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Ofgem launches evaluation of balancing costs as they soar by 39% during lockdown

Image: Andy Beecroft.

Image: Andy Beecroft.

Ofgem is evaluating it balancing costs system after costs rose by 39% during lockdown.

Between March and July 2020, the Britain’s grid balancing costs rose to £718 million, nearly 40% higher than National Grid ESO expected, as consumer behaviour changed due to the nationwide lockdown.

The change in consumer demand and its impact on balancing the grid was exacerbated by a high period of renewable output as well, further challenging National Grid ESO.

A number of steps were taken to mitigate the impact, including contracting EDF’s nuclear power plant Sizewell B to run at half capacity, introducing a new service called Optional Downwards Flexibility Management and clarifying emergency arrangements for the disconnection of distributed generation.

Despite these steps, though, the Balancing Use of System charges still saw record highs through the spring and summer period. This led SSE to put in a request to National Grid ESO to defer Balancing Services Use of System (BSUoS) costs in May, after it identified that there would already be an additional £500 million increase in charges.

Ofgem’s evaluation will look at both system operation actions throughout the lockdown period, and how well the market responded to the system challenges and the actions taken by the ESO, to inform future policy development.

In an open letter published by the regulator, Eleanor Warburton, deputy director of ESO and gas systems, wrote: “Given the high balancing costs incurred this summer, it is important that we understand in more detail what happened in this period and identify whether there are lessons for the ESO to learn to manage these kinds of issues in future.”

It will seek evidence from National Grid ESO throughout August, before hosting industry roundtables in early September.

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