A new report commissioned by Scottish Renewables has described the UK’s approach to constraint management as “outdated” and in need of a “major revamp.”
Established prior to the wind generation boom, the constraint management system has been struggling to cope with the substantial increase in renewable deployment over the last 20 years, the ‘Exploring options for constraint management in the GB electricity system’ report stated.
This, paired with what Scottish Renewables called “a decade of under investment in the UK’s electricity transmission network” has resulted in constraint costs growing significantly, with the current system “no longer delivering good value.”
The report – published by renewable service company the Energy Landscape – revealed that overall, the average cost of relieving transmission constraints rose from £109/MWh between 2018/19 to £366/MWh between 2022/23.
These constraints also lead to the curtailment of the cheaper energy provided by renewables such as wind and solar, and replacing them with more expensive energy sources like fossil fuels.
Scottish Renewables warned that if the current method of constraint management continued, consumers will be left exposed to “significant risks from future energy price crises and delays to new transmission capacity.”
“The way we currently manage grid constraints must be reformed to reflect the needs of our rapidly decarbonising electricity system, and this report from the Energy Landscape demonstrates the potential for constraint management markets to play a key role in this new approach,” said Andrew MacNish Porter, senior policy manager at Scottish Renewables.
The review of electricity market arrangements (REMA) is currently ongoing in its effort to determine the best market mechanism to support the UK’s future energy system. Running from July to October 2022, a summary of responses from the first consultations was published in March 2023.
The summary confirmed that 80% of respondents didn’t feel that the market was fit for purpose and one of the proposed mechanisms with most traction within REMA was Locational Marginal Pricing (LMP).
An LMP mechanism would split the energy market into multiple sections, either zones or nodes, varying the price of energy by location.
Energy Systems Catapult and the National Grid ESO have praised nodal pricing as an attractive solution for the wholesale market to reduce consumer costs, however, other industry players have expressed fears of the locational pricing inducing a ‘postcode lottery’ and resulting in a loss of revenue for generators.
Scottish Renewables fits into the latter group, stating it felt that LMP had been “presented as the only solution suitable for a high-renewable power system” but said the its own standpoint is “clear that LMP would be a disaster for the Scottish renewable energy industry, would put net-zero at risk, and lead to poor outcomes for consumers.”
MacNish Porter added that Scottish Renewables: “reiterate[s] [its] view that LMP should be ruled out so that attention can then focus on building an evolutionary package of reform to existing market arrangements which will deliver a reliable, efficient, cost-reflective decarbonised energy system in the best interests of consumers across the entirety of the UK.”
Instead, the report offered a number of recommendations that help manage constraints in Britain’s grid whilst mitigating risks and costs associated with LMP.
These suggestions include:
- Better access to the future forecasts of future constraints.
- Develop a portfolio approach to constraint management which makes a collection of tools available to the Future Systems Operator (FSO) to act over a range of timescales and to ensure all potential providers can support constraint management.
- Allow the FSO to offer long-term contracts, over months and years, for constraint management.
“For several years it has been clear that the current system for managing constraints is struggling. But it is surprising that there has been so little focus on developing a better system. Today, National Grid ESO uses forecasts of future constraint levels to make recommendations on transmission investment to be delivered in a decade’s time, but then must wait until an hour before delivery before taking meaningful action to resolve constraints,” said Simon Gill, director at the Energy Landscape.
“Constraint management will remain an important part of an efficiently operated electricity system. It is imperative that, as a sector, we devote significant effort to developing an effective way forward.”
In February 2023, Gill published a briefing note warning that an LMP system in Scotland could impact investment significantly.