Ofgem has approved a regulation change that will allow parties without a supply licence to participate in the Balancing Mechanism (BM) as part of preparations for the Great Britain’s involvement in a Europe-wide energy balancing platform.
The proposal, known as P344, was trailed by National Grid earlier this month as part of its roadmap for opening up wider access to the BM to smaller players and has now been picked up by the regulator.
The modification is expected to be implemented by 28 February 2019, in time for participation in the test phase of the Trans-European Replacement Reserve Exchange (TERRE). The goal of this project is to develop a platform that allows the ten European transmission system operators (TSOs) using Replacement Reserves (RP) to exchange balancing energy from this type of reserve.
RP refers to the active power reserves available to restore or support the level of frequency restoration reserves (FRR) required to prepare for additional system imbalances, including generation reserves.
Through TERRE, balancing service providers (BSP) in will be able to provide balancing services to other TSOs in addition to those in their native markets from a go live date set for Q4 2019.
While Great Britain and Northern Ireland’s future relationship with such initiatives remains to be seen in the face of a potential ‘no deal’ Brexit which could throw the UK out of the Internal Energy Market (IEM), Ofgem’s modification approval stands to have an impact on domestic business models.
As suggested by National Grid previously, P344 creates a new type of market participant, to be known as a ‘Virtual Lead Party’, that will not require a supplier licence to enter the BM. They will be able to create a “Secondary BMU” for the purpose of providing balancing services to the BM or to the cross-border RR market (TERRE) if available.
These Secondary BMUs can be aggregated independently of their supplier, meaning that distributed generation, aggregators, and consumers will be able to register BMUs and participate directly in the BM.
Ofgem expects P344 to improve the “efficiency, co-ordination and economic operation of the electricity system” while creating greater transparency within the market. Combined these factors are thought to result in greater liquidity in the market, therefore increasing operational efficiencies and lowering costs.