Tag: electricity system balancing and ancillary services

The cost of staying in control

What: Industrial landscape with cables, pylons and train at sunset Where: Somerset, UK When: January 2016

The cost of keeping Britain’s power system stable has soared, and now adds 20% onto the cost of generating electricity.

The actions that National Grid takes to manage the power system have typically amounted to 5% of generation costs over the last decade, but this share has quadrupled over the last two years.  In the first half of 2020, the cost of these actions averaged £100 million per month.

Supplying electricity to our homes and workplaces needs more than just power stations generating electricity.

Supply and demand must be kept perfectly in balance, and flows of electricity around the country must be actively managed to keep all the interconnected components stable and prevent blackouts.  National Grid’s costs for taking these actions have been on the rise, as we reported over the previous two summers; but recently they have skyrocketed.

At the start of the decade, balancing added about £1/MWh to the cost of electricity, but last quarter it surpassed £5/MWh for the first time (see below).

Balancing prices have risen in step with the share of variable renewables.  The dashed line below shows that for every extra percent of electricity supplied by wind and solar adds 10 pence per MWh to the balancing price.  Last quarter really bucks this trend though, and balancing prices have risen 35% above the level expected from this trend.  The UK Energy Research Centre predicted that wind and solar would add up to £5/MWh to the cost of electricity due to their intermittency, and Britain has now reached this point, albeit a few years earlier than expected.

This is partly because keeping the power system stable is requiring more interventions than ever before.  With low demand and high renewable generation, National Grid is having to order more wind farms to reduce their output, at a cost of around £20 million per month.  They even had to take out a £50+ million contract to reduce the output from the Sizewell B nuclear reactor at times of system stress.

Two charts illustrating the costs of balancing Great Britain's power system

[Left] The quarterly-average cost of balancing the power system, expressed as a percentage of the cost of generation. [Right] Balancing price shown against share of variable renewables, with dots showing the average over each quarter

A second reason for the price rise is that National Grid’s costs of balancing are passed on to generators and consumers, who pay per MWh.  As demand has fallen by a sixth since the beginning of the coronavirus pandemic, the increased costs are being shared out among a smaller baseOfgem has stepped in to cap the balancing service charges at a maximum of £10/MWh until late October.  Their COVID support scheme will defer up to £100 million of charges until the following year.

For a quarter of a century, the electricity demand in GB ranged from 19 to 58 GW*.  Historically, demand minus the intermittent output of wind and solar farms never fell below 14 GW.  However, in each month from April to June this year, this ‘net demand’ fell below 7 GW.

Just as a McLaren sports car is happier going at 70 than 20 mph, the national grid is now being forced to operate well outside its comfort zone.

This highlights the importance of the work that National Grid must do towards their ambition to be ready for a zero-carbon system by 2025.  The fact we are hitting these limits now, rather than in a few years’ time is a direct result of COVID.  Running the system right at its limits is having a short-term financial impact, and is teaching us lessons for the long-term about how to run a leaner and highly-renewable power system.

Chart: Minimum net demand (demand minus wind and solar output) in each quarter since 1990

Minimum net demand (demand minus wind and solar output) in each quarter since 1990


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Front cover of Drax Electric Insights Q2 2020 report

Electric Insights Q2 2020 report [click to view/download]

What is the national grid?

Electricity grid

What is the grid?

The national grid, or simply the grid, is the network of powerlines, pylons, gas lines and interconnectors that makes up Great Britain’s electricity and gas systems — and the engineers, technology and rules responsible for their seamless operation. It ensures electricity generated anywhere, by any source, can be transmitted to meet the demand for power wherever it’s needed across the country. It heats homes and businesses. It helps us to cook our food.

The national electricity grid consists of a high voltage transmission system, which connects electricity from power stations to substations and smaller local networks – called Distribution Network Operators, or DNOs – which transport electricity into homes and businesses.

Key national grid facts

How does it work?

Transporting electricity around the grid is more complicated than just connecting cables to power generators. In order to move power around the country, things like voltage and frequency of electricity must be balanced and kept uniform at all times. Without this, unstable electricity could damage equipment and ultimately lead to blackouts.

The National Grid Electricity System operator (ESO) is a separate entity from the National Grid company, and is responsible for maintaining the correct voltage, frequency and reserve power levels to ensure electricity is transmitted safely and efficiently at all times.

It does this by working with power generators and energy storage facilities to provide what are known as ‘ancillary services’ – a set of processes that keep the power system in operation, stable and balanced.

The national grid is the network of power stations, powerlines and electricity infrastructure that allows electricity to be generated, transported and used across the country.

Who controls it?

In Great Britain the National Grid company owns and operates the transmission systems which ensure electricity is delivered safely and reliably across the country.

The local distribution system is made up of 14 regional DNO companies, which deliver electricity at a lower voltage from substations to homes and businesses.

Great Britain’s grid incudes England, Scotland, Wales and several surrounding islands. Northern Ireland is part of an island-wide electricity system with the Republic of Ireland.

National grid fast facts

  • Great Britain’s grid is made up of more than 7,000 kilometres of cables, 90,000 pylons, 346 substations, and 1,500 kilometres of underground cables
  • Construction of the grid began on 14 July 1928 and was completed on 5 September 1933
  • It was originally designed to operate as 7 separate, connected grids, before a group of rebellion engineers attempted to run it as one on 29 October 1938. It has run as one grid ever since
  • A decade ago, Britain had 80 individual points of generation to manage. Today there are nearly one million
  • All electricity in Great Britain operates at a frequency of 50Hz. A deviation of just 1% above or below could cause damage

How is the grid changing?

As the sources that generate Great Britain’s electricity change to include more renewables, the grid has also changed.

The grid was built to work with large power stations that operate huge spinning turbines. With decarbonisation it’s evolved to include a greater variety of intermittent weather dependent sources such as wind, solar and decentralised power sources that serve individual buildings or communities.

This makes managing the grid’s stability more complicated, and requires the use of more ancillary services, usually delivered by flexible generators such as thermal power stations.

Go deeper

What are ancillary services?

Ancillary services

What are ancillary services?

Ancillary services are a set of processes that enable the transportation of electricity around the grid while keeping the power system operating in a stable, efficient and safe way.

Why do we need ancillary services? 

When electricity makes its way through the country, it needs to be managed so that the power generation and electricity useage levels are equal.

The regulating of elements such as frequency and voltage has to be carefully managed, so that the massive amounts of electricity moving – or transmitted – are able to be used safely in homes,  businesses, schools and hospitals around the country.

Ancillary services enable the power system to operate in a stable, efficient and safe way.

 What do ancillary services offer?

Ancillary services include a wide variety of electrical efficiency and safety nets, all focussed on ensuring the power system delivers enough output to meet demand yet remains stable:

Frequency: The UK’s power system runs at a frequency of 50 hertz – to stay balanced, it has to remain at that frequency. Turbines and generators adjust the speed at which they spin automatically to increase or decrease power in line with demand and ensure that the system is kept stable.

Voltage: Different parts of the UK’s transmission system use voltages of either 400, 275 or 132 kilovolts. To ensure that voltage remains within 5% of those figures at all times, to be safe for domestic electricity use, power stations can produce or re-absorb excess energy as reactive power, keeping the overall system reliable.

Inertia: Turbine use is important in keeping the system operating in its current state, even with disruptions and sudden changes. The electricity system uses the weight of heavy spinning turbines to create stability, acting as dampeners and smoothing out unexpected changes in frequency across the network.

Reserve: An important part of ancillary servicing is making sure that there are no surprises – so holding back powerto release if something unexpected happens means that the network can function confidently, knowing that there are generators and other power providers such as pumped hydro storage waiting ready to back it up.

Key facts about ancillary services

Who manages ancillary services?

In the UK the grid’s stability is managed by National Grid Electricity System Operator (ESO) – a  separate company of National Grid Electricity Transmission (ET). The ESO works with ancillary service providers to either sign long-term contracts or make short term requests for a service.

These partners are often power stations, such as Drax Power Station, which have large spinning turbines capable of controlling voltage, frequency, providing inertia and serving as a source of reserve power. 

What is the future of ancillary services, as we move to a more renewable system?

As the UK’s electricity system continues to change, so to do its requirements for different ancillary services. The switch from a few very large power stations to a greater variety of different electricity sources, some of which may be dependent on the weather, as well as changes in how the country uses electricity, means there is a greater need for ancillary services to keep the grid stable.

These services have historically been delivered by thermal power stations, but new innovations are enabling wind turbines to provide inertial response and overcome changes in frequency, and batteries to store reserve power that can then be supplied to the power system to ensure balance.

Ancillary Services

Ancillary services fast facts  

  • Batteries can in some cases be cheaper ancillary alternatives to conventional sources of energy. The Hornsdale Power Reserve, which runs on a Tesla battery in South Australia, lowered the price of frequency ancillary services by 90% after just four months of use.
  • Ancillary services usually work from habit; knowing when to slow electricity production, or increase supply based around the general public’s standard working hours, dinner time and the early morning rush.
  • But during the COVID-19 lockdown, electricity consumption on weekdays fell by 13% and so National Grid ESO had to intervene with ancillary services to keep the lights on.
  • Every year, the ESO’s ancillary services move 300 terawatt hours (TWh) of electricity, which is equal to 4 trillion kettles boiling at once.

With recent innovations around renewable energies, there are a wider variety of ways for ancillary services to generate power.

Go deeper

Button: What is decarbonisation?

How electrical transformers work

Getting electricity safely and efficiently from generators, through power lines and across the country into our devices is a careful balancing act. One of the vital aspects of this is the voltage.

An electrical substation with transformers.

The National Grid’s transmission lines work at a voltage of 400,000 volts (v) and 275,000v, but if electricity were to enter homes at this voltage it would quickly damage anything it powered. Instead, regional distributors deliver electricity into homes at a much lower level of 230v.

Achieving a voltage level that’s safe to use requires stepping it up or down through transformers – huge pieces of electrical grid equipment that use a simple idea to have a big impact.

Why we need transformers

Voltage is like water pressure. Having high voltage transmission lines means the charged electrons that make up electricity are moving very efficiently through the system, with less energy being lost as heat along the way. However, that same ‘pressure’ is too much for just charging a phone. It would likely overload the device’s circuits and leave the user with a smouldering mess.

That’s where transformers step in. Electricity is produced at a variety of voltages around Great Britain, depending on different types of generation. In order to send it to where the demand is without losing too much energy as heat along the journey, a transformer attached to large power generators such as Drax’s biomass power plant or Beatrice offshore wind farm increases the voltage to 400,000v or 275,000v. The voltage depends on what part of the national transmission system the power station is connected to.

When the electricity arrives via pylons at a particular region of Great Britain, another transformer brings the voltage down to 132,000v for the regional distribution system. Subsequently, another reduces it to 11,000v in towns and villages, before a final transformer reduces the voltage to a safe 230v for use in homes and businesses.

Keeping the voltage high is useful in preventing energy loss to heat, but it also does something else important to the electricity shooting around the country.

Keeping voltage high to cut down current

If voltage is the water pressure, then current is the actual water particles moving through the pipes. In electrical terms the current is the charged electrons that actually power our lights and devices.

When these electrons travel along the electricity grid’s cables, they face resistance (imagine a partial blockage in a water pipe) this causes some electrical energy to be lost to heat. Getting the right amount of electricity needed around the country means keeping energy loss as low as possible. If the current is lower, fewer charged electrons are bumping into resistance at any one point in the system and less electrical energy is being lost.

Conveniently for the grid, raising the voltage of electricity causes the current to decrease and vice versa. How transformers actually do this is all a matter of coils. 

Super transformer at Cruachan Power Station

Transformer at Cruachan Power Station

Winding voltage up and down

Transformers work using the principal of electromagnetic induction, something the British scientist Michael Faraday first realised in 1831. He noticed that when a magnet moved through a coil of copper wires, a current flowed through those wires. It’s this same principal that enables spinning turbines to generate electricity today.

Michael Faraday

Michael Faraday

Similarly, when a current flows through a copper coil wrapped around an iron core, the core becomes magnetic.

Faraday did experiment with running currents through multiple copper coils, but it was scientist and Irish priest Father Nicholas Callan who in 1836 discovered the underlying principal of many of the world’s transformers today. He found if two separate sets of copper wires were wound around each end of an iron core and an electrical current was passed through one of them (the primary winding) then a magnetic field is created that causes an electric current to flow in the secondary winding.

However, things change depending on how many times each wire is wound around the core. If there are more turns in the secondary winding than the primary one, then when a current is induced the voltage increases. When there are fewer turns in the secondary winding than the primary, the voltage decreases.

Callan's Induction Coil

Callan’s Induction Coil (1845)

Moreover, Father Callan discovered that the increase or decrease in voltage is directly proportional to the number of turns in the windings. So, theoretically, if an electrical current with a voltage of 5v is passed through a primary winding with 10 turns and creates a current in a secondary winding with 20 turns, the voltage will also double, in this case to 10v.

Father Callan’s invention is known as an induction coil, where the two sets of windings share a long, thick iron rod. Since then the transformer has undergone continual revision, optimisation and specialisation for different use cases. However, the underlying principal of using electromagnetic induction to increase and decrease voltage remains the same.

From homes to power stations

One of the most common types of transformers are distribution transformers – the kind often found on utility poles near homes. These transformers perform the final step down from local distribution systems to 230v as the electricity enters homes and businesses.

These often use an iron core that takes the form of a hollow square with windings wrapped around both ends. When a current passes through and magnetises the core it causes it to expand and contract in a process known as magnetostriction, which sometimes causes enough vibration to produce an audible hum.

A transformer being moved from Longannet to Cruachan Power Station in 2019.

A transformer being moved from Longannet to Cruachan Power Station in 2019.

In these type of transformers it’s safe for the current to be transferred through the air between the two windings, but when higher voltages are being used, such as at Cruachan Power Station – the biggest pumped storage facility in Scotland – different approaches are needed. Large power station-scale transformers are submerged in a special insulating oil inside a metal container. The oil provides electrical insulation to prevent short circuits while also cooling the core and windings, preventing damage and failure.

Even as the main sources of Great Britain’s electricity change from coal and nuclear power stations to wind farms and solar panels, transformers will remain an essential part of the grid, in getting the right amount of power to where we need it – fast.

Under lockdown, every day is a Sunday

empty UK motorway in England at sunset with no traffic

On March 23rd the UK took an unprecedented move to tackle the coronavirus. Most business that had not already closed moved online, with millions of people now working from home. This had a huge impact on electricity demand: consumption on weekdays fell by 13% to its lowest levels since 1982 – a time when there were 10 million fewer people in the country, and GDP was a third lower than today.

Other regions have seen a similar collapse in electricity demand. Spain, Italy and France have all seen electricity demand fall by 10-15% according to analysis by Ember. Across the Atlantic, New York City has seen similar reductions.

Demand has fallen for a simple reason: with schools and workplaces now closed or running with a greatly reduced staff – machinery, computers, lights and heaters are not drawing power. Electric rail, tram and tube systems are also running a reduced service. On the contrary, with more people at home, household electricity consumption has increased. Octopus Energy estimate that during social distancing (before the stricter lockdown came into effect) homes were consuming up to a third more electricity, adding £20 per month to the typical bill.

The impact of lockdown on Britain’s electricity demand is much like living through a month of Sundays. The average profile for a March weekend day in previous years looks very similar to the daily profile for weekdays since lockdown begun – both in the amount of electricity consumed and the structure. Post-lockdown weekends have even lower demand, tracking 11% below weekday demand.

People no longer have to get up at the crack of dawn for work. On a typical weekday morning, demand would rise by 10 GW over two hours from 5:30 to 7:30 AM. Now it takes more than twice as long – until midday – for this rise to occur. At the other end of the day, there would normally be a small peak in demand around 8 PM from people gathering in pubs and restaurants up and down the country. Both on weekdays and weekends, demand begins falling earlier in the evening as the sofa has become the only available social venue.

urban street cafe empty without visitors

With lower demand comes lower power prices. Wholesale electricity prices are typically 7% lower on Sundays than on weekdays for this reason. March saw the lowest monthly-average power price in 12 years, down one-third on this month last year. Prices were already heading downwards because of the falling price of gas, but the lockdown has amplified this, and negative prices have become commonplace during the middle of the day. There was not a visible impact on carbon emissions during the first quarter of the year, as only the last week of March was affected. However, as lockdown continued into April and May, emissions from power production in Britain have fallen by 35% on the same period last year. The effect is slightly stronger across Europe, with carbon emissions falling almost 40% as dirtier coal and lignite power stations are being turned down.

Will some of these effects persist after lockdown restrictions are eased? It is too early to tell, as it depends on what long-lasting economic and behavioural changes occur. Electricity demand is linked with the country’s GDP, which is set to face the largest downturn in three centuries. Whether the economy bounces back, or is afflicted with a lasting depression will be key to future electricity demand. It will also depend on behavioural shifts. People are of course craving their lost freedoms, many may appreciate not going back to a lengthy daily commute – and the rise of video conferencing and collaboration apps has shown that remote working may finally have come of age. With even a small share of the population continuing to work from home on some days, there could be a lasting impact on electricity demand for years to come.


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What makes a country’s electricity system stable?

How reliable is Great Britain’s electricity system? Across the country electricity is accessible and safe to use for just about everyone, every day. Wide-scale blackouts are very rare, but they do happen.

On 9 August 2019 a power cut saw more than 1 million people and services lose power for just under an hour. It was the first large-scale blackout since 2013. Although this proves the network is not infallible, the fact it was such an outlier in the normal performance of the grid highlights its otherwise exemplary stability and reliability.

But what is it exactly that makes an electricity system stable and reliable?

At its core, system stability comes down to two key factors: a country or region’s ability to generate enough electricity, and its ability to then transport it through a transmission system to where it’s needed.

When everything is running smoothly an electricity system is described as being ‘balanced’. In this state supply meets demand exactly and all necessary conditions – such as voltage and frequency – are right for the safe and efficient transport of electricity. Any slight deviation or mismatch across any of these factors can cause power stations or infrastructure to trip and cut off power.

A recent report by Electric Insights identified the countries around the world with most reliable power systems, in which the UK was fourth. It offers an insight into what factors contribute to building a stable system, as well as those that hold some countries back.

Generation and reliable infrastructure  

According to the report, France has the most reliable electricity system of any country with a population of more than five million people, having gone a decade without a power outage. One reason for this is the country’s fleet of 58 state-controlled nuclear power stations which generate huge amounts of consistent baseload power.

In 2017 nuclear power made up more than 70% of France’s electricity generation while hydropower accounted for another 10% of the 475 Terawatt hours (TWh) consumed across the county that year.

Penly Nuclear Power Station near Dieppe, France.

Now, as its nuclear stations age, France is increasing its renewable power generation. As these sources are often weather dependent, imports from and exports to its neighbours are expected to become a more important part of keeping the French network stable at times when there is little sunlight or wind – or too much.

Importing and exporting electricity is also key to Switzerland’s power system (third most reliable network on the list), with 41 border-crossing power lines allowing the country to serve as a crossroads for power flowing between Italy and Germany. It means its total imports and exports can often exceed electricity production within the country.

Electricity pylons in Switzerland.

Switzerland’s mountainous landscape also means ensuring a reliable electricity system requires a carefully maintained transmissions system. The Swiss grid is 6,700 kilometres long and uses 40,000 hi-tech metering points along it to record and process around 10,000 data points in seconds.

The key to the stability of South Korea – the second most stable network on the list – is also its imports, but rather than actual megawatts it comes in the form of oil, gas and coal. The country is the world’s fourth biggest coal importer and its coal power stations account for 42% of its total generation.

Seoul, South Korea.

However, in the face of urban smog issues and global decarbonisation goals it is pursuing a switch to renewables. This can come with repercussions to stability, so South Korea is also investing in transmission infrastructure, including a new interconnector from the east of the country to Seoul, its main source of electricity consumption.

It highlights that if decarbonisation is going to accelerate at the pace needed to meet Paris Agreement targets, then many of the world’s most stable and reliable electricity systems need to go through significant change. Balance will be needed between meeting decarbonisation targets with overall system stability.

However, there are many countries around the world that focus less on ensuring consistent stability through decarbonisation and are instead more focused on how to achieve stability in the first place.

Stalling generation

The Democratic Republic of Congo is the eleventh-largest country on earth. It is rich with minerals and resources, yet it is the least electrified nation. Just 9% of people have access to power (in rural areas that number drops to just 1%) and the country suffers blackouts more than once a month as a result of ‘load shedding’, when there isn’t enough power to meet demand so parts of the grid are deliberately shut down to prevent the entire system failing.

Currently, the country has just 2.7 GW of installed electricity capacity, 2.5 GW of which comes from hydropower. The country’s Inga dam facility on the Congo river has the potential to generate more electricity than any other single source of power on the planet (it’s thought the proposed Grand Inga site could produce as much as 40 GW, twice that of China’s Three Gorges Dam) and provide electricity to a massive part of southern Africa. A legacy of political instability in the country, however, has so far made securing financing difficult.

Congo River, Democratic Republic of Congo.

Nigeria is one of the world’s fastest growing economies, and with that comes rapidly rising demand for electricity. However, just 45% of the country is currently electrified, and of these areas, many still suffer outages at least once a month. The country has 12.5 GW of installed capacity, most of which comes from thermal gas stations, but technical problems in power stations and infrastructure, mean it is often only capable of generating as much as 5 GW to transmit on to end consumers.

This limited production capability means it often fails to meet demand, resulting in outages. The problem has been prolonged by struggling utility companies that are unable to make the investments needed to stabilise electricity supply.

Keen to resolve what it has referenced as an ‘energy supply crisis’, the Nigerian government recently secured a $1 billion credit line from the World Bank to improve access to electricity across the country.

The investment will focus in part on securing the transmission system from theft, thus allowing the private utility companies to generate the revenue needed to improve generation.

Transmission holding back emerging systems

Balancing transmissions systems is a crucial part of stable electricity networks. Maintaining a steady frequency that delivers safe, usable electricity into homes and businesses is at the crux of reliability. Even countries that can generate enough electricity are held back if they can’t efficiently get the electricity to where it is needed.

Brazil has an abundance of hydropower installed. Its 97 GW of hydro accounts for more than 70% of the country’s electricity mix. However, the country’s dams are largely concentrated around the Amazon basin in the North West, whereas demand comes from cities in the south and eastern coastline. Transporting electricity across long distances between generator and consumer makes it difficult to maintain the correct voltage and frequency needed to keep a stable and reliable flow of electricity. As a result, Brazil suffers a blackout every one-to-three months.

Hydropower plant Henry Borden in the Serra do Mar, Brazil.

The country is tackling its transmissions problems by diversifying its electricity mix to include greater levels of solar and wind off its east coast – closer to many of its major cities. The country has also looked to new technology for solutions.

At the start of the decade as much as 8% of all electricity being generated in Brazil was being stolen, reaching as high as 40% in some areas. These illegal hookups both damage infrastructure, making it less reliable, as well as blur the true demand, making grid management challenging.

Brazil has since deployed smart meters to measure electricity’s journey from power stations to end users more accurately, allowing operators to spot anomalies sooner. Electricity theft is a major problem in many developing regions, with as much as $10 billion worth of power lost each year in India, which suffers blackouts as often as Brazil.

It highlights that even when there is generation to meet demand, maintaining stability at a large scale requires constant attention and innovation as new challenges arise.

This looks different around the world. Some countries might face challenges in shifting from stable thermal-based systems to renewables, others are attempting to build stability into newly connected networks. But no matter where in the world electricity is being used, ensuring reliability is an ever-ongoing task.

Electric Insights is commissioned by Drax and delivered by a team of independent academics from Imperial College London, facilitated by the college’s consultancy company – Imperial Consultants. The quarterly report analyses raw data made publicly available by National Grid and Elexon, which run the electricity and balancing market respectively, and Sheffield Solar. Read the full Q3 2019 Electric Insights report or download the PDF version.

Maintaining electricity grid stability during rapid decarbonisation

Cruachan pylons

Great Britain’s electricity system is in the middle of a revolution. Where power supply was once dominated by some big thermal coal, gas and nuclear power stations, it now comes from an array of sources. Thousands of new individual points have been added to the mix, ranging from large interconnectors, that bring in power from neighbouring countries, through to wind farms, solar panels, small gas and diesel engines.

The energy mix has been changing radically, with low carbon sources expected to provide 58% of Great Britain’s power by 2020, up from 22% in 2010 and 53% in 2018. However, the security standards at which the electricity grid needs to be operated remain the same; these are predominantly voltage and frequency, and nominally 230 V and 50Hz for a domestic consumer.

The operation of the Transmission system, including maintaining these standards is overseen by the National Grid Electricity System Operator (ESO), using a set of vital tools it needs to have available, known as ancillary services. Some of this capability was inherent in large generators, which could provide the ancillary services required to keep a stable transmission system. Maintaining system stability, with thousands of generation points — a large part of which are not directly controllable — is increasingly challenging.

Click graphic to view/download

Ancillary services enable electricity to reach the end customer when and where it is required, in a safe manner, within acceptable quality standards. In addition to managing voltage and frequency levels, these standards also include maintaining adequate reserves to accommodate demand forecast uncertainties, generator breakdown and system faults. 1.

As the electricity mix changes, so must the process by which these services are secured. A diverse set of existing and genuinely new solutions will be needed to keep the lights on in the net zero carbon future.

Three steps to creating the right environment for a stable, resilient future grid:

1. Make the value of ancillary services transparent

In order for companies to help the ESO, be they generators or other service providers, it must be open and transparent about what’s needed to maintain grid stability and build resilience for the future.

“The ESO is the only buyer in the ancillary services market and is well-positioned to understand how the system is evolving. It should be proactively flagging how its needs may evolve in the future, so that the market can develop solutions to meet them”, says Marcelo Torres, Drax’s Regulation Manager – Markets.

Certain ancillary services still don’t have their own competitive markets and are provided as a “by-product” of the generation of electricity. An example is reactive power, for which there are no developed functioning regional markets yet. Generally, all power stations connected to the transmission network with a generation capacity of over 50MW are required to have the capability to provide this service, at a default price that may not reflect its real value to the system.

Another example is inertia, provided today largely through the heavy spinning turbines of thermal and pumped-storage hydro stations, which serve as stored energy that can slow down or smooth out sudden changes in network frequency.

If ancillary services were valued explicitly, market participants would have an insight into how much they are actually worth to the ESO and the grid’s stability, which would in turn incentivise new, competitive products to reach the market.

Torres points to technologies such as synchronous compensators, which are machines capable of providing ancillary services, including inertia and reactive power, without generating potentially unneeded electricity.

Services which can be provided by different power technologies

Click graphic to view/download

“These solutions will enable more renewables to connect safely to the network at a lower cost to consumers. For these solutions to come forward, ascribing the right value to ancillary services will be key. Without clear price signals, there is a risk of underinvestment in those technologies that provide the services needed, potentially resulting in price shocks for consumers”.

“The ESO is moving in the right direction with its recent Network Development Pathfinder projects. It has accelerated this work, launching its first ever tender for inertia and should roll out similar initiatives GB-wide. Such procurements should align with existing investment signals such as those provided by the Capacity Market. This should allow for the right type of capacity to be built where it is most needed, delivering a secure and resilient grid”.

2. Create market confidence

“Constructing the machinery and infrastructure that will enable the ESO to operate a carbon-free system will require major financial investment, as well as years to plan and build,” says Torres.

“This can only be achieved if Ofgem designs the ESO’s incentives in a way that rewards it for taking bold, strategic initiatives that have the potential to deliver good value for money to consumers in the long-term.”

Evidence of this working is shown in the success of offshore wind, which now provide around a sixth of Great Britain’s electricity, at record low prices. This is partly due to the government providing offshore wind developers with revenue stabilisation mechanisms, known as ‘Contracts for Difference’ (CfDs).

This is not a new concept for government and regulators around the world looking to enable investment in energy infrastructure. Financing renewables to achieve decarbonisation is enabled through CfDs or market-led hedging tools, like Power Purchase Agreements. Investment to ensure there is sufficient capacity to meet peak demand is secured through long-term contracts, competitively awarded through the Capacity Market. Similarly, investment in interconnection is supported through Ofgem’s ‘Cap & Floor’ regime.

“Subsidy isn’t required for investment in ancillary services. What’s needed,” says Torres, “is a clear and stable market framework designed around the system’s needs, which provides a mix of short and long-term signals. More certainty over the market landscape and the expected returns will lower the risk of these investments and get the solutions needed at a lower overall cost to consumers.”

“Long-term procurement is not the right answer everywhere. Where there is already a mature and liquid market, such as the case for frequency response, buying services closer to real time makes sense for two reasons. First, it allows prices to reflect more accurately the market conditions and therefore the real value of a service at the time when it is needed. Second, it allows a wider range of resources to participate in the market, increasing competition. Striking the right balance between short and long-term procurement is key to create a sustainable ancillary services market.”

Currently, the ESO requests that electricity-generation firms commit to supplying a certain amount of power for the purpose of frequency response, a month ahead of time. For resources such as wind farms or solar, which are dependent on the weather, this makes it extremely difficult for them to enter this market. Even for conventional large thermal generators it can be a problem, as many of them do not know how or if they will be running beyond a few days.

“The ESO is currently conducting some trials procuring frequency response one week in advance. While this is an improvement, it is still too long a lead time for intermittent sources or demand-side response, which ideally need day-ahead or almost real time auctions to unlock their full potential,” says Torres.

“The ancillary services market has been through a prolonged period of change since the ESO published its System Needs and Product Strategy in 2017. Without knowing how the market landscape will look like by the end of these reforms, it’s difficult for providers to develop the right solutions.”

A shift in thinking, which considers what the electricity network might require in the future, and how to provide the market with financial incentives to make it a reality, is needed. A resilient, stable future system is to the advantage of consumers.

3. Diversify

There will be no silver bullet that can solve all the challenges the energy transition poses. Maintaining system reliability in a high renewables world will require large amounts of dispatchable power, with different response time and duration. From small batteries and demand-side response that will manage instantaneously frequency fluctuations, through to large pumped storage hydro plants that will provide backup power during the days when the wind won’t blow and the sun won’t shine. A framework structured around the system’s different needs should aim at harnessing flexibility across a range of technologies and sizes.

 

Truly diversifying will also involve unlocking the flexibility potential on the distribution grid. To achieve this, the way that access to the distribution network is managed and paid for will need to evolve. Today, with big parts of the distribution network being congested, small flexible assets are asked to wait in the queue for several years or face disproportionate amount of network reinforcement costs to get connected.

Machine hall, Cruachan Power Station

The ongoing review of the network access and forward-looking charging arrangements needs to address these barriers soon, if we are serious about making use of flexibility to foster the energy transition, while keeping consumer bills as low as possible.

Since 2018, GB’s Distribution Network Operators (DNOs) have been tendering and procuring for various flexibility services to manage congestion in regional electricity grids. In 2019, they published a roadmap setting out the steps they intend to take to enable a smarter and more flexible energy system.

“As we transition from DNOs towards Distribution System Operation – a wider set of functions and services to run a smart distribution grid – the regional networks will be open to market-based flexibility solutions. DSOs will be able to compete on a level playing field, offering options for network reinforcement. As DNOs move from trials to more structured flexibility procurement, harmonisation and effective coordination with the national markets will be the key pre-requisites to reveal the true value that flexibility can bring to the energy system,” argues Torres.

“To build a modern and resilient grid we will need a wider lens on what’s possible. It’s going to be an exciting journey on the road to net zero!”

This story is part of a series on the lesser-known electricity markets within the areas of balancing services, system support services and ancillary services. Read more about black startsystem inertiafrequency responsereactive power, voltage control and reserve power. View a summary at The great balancing act: what it takes to keep the power grid stable and find out what lies ahead by reading Balancing for the renewable future.