National Grid looks to extend balancing services for next two years

National Grid is considering extending the option to purchase balancing services for winter 2016/17 and 2017/18, due to “uncertainties” around supply and demand outlook prior to the capacity market coming into force in 2018/19.

Grid has opened a consultation on whether to continue making supplemental balancing reserve (SBR) and demand-side balancing reserve (DSBR) services available for the next two winters.

“Given the uncertainty over whether there will be sufficient capacity margins available in the electricity market for balancing purposes, it is prudent that we explore options that help us do our job in transporting Britain’s energy,” balancing services manager Claire Spedding said.

DSBR is targeted at large energy users who volunteer to reduce their demand during winter weekday evenings between 4 and 8 pm in return for a payment, while SBR is targeted at keeping power stations in reserve that would otherwise be closed or mothballed.

In its Electricity Security of Supply report, Ofgem warned of uncertainty on the outlook for winter 2016/17 margins, and suggested this as a “significant opportunity” for industry to play a role in delivering security of supply by “returning mothballed plant to the market or improving plant availability”.

Increasing imports from neighbouring countries could also help, it added.

However, the regulator insisted Grid has enough additional balancing services to secure electricity supplies for consumers this coming winter, in an attempt to quell fears of blackouts, saying: “National Grid forecasts a margin for this winter at 5.1 per cent which it considers manageable.”

Ofgem senior partner of markets Rachel Fletcher said: “We are confident that National Grid has the tools it needs this winter to manage the risks arising from the recent power station closures.

“As there is a wider range of uncertainties in the outlook for 2016/17, National Grid’s decision to consult on extending these services into next winter is a prudent one. However, given we are 18 months away from winter 2016/17 there is also plenty of opportunity for generators and other market participants to continue to make more supplies available.”

In its winter consultation last week, National Grid predicted a de-rated electricity capacity margin of 5.1 per cent for the coming winter, the tightest since a 4 per cent margin in winter 2005/6, following a recent spate of power station closures.

National Grid director of market operation Cordi O’Hara said: “As system operator, we feel we’ve taken a sensible precaution again this winter to buy some extra services. Together with the tools we already use to balance the network these additional services will significantly increase the energy reserve available this winter.”