The National Grid has outlined a roadmap to enable all ‘flex’ providers to sell into the Balancing Mechanism.
The Balancing Mechanism (BM) allows the National Grid to balance supply and demand with an almost real-time response, dubbed as the ‘ultimate flexibility market’.
This new roadmap allows flexible participants to sell into the BM by altering the generation and consumption levels of their assets. Bids are placed in flexibility to half hour settlement periods, the Grid then purchases what it needs to balance the system.
BM differs from ancillary services (AS) as with AS, flexibility is contracted in advance, usually at a fixed rate, for set durations. As a larger market it can also offer more opportunities to providers who can respond on a within-day basis.
The Balancing Mechanism is worth up to £350m to providers but this figure is expected to increase as more renewable and distributed generation comes online and large power plants are phased out.
As it stands, BM is available to licensed energy suppliers and transmission connected generators, although it is also possible for distribution connected generators to participate.
It is not possible to directly participate in the Balancing Mechanism without a supply licence, forcing aggregators such as Limejump, which uses ‘virtual power plant’ technology to acquire one.
As competition increases, the price paid for ancillary services falls, meaning providers must seek additional revenue streams. As a result it is vitally important that the grid has access to all flexibility within the market to improve competition and create liquidity, so costs are not passed on to the consumer.
As well as increasing competition within the UK, the National Grid must also enable flex participants access to the cross-border, European flexibility market, Project Terre by the end of 2019. This has proved to be a complicated process due to contrasting trading strategies used by existing systems.