Ofgem approves preparations for European balancing platform

Ofgem has approved a package of reforms to the Balancing and Settlement Code (BSC) being introduced in preparation for a new Europe-wide balancing platform.

The code modification P344 will implement the common settlement arrangements which will be used by countries participating in the Trans-European Replacement Reserves Exchange (TERRE).

In a letter explaining its decision, Ofgem said the introduction of TERRE will give the system operator at National Grid access to additional sources of flexibility from across the continent – making it easier and cheaper to manage the power grid – whilst also creating new revenue streams for balancing service providers.

P344 will allow actions taken through TERRE to be factored into the calculation of imbalance prices and volumes in the balancing mechanism and enable associated payments to be made between the system operator and balancing service providers in Great Britain, including non-delivery charges.

Ofgem said existing balancing mechanism units (BMUs) will notice “very little difference” between the current settlement arrangements and those being introduced by P344.

The modification will have bigger impact on those not currently participating in the mechanism by creating a new type of signatory to the BSC known as a “virtual lead party”.

A virtual lead party will be able to create an aggregated BMU without being the registered supplier for the sites they are aggregating or holding a supply licence at all.

Ofgem said this new role will give direct access to the balancing mechanism for aggregators, distributed generators and consumers – again making it cheaper and easier for National Grid to operate the transmission network.

The regulator considered two different versions of the modification – the original proposal and an alternative version under which customer consent would not be required for their supplier to receive half-hourly data on their delivered volumes.

Both modifications were given the all-clear by the BSC panel at a meeting in June, with a small majority of members (6:4) favouring the latter over the former.

Ofgem noted the concerns expressed by some suppliers that if customers do not give permission for their data to be shared, they will be unable to verify whether their accounts have been properly adjusted.

It has nevertheless gone against the recommendation of the BSC panel in opting for the original proposal requiring customers’ consent for data sharing. The regulator said if problems do emerge, they can be rectified through future modifications.

Ofgem has also approved a related code modification called GC0097 that will apply numerous updates to the Grid Code in preparation for TERRE. They cover topics such as data submission processes, qualification requirements and responsibilities for coordination between distribution network operators and the system operator.

The modification will also align the Grid Code with the BSC, thereby allowing BMU data submitted to the system operator to be aggregated at the level of the grid supply point (GSP) group. A GSP group covers all GSPs within a distribution network licence area, of which there are 14 across Great Britain.

The current rules stipulate that data must be aggregated at the GSP level and in doing so have acted as barrier to the creation of aggregated BMUs. Limejump recently announced it had entered the first aggregated BMU into the balancing mechanism after receiving a derogation from this requirement by Ofgem.

TERRE is being developed by the European Network of Transmission System Operators for Electricity (ENTSO-E). The platform will allow the trading of “replacement reserves” – the slowest responding of three categories of reserves set out in the European Commission’s 2017 guidelines for transmission system operation.

Replacement reserves are used to maintain the frequency of the power grid once a deviation from the correct level has already been contained and reversed by faster responding reserves.

Not all transmission system operators in the EU use or will use replacement reserves, but as one of the ones that does, National Grid is legally required to participate in TERRE under new EU regulations which came into effect in December 2017.

Other system operators taking part in the scheme include those from France, Spain, Portugal and Italy. The system operators for the Republic of Ireland and Northern Ireland are also observers.

The project is currently expected to go live between October and December next year. Ofgem has issued a direction for P344 to be implemented by 28 February 2019.

Earlier this month, National Grid published a roadmap laying out its plans to widen access to the balancing mechanism, primarily through the introduction of TERRE and the associated code modifications.