Electricity prices have been driven up by the re-launch of Short-Term Operating Reserve (STOR) as a day-ahead service, according to new data from EnAppSys.
National Grid ESO brought in STOR as a day ahead service – as opposed to tendering for season-long durations as it previously had – from 1 April, allowing asset owners to optimise between STOR and other market segments.
It has a target requirement of 1,310MW holding capacity a day, with the capacity procured in a daily auction held before the day-ahead EPEX and Nordpool auctions.
During its first month, holding prices for STOR ranged from £0.50/MW/h to £6.50/MW/h, and averaged at £3.00/MW/h. This is higher than during the same period in both 2019 and 2020, according to EnAppSys.
“Following the tight system and high prices seen in the energy market on 12 April, STOR prices rose in subsequent days as providers of capacity factored in the expected value of lost opportunity in the energy market,” said Paul Buckworth, principal consultant at EnAppSys.
“On that day, cash-out prices reached £1,971.59/MWh and STOR providers on subsequent days sought increased fees to cover the opportunity cost that resulted from not participating in the energy markets.
“Effectively, STOR’s return as a day-ahead service is part of National Grid’s plan to move procurement of grid services closer to real time. Participants in this service are able opt in and out of this segment of the market on a daily basis as the prevailing economics dictate, and can optimise against other revenues available in the wholesale markets and/or balancing mechanism.”
Initially, there was a high volume offered into the STOR market, with 2,918MW bid in on 1 April. This fell back to 1,220MW by 15 April, falling below National Grid ESO’s target capacity.
Towards the end of the month this then stabilised to around 2,000MW. Accepted volumes were between 1,127MW and 1,313MW over the first month, with the exception of 8 April when a glitch led to no tenders being accepted.
Throughout this first month, a number of companies have tested out different bidding strategies, tendering in different units at different prices. Uniper priced its Killingholme combined‐cycle gas turbine natural gas power unit 2-1 low at £0.50/MW/h on most days, while its Killingholme 2-2 was priced at around £1.25/MW/h for example. As such, 2-1 was accepted into STOR while 2-2 entered the balancing mechanism.
By making STOR day-ahead, there are greater opportunities for “savvy operators to make money” added Buckworth.
“To succeed in this more dynamic market environment, participants will need tools and systems to actively monitor and forecast all market segments and to optimise between them on a daily basis.”