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Brand new this autumn and winter is the Capacity Market Notice (CMN). This is National Grid’s newest tool of communication with the energy industry. Since the CMN’s introduction on 1 October 2016, two of them have been published.
On 31 October 2016 at 12:06 National Grid released its first Capacity Market Notice for 16:30. A CMN is an automatic operating margin notice issued by National Grid. As Halloween night approached, the CMN spectre hovered over the market until it was cancelled at 19:00.
In the graph below, you can see the shadow of the CMN lurking in cost of actions National Grid took to Balance electricity supply and demand. Halloween saw a large number of accepted Offers over £1,000/MWh these are shown as the darker blue volumes. Offers are actions used by National Grid to increase the amount of electricity on the system. From November last year to the end of October National Grid has accepted 164 Offers with a price greater than £1,000/MWh. On 31 October, National Grid accepted 103 of the 164 Offers priced over £1,000/MWh. The highest priced of the Halloween accepted Offers was £2500/MWh from a coal Balancing Mechanism Unit (BMU).
Electricity market imbalances are settled on a half hourly basis with each half hour referred to as a Settlement Period. Data provided by Elexon.
The high priced accepted Offers would have been a treat for those trading parties submitting the Offers. However, parties paying for energy imbalances at the System Price will be left feeling tricked. The System Price was calculated as £519/MWh during Settlement Period 34 and £661/MWh during Settlement Period 35. These Settlement Periods were the only ‘Short’ Settlement Periods while the notice was active, when National Grid had to increase the overall level of electricity on the system.
The Halloween frights managed to also spook the energy trading desks. While the CMN was active, the Market Index Price reached a peak of £792/MWh in Settlement Period 36. This is calculated from same day trades via Power Exchanges, the electricity market places.
This was also the first day of the Supplementary Balancing Reserve (SBR) contracts window. National Grid renegotiated the SBR window to start a day early than originally planned, on 31 October rather than 1 November over fears of tight margins. From Elexon, we have compiled a set of FAQs to help industry understand better what SBR is and its impact on Settlement.
Despite any Halloween witches plots National Grid did not have to resort to using an SBR provider. They were able to manage the system by using Bids, Offers and Short Term Operating Reserve (STOR) providers’ actions.
Looking forward, as the UK travels further into colder temperatures and shorter days we can expect tighter operating margins leading to more CMN’s. The knock on effects could be peaks and troughs in imbalance and market prices looking spikier than a snowflake.
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