Energy Network Balancing

Energy Network Balancing

Last Monday saw wholesale energy prices dip to negative levels for more than six hours meaning suppliers where having to pay to produce energy, forcing National Grid to order power plants to turn down production.

This event was off the back of unseasonably warm and bright conditions meaning more of the public where outside enjoying the weather creating a drop-in demand alongside a surge in solar production going from a seasonal average of 3.5GW to 7. 7GW. This kind of event is not that unusual and similar events where seen last year in January and August.

Common sense would dictate that if power producers where having to pay for their power to enter the system, they would naturally curtail producing to continue to be profitable, however this leaves out the vast array of subsidies that some producers are receiving in the form of ROCs, Fits, or even PPA agreements.

What this means in practice is that some producers would need much higher negative market figures before they would not be making a profit i.e if the market price is -£70MWh and the subsidy is £150 a MWh, they would still be making £80 a MWh. This leaves Nation Grid with the problem of balancing the system which it does by restricting generators who then receive payment for the energy they have to restrict (curtailment charges), these are negotiated between Nation Grid and each generator. Last year there was 125M of curtailment charges paid to wind farm operators, these are recouped through energy bills from the consumer.

On the other side of this storage operators i.e grid scale battery and pump storage hydro meant they could use this negative pricing to purchase power to store the energy. In effect being paid to fill up their batteries or pump water to the top of the reservoir.

As we move towards low-carbon generation and away from thermal generation i.e coal plants closures by 2024 plus the difficulty the Government is having with nuclear generation we are going to become more and more reliant on the intermittent generation of renewable energy, meaning these types of events will only increase. 

It’s clear that large scale renewable deployment comes the need for large scale storage whether that comes from pumped storage hydro, batteries or other technologies. National Grid’s 2018 future energy scenarios report forecasts that up to 29GW of total storage capacity will be needed by 2050.

As the amount of storage increases this will reduce the need for National Grid to curtail renewable generation making sure the country maximises the potential of renewable energy, reduces the costs to the consumers and keeps the lights on.

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