasn’t reached, with accepted capacity for the week ahead totalling 1,058MW (of a 4,200MW total buy order). The price limit was capped around £5.50/MW/hr during overnight periods (EFA 1-2) and around £3.50/MW/hr during the daytime (EFA 3-6). The first auction cleared at £5.25/MW/hr during overnight periods and at £3.25/MW/hr during daytime periods.
Fast-forward to the latest auction, published on 26 July, and participant numbers have marginally increased from the first auction. Two more entrants have entered the trial, BESS HoldCo and BESS Hill Farm, bringing the total number of participants up to five, consisting of 17 units.
Of these participants, Grid Beyond has currently done well in terms of accepted contracts awarded or accepted capacity. As of the 26 July auction, Grid Beyond has accounted for 60% (5,745MW) of all awarded contracts in the trial. For context, the second highest is the total amassed by Battery Energy Storage Systems (BESS) at 25% (3,092MW).
As Figure 2 highlights the volumes in cleared auctions have currently totalled nearly half the daily capacity limit of 600MW (100MW limit per EFA block). Cleared capacity in the trial has totalled 10,965MW to date, with daily EFA block capacity ranging between 7-97MW.
However, in the most recent auction, EFA blocks 3-6 on 1st and 2nd August failed to clear. This was compounded by the absence of Grid Beyond from that week’s auction and saw the total accepted weekly capacity fall by 1,302MW week-on-week.
Comparing this to the traditional monthly tendered auction for Firm Frequency Response (FFR) accepted static tenders totalled 193MW in each EFA blocks in July’s FFR tender round, while the dynamic market totalled 1,084MW, with EFA block volumes ranging between 405-522MW.
It should be noted that these aren’t like-for-like comparisons with both procurement styles offering different frequency response services with differing technical and tendering parameters.
Concerning the technology types identified in the auction trial, they mirror their monthly tendered counterpart in that they are made up of battery storage or aggregated units – continuing the prevalence of these technologies in the frequency response space. In terms of opening the doors to renewables like wind, this has yet to be seen. Phase two is the more likely point in which we could potentially see the introduction of such asset types, with more products available.
Moving onto the cleared prices in the trial, buy price limits for overnight and daytime periods differ in each weekly auction – with the former being the premium response period. This has seen overnight prices clear on average at £5.01/MW/hr, ranging between £4.8-5.38/MW/hr. Prior to the latest auction on 26 July, daytime response periods held an average clearing price of £3.34/MW/hr and ranged between £3.35-3.39/MW/hr. However, in the latest auction EFA blocks 3-4 cleared at £0.10/MW/hr – with a cleared quantity of 12MW. This event has weighed on the average, falling to £2.76/MW/hr.
In comparison to the July FFR monthly tender round, both Limejump and Grid Beyond had successful static tenders for daytime response offering 4-5MW of response at a rate ranging between £3.23-3.90/MW/hr. This is fairly comparable with the rates obtained in the trail.
The real difference can be spotted in overnight periods with past static prices for these periods in the monthly FFR tender rounds averaging £1.5/MW/hr, less than half the value obtained in the auction trial.
It is still early days for the auction trial – after all, it is meant to span two years – but spectators will hope for greater market liquidity and participation as the auction develops. Additionally, the trial is yet to demonstrate new participation from those who cannot control their availability (i.e. renewables) as per the ESO’s product roadmap published back in December 2017. However, the new procurement approach will suit different developers.
More broadly, the trialling of same-day frequency response is an exciting prospect for all participants involved in balancing services and shows a positive direction of travel from the ESO in terms of future-proofing the service and engaging in fresh approaches to the challenges ahead.
Phase 2 in September should be one to watch with the introduction of wider services and potential for the introduction of non-traditional sources of frequency response.