Month: August 2018

The Balancing Mechanism

The Balancing Mechanism

The Balancing Mechanism (BM) is one of the tools used by National Grid to balance electricity supply and demand close to real time. Electricity cannot currently be stored at scale and must be manufactured at the time of demand and so it is becoming increasingly important for the success of the transition to more flexible, renewable sources of energy.  Where National Grid predicts that there will be a discrepancy between electricity production and demand during a certain time period, they may accept a ‘bid’ or ‘offer’ from a Market Participant to either increase or decrease generation (or consumption).

In today’s market the Balancing Mechanism is used around 3,000 times each day, at a cost of £350 million a year.  With the renewable energy sector continuing at a pace, and the associated volatility this creates in the system, we know that this market is just going to keep growing.

Headline figures of £2,500/MWh certainly catch people’s eye, especially when compared with £50/MWh in wholesale markets.  While this happens only rarely it is not uncommon for the price to sit above £100/MWh for a lot of the time, as it has done around a third of the time over the last two years.

When it was established, BM was expected to balance 2% of the market in 2001.  On an average day in 2018 it is being used to balance 5% of electricity, and National Grid have even been known to use the Balancing Mechanism to reposition over 50% of the market.  There is clearly an opportunity here for our PSH projects.

Currently the market has been dominated by the big 6 energy companies, whoever this month a company called Limejump has been admitted into the Balancing Mechanism using a virtual Power Plant making it the first company to use an ‘aggregated’ BM unit (BMU) in the market.  They currently have three aggregated units with a total of 178MW available.   The company expects to operate up to 600MW+ as the business develops and grows.

Limejump have 150MW of batteries and other demand response assets within its managed portfolio, and sees their entry into the BM as an opportunity to compete with the big six energy suppliers and other large power plants in this £1 billion a year market.  We believe that our PSH projects will benefit massively from this evolving market, and will be attractive to a great many aggregate operators and anyone else hoping to challenge the dominance of the big six.

This all coincides with a need for the National Grid to change the way it procures for Black Start services.  Indeed, National Grid are keen to migrate to a competitive process that allows for a more diverse range of technologies into the mix.

Cathy McClay, head of commercial electricity at National Grid writes, “The world of energy is changing around us; as our industry moves towards a low carbon future, this presents us with challenges.  Fewer traditional providers of system restoration services, also known as Black Start services, are now available to us…. This calls for us to look at the future approach to Black Start.”

As coal has been pushed off the grid by a combination of policy and cheaper renewable energy sources the National Grid has sought to rethink its Black Start Strategy.  One problem currently is that the conventional power stations that make up the largest portion of the current framework cause problems simply due to the time it can take them to power up.  Our PSH projects can power up almost instantly, only a fraction slower than batteries but on a significantly larger scale.  As these projects are still in the planning stage National Grid has not yet taken these into account but has planned for different technologies to be capable of providing Black Start at different stages, starting with interconnectors.

At ILI we think it makes more sense to use our own natural assets in this country and that is why we are promoting the benefits of UK based Pump Storage Hydro.

UK Offshore Generation Capacity Set To Double

UK Offshore Generation Capacity Set To Double

A new Government initiative launched last week is set to double the UK’s offshore capacity over the next ten years. If this does come to pass, then between 20% and 30% of the UK’s electricity will come from offshore wind generation. This is partly due to vastly reduced development costs making offshore wind an increasingly affordable source of clean energy.

In addition, the Government has set up auctions in which developers bid for Government financial support which aids in reducing costs passing savings to consumers. Claire Perry, the Climate and Energy Secretary confirmed that the auctions would be held every two years and would give the industry the stability required to continue to invest in the infrastructure.

RenewableUK’s chief executive, Hugh McNeal, said: “This sets us on the path to deliver the tens of billions of pounds of investment that will be needed to meet our ambition of at least 30GW by 2030.

“We can look forward to a pipeline of new offshore wind projects that will support tens of thousands of jobs across the UK.”

The auctions confirm the amount of support each individual project will require meaning that the cost of supporting them has halved over the past five years and has been deemed such a success that similar systems have been adopted worldwide by other governments.

Environmental groups have cautiously welcomed the new initiative but with the continued falling cost of both offshore and onshore wind generation questioned why the government was still committed to spending vast amounts of funds on nuclear generation.

Kate Blagojevic from Greenpeace said: “Onshore wind is also getting cheaper all the time, and is now the UK’s cheapest electricity source.

“Solar has been dropping for so long that it has actually reduced in cost by an astonishing 99% since the technology was commercialised.

“This makes the government’s huge financial support for nuclear, the one low carbon source which keeps going up and up in price, all the more confusing and irrational.”

The UK government confirmed that a wide range of energy generation sources are required for a stable energy mix.

ILI Group have long advocated that wind and solar can in the long term provide enough electricity to ensure demand is met and carbon emissions are reduced. However, this will not be possible without industrial scale storage and a renewed development programme ensuring that new projects are brought to fruition.

At ILI Energy we agree that a diverse energy mix is required however with world heating up and carbon emissions reductions legally required our focus should be on renewables with wind – both onshore and offshore – and solar generating the most.

As mentioned above, costs are reducing. In addition, the technology is now more efficient meaning more energy can be generated from each installation. There does however remain the issue of intermittency and although the grid can cope with this up to a certain point should we increase our renewable production levels substantially industrial scale storage will be required.

This is where large scale storage solutions such as pump storage hydro can make a real difference to our carbon emissions. Wind turbines can generate at any time, whether the energy is required or not and if not, it can be stored for use at times of peak demand. This in turn will lead to less reliance on the more traditional – but high carbon producing – short term demand solutions such as gas.

It’s been clear for some time now that storage solutions are necessary for us to take full advantage of our renewable resources and with the right support it can be the backbone of our low carbon energy generation mix.

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