ESO holds first auction for new Balancing Reserve service

The Electricity System Operator (ESO) has held its first auction for its new Balancing Reserve service, which it will enable it to procure Regulating Reserve on a firm day-ahead basis.

Regulating Reserve is used to correct imbalances between generation and demand in real time. This service has previously been procured on the day by accepting bids and offers in the Balancing Mechanism to create headroom and footroom.

However, the cost of these bids and offers has risen significantly in recent years and during periods of scarcity can be extremely expensive.

The new Balancing Reserve service will allow the ESO to procure reserve capacity through day-ahead auctions, lowering costs and improving system security by guaranteeing it is available when needed.

The ESO held its first action on Tuesday (12 March) using its new Enduring Auction Capability platform, which debuted in December. Ten providers entered the auction, with 46 units taking part.

The ESO procured 428MW of positive balancing reserve at a volume-weighted average price of £9.46/MW/h. Clearing prices for each half-hour service windows ranged from £0/MW/h to £29.21/MW/h.

It also procured 271MW of negative balancing reserve at an average price of £0.98/MW/h, with clearing prices for each service window ranging from £0/MW/h to £1.55/MW/h.

The ESO said it is initially seeking to procure 400MW of positive and negative balancing reserve over all 48 service windows each day. It will then increase this target for certain parts of the day, creating a more profiled requirement, before ultimately moving to a fully dynamic requirement that changes for each service window and day as driven by system conditions.

For the time being, the ESO will still secure some of its Regulating Reserve requirements through the Balancing Mechanism. The utilisation of reserves will continue to take place through the acceptance of bids and offers in the Balancing Mechanism.