The UK’s largest electricity supplier, Octopus Energy, has issued a “plea” to the National Energy System Operator (NESO) to “pay people, not power plants”.
The call comes after NESO issued its first Electricity Margin Notice (EMN) for this winter period for 8 January. Margins were forecast to be too low as the result of a combination of low wind generation, outages and the cold weather.
NESO took several steps to manage the system margin shortfall of 1,700MW, but Octopus has criticised the system that saw NESO pay up to £5,750/MWh to the gas-powered Rye House and Connah’s Quay Power Stations, far more than its demand flexibility service (DFS) payments.
Octopus’ own demand flexibility scheme, ‘Saving Sessions’, which pays customers to shift their energy use out of peak demand, offered £900/MWh, while its dynamic tariff, Octopus Agile, jumped to £1/kWh.
According to the utility, the £17 million paid to gas responders in the balancing mechanism (BM) is £5 million more than was paid to households through the DFS across all of 2024.
Further, Octopus highlighted that a “drastic” reduction in DFS payments this winter has seen a 50% drop in household participation in flexibility services. As the UK’s transition to clean power by 2030 is predicated on demand-side flexibility to support the electricity grid, this is a cause for some concern.
Founder of Octopus Energy Greg Jackson said yesterday is “another example of our malfunctioning energy system”.
He added: “Millions of pounds were added to bills in just a few hours to pay a handful of gas power plants for a modest amount of electricity.
“It would have been far cheaper to pay customers who chose to use a bit less instead. This was incredibly successful last year, but has been crippled by bureaucratic wrangling.”
Battery response to tight electricity margins
When the de-rated margin in Great Britain hit 1GW, battery storage operators provided over 2GW of committed response across frequency response and wholesale markets. Director of industry at market analysis firm Modo Energy Ed Porter noted that this figure could be estimated up as it does not include additional response outside the BM — leading to a combined figure well over the lowest de-rated margin of 1,003MW.
In a post to LinkedIn, Porter wrote: “That’s more than the system’s de-rated margin and shows how key these assets are to ensuring grid operability. Perhaps questions should be asked of the capacity market (CM) de-ratings?”
At the peak of the issue (5PM), Porter pointed out that many batteries were actually reversed to charge. This could be because the EMN pushed more generation to be online or the control room was running with a buffer. Batteries, as the lowest-cost balancing tool, turned down, and, Porter told Current±, “all of that points at Wednesday not being quite as tight as it first seems.”
