Testing opens for balancing mechanism and Terre


Companies that want to trade power in the GB balancing mechanism – and the European reserve exchange called Terre – can start to test their systems this month.

Elexon is leading on work to change settlement systems so that aggregators can trade flexibility within the balancing mechanism (BM), the main tool used by National Grid to balance supply and demand close to real time.

As contracted revenue streams for flexibility come under pressure, the BM is seen as an increasingly important market for flexibility providers.

To date, only licensed suppliers have been able to trade in the BM – which led some aggregators, such as Limejump and more recently Flexitricity, to acquire supply licences.

However, National Grid and Elexon aim to enable parties without supply licences to participate, with the arrangements also enabling participation in the new European reserve exchange, Terre, involving nine European transmission system operators (TSOs).

That will enable companies selling flexibility to access deeper pools of value – with the BM accounting for almost half of GB balancing costs – around £530m per annum net or £1.1bn gross.

By way of comparison, non-BM ancillary services stood around £480m in 2018/19 – but that includes Black Start, a grid reboot service that is currently the preserve of large power stations.

Terre will likely be a smaller opportunity for flexibility providers, though could theoretically be worth nine figures – if the five of the eight TSOs physically connected to the GB system have similar requirements to the UK’s estimated 1.1TWh per annum.

Terre was due to go live at the end of 2019, but has now been pushed back because the French TSO, RTE, isn’t ready to go live.

Because the GB route into the market is via France, National Grid has also requested a derogation and all the other TSOs bar Czech Republic are now holding fire, potentially until December 2020.

Elexon said it still intends to make wider BM access available this year, regardless of whether GB participation in Terre is deferred.

Alongside making changes to industry codes to enable aggregators to play in the BM and Terre, Elexon is developing a software platform that they can use to access the markets as ‘virtual lead parties’, or VLPs.

The firm is inviting aggregators and others to test the platform to ensure their systems are compatible and later this month will start publishing bids and offers for replacement reserve as well as publishing additional information in its settlement reports to reflect replacement reserve trading and VLP participation.

The tests, which will run through September and October, are open to existing Balancing and Settlement Code parties, prospective VLPs, half-hourly electricity data aggregators, and third parties that provide software involved in settlement.

Those interested in taking part in testing should email TERRE.testing@elexon.co.uk

Related stories:

Terre delayed, France blamed

Terre and BM: Elexon opens market entry process for aggregators

National Grid works to open BM to all, prepares for Terre

New control desk ‘doubles small flex’ in BM

Can the Balancing Mechanism offset FFR price erosion? 

National Grid outlines plans to bring all flex providers into Balancing Mechanism

Flexitricity aims for supply licence, eyes BM prize

Limejump: Aggregators will need a supply licence to survive

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