National Grid ESO is to undertake a review of the balancing market, citing “very high-cost days” in the Balancing Mechanism in recent weeks.
This review is to be run by the National Grid ESO Market Monitoring Team and carried out by external consultants.
The ESO said there are many issues that can have contributed to the high costs, but as these costs are ultimately borne by consumers, it is important to fully understand the factors driving the market.
In its Winter Outlook, the ESO outlined how price spikes in the Balancing Mechanism are likely to continue in the winter period as a result of tight margins, with its sensitivity analysis indicating that the tightest margins could occur in the first two weeks of December.
Last winter saw imbalance prices in the Balancing Mechanism reach £4,000/MWh on several occasions, while prices hit £4,037.80/MWh in September 2021.
This came off the back of 2020 recording significant increases in balancing costs, which rose 39% during the first COVID-19 lockdown as changes in consumer demand mixed with a period of high renewable output.
“Our review will seek to ensure that, at a time when households’ budgets are under strain, consumers can continue to have confidence in the market,” the ESO said.
