New research from Modo Energy has revealed that 12% of the UK’s total battery revenues are now coming from the National Grid ESO’s (ESO) Balancing Reserves (BR).
Launched two weeks ago, the BR service was introduced to reduce the costs of balancing the system and provide the ESO with better visibility of reserve volume.
In total, 43 batteries have participated in the service since its launch, accounting for 12% of total battery revenues, and the in-merit dispatch rate for batteries reached 8.5% in the week following the launch, higher than the previous month’s record-high figure.
Prices for the positive service in the first auction were volatile, ranging from £0/MW/h to £29/MW/h, averaging £9.57/MW/h. Since then, prices have stabilised, with 87% of settlement periods seeing prices below £5/MW/h.
Negative reserve prices, on the other hand, have averaged £1.07/MW/h. This is because the ESO has capped prices at £1.55/MW/h.
When wholesale prices increased, for example, on 20 March at 18:00, clearing prices in positive reserve also rose, which was predominantly driven by an increase in the volume of gas peakers bidding for the positive service.
These units largely sat out the first auction, offering just 64MW in each 30-minute period on average. Since then, gas peakers have bid 270MW across the day, and over 90% of this volume is priced below £5/MW/h.
Gas peakers and batteries have competed for the most positive BR volume and have each provided 45% of the positive BR on average, with the remainder coming from combined-cycle gas turbines (CCGT).
Coal and CCGTs now account for most of the contracted negative BR volume. The low price cap of just £1.55/MW/h means the accepted volume is often below 100MW, all provided by batteries.
However, when CCGTs and coal are online during peak demand periods, they provide cheap negative reserve availability. This allows the ESO to purchase over 400MW of negative BR within the price cap.
ESO’s BR
When news of the BR first spread, National Grid ESO suggested that the storage and flexibility it allowed for could save customers up to £639 million over four years.
Before February 2024, the ESO purchased energy to correct imbalances in the GB power system in real-time using optional bids and offers in the Balancing Mechanism (BM) to create what is known as the ‘Regulation Reserve’.
The new BR service, recently approved by energy regulator Ofgem in February, will allow the ESO to procure Regulating Reserve on a “firm basis” a day ahead, with daily auctions running on its Enduring Auction Capability (EAC) platform with a minimum contract size of 1MW.
Energy procured the day before will be used to meet system demand and be cheaper than buying energy ‘on-demand’, therefore reducing costs whilst also improving system security as reserve capacity is guaranteed for the ESO Control Room to access when required.
Moreover, in the same month, ESO announced it would soon make changes to allow 300MW of flexible assets to be introduced to the BM.
This move aimed to create greater consumer participation in flexibility, meaning the capacity from small-scale assets, such as electric vehicle (EV) chargers and electric heating systems, can be used to balance the electricity system’s demand.
The firm said it will permit a capped cohort of assets into the BM as part of an aggregated unit, each with an individual capacity of no more than 1MW.
