ESO consults on embedded generator de-rating factors

National Grid Electricity System Operator (ESO) has issued a consultation on a new methodology for determining the de-rating factors for embedded generators in the Capacity Market, in particular gas and diesel reciprocating engines and energy-from-waste plants.

Due to a lack of specific data, conventional generators embedded in distribution networks have previously been grouped together with their closest transmission-connected equivalents – for example, gas engines with open-cycle gas turbines – and their de-rating factors set at the same level using the same methodology.

These de-rating factors, representing their expected availability during periods of peak demand, are currently calculated based on the Maximum Export Limits (MEL) of Balancing Mechanism Units over previous winters. As a result, they are derived from data predominantly collected from generators connected to the transmission network.

Based on a recommendation by the Panel of Technical Experts appointed by the Department for Business, Energy and Industrial Strategy (BEIS) to scrutinise the Capacity Market, the ESO conducted a review of de-rating factors for conventional embedded generators and concluded it may be better to set them using an alternative methodology.

Its preliminary proposal is to calculate the de-rating factors for conventional embedded generators based on two sources of data: the embedded capacity registers that distribution network operators are now required to publish and matched half-hourly metered output data provided by Electralink.

Unlike Maximum Export Limits, metered output does not necessarily reflect whether a unit is available. The ESO said it therefore limited this data to periods when embedded generators are most likely to be running.

Using this methodology, the ESO produced indicative de-rating factors of 90.47% for gas engines, 77.44% for diesel engines and 92.79% for energy-from-waste plants. The figures for gas and diesel engines are both significantly lower than their current de-rating factors.

The ESO said these lower rates may genuinely reflect their availability during winter peaks but said this is counter-intuitive given that they are often newer assets: “It’s entirely feasible that there are still periods within our assessment where these units were available but not generating, despite trying to identify periods where we may have reasonably expected them to be generating.”

These rates also exclude units in the Short-Term Operating Reserve (STOR), which are included in the current methodology. The ESO said adding these units to the calculation and assuming 100% availability on the basis that they receive availability payments increases the indicative de-rating factors to 88.5% for gas engines, 70.93% for diesel engines and 94.16% for energy-from-waste plants.

The ESO asked for feedback on a number of issues, including whether the data sources it has identified are appropriate; whether metered output is reflective of availability; whether STOR units should be included in the calculation of de-rating factors; whether diesel should be included the calculation for reciprocating engines; and whether the alternative methodology as a whole is better than the current methodology.

The deadline for responses is 11 March.

The ESO said the alternative methodology could not be implemented in time for the upcoming Capacity Market auctions in February for which business and energy secretary Kwasi Kwarteng has now finalised the parameters.

In a letter to the ESO, Kwarteng accepted the ESO’s recommendation to increase the target for the 2025/26 delivery by 0.5GW to 43.6GW to account for minor technical considerations.

However, the secretary of state also decided to keep the target for the four-year-ahead (T-4) auction at 42.1GW and instead lower the amount held back for the corresponding year-ahead (T-1) auction from 2GW to 1.5GW.

For the T-1 auction for delivery in 2022/23, Kwarteng increased the target from July’s preliminary figure of 4.5GW to 5.361GW to reflect “broader uncertainties” in the power sector. The new target is also above the ESO’s recommendation of 4.7GW.