Ofgem exempts ESO from move to 15-minute settlement period

Ofgem has exempted the electricity system operator (ESO) at National Grid from a requirement under EU regulations to move to a 15-minute imbalance settlement period from the end of 2020.

It said its cost-benefit analysis indicated the change would incur net costs to consumers of between €615 million and €1.82 billion.

The EU regulations introduced in 2017 and 2019 allow national authorities to grant an exemption after first conducting a cost-benefit analysis in collaboration with the Agency for the Cooperation of Energy Regulators. Ofgem based its analysis on the methodology, assumptions and data from a 2016 study by Frontier Economics which was used to support the requirement for a 15-minute imbalance settlement period (ISP).

Ofgem found the change would “incur significant costs and result in relatively little benefits”, putting the costs at between €853 million and €1.95 billion and the benefits at between €137 million and €238 million.

“The analysis suggests that harmonising to a 15-minute ISP would not be in the interest of consumers and stakeholders and that an exemption to 15-minute ISPs will provide the maximum net welfare for GB consumers,” it added. “Moreover, retaining a 30-minute ISP would not prevent Great Britain from effectively participating in the new European balancing platforms.”

The regulator said it was nevertheless important for the power sector to ensure any new systems could cope with both 30-minute and 15-minute settlement periods where there is a low cost of doing so: “This should contribute to lower costs of a possible change if at any point in time, a periodic cost-benefits analysis suggests a high benefit of moving to a 15-minute ISP.”