National Grid’s new measures to push power off the system offer a glimpse of the not too distant future: Without greater flexibility, balancing gets harder and more expensive, especially when demand is low.
To manage the demand drop caused by coronavirus, National Grid has launched a new footroom tool, which pays distributed generators to stop exporting power or businesses to consume more grid electricity.
The ESO has attracted more than 2.5GW of Optional Downward Footroom Management (ODFM) in remarkably quick time. Over the weekend, much of it was instructed. According to Elexon data:
- Maximum 1006 MW (capacity of 2633MW) was instructed for delivery between 23:00 22/05/2020 and 06:00 on 23/05/2020
- Maximum 1920 MW (capacity of 2633MW) was instructed for delivery between 06:00 23/05/2020 and 16:30 on 23/05/2020
- Maximum 855MW (capacity of 1610MW) was instructed for delivery between 23:00 23/05/2020 and 09:30 on 24/05/2020
- Maximum 1048 MW (capacity of 1578MW) was instructed for delivery between 10:00 25/05/2020 and 16:30 on 25/05/2020.
But who’s counting
The ESO is also paying EDF to halve output from Sizewell B over summer. But all of this comes at a cost, at a time when energy companies are already struggling with rising bad debt as customers, particularly businesses facing an uncertain future, stop paying their bills. Many are also left with significant hedging issues following the collapse in demand.
National Grid says its actions will save £213m in balancing costs (BSUoS) over summer. But its forecast of BSUoS costs for the year has increased from under £1.5bn in February, to around £2bn as of this month. In May alone, costs doubled from about £60-£70m to an expected £130m. June to August these are predicted to be much higher, between £117m and £133m extra per month.
Energy firms are worried. SSE says the impact of extra balancing actions create “a high probability of BSUoS in individual periods effectively doubling the total cost of electricity”. It has tabled a motion to cap additional Covid-19 balancing costs at £500m and defer payment until 2021, spreading it out across the year. Suppliers and generators, it argues, could not have forecasted such an increase in costs ahead of time.
Meanwhile, firms are also lobbying for deferral of other bill items, such as network charges and levies, which risks creating an even bigger bill further down the line.
The winners for now are flexible assets. Battery storage operators, for example, are rubbing their hands, suggesting the current situation foreshadows how the grid may look in five years’ time, when National Grid has committed to run solely on zero carbon sources whenever it can.
Kiwi Power head trader, Aaron Lally, said the firm traded batteries across services including ODFM footroom over the weekend.
“If this trend continued for the whole year, we could see battery costs recovered in 2-3 years,” he said, suggesting that the push to decarbonise the grid means “the business case for battery storage, driven by contracted markets, has never been more attractive”.
“We need 10GW,” said Lally. “Any less, the market is imbalanced and existing asset owners will be making profits that will make the original EFR contracts look like peanuts.”