UK energy regulator Ofgem has ordered an investigation into the National Grid’s balancing system, after costs of managing the grid rose to £718m (€782m) during the Covid-19 lockdown.
In an open letter Ofgem has set out its intention to evaluate the “high balancing costs” on Great Britain’s electricity system during spring and summer 2020 and “identify lessons” that need to be explored further in order to reduce costs to consumers going forward.
From March to July balancing costs increased by 39% more than the National Grid Electricity System Operator (ESO) had modelled costs for the period.
The cost increase corresponded with the impact nationwide lockdown had on consumer electricity consumption behaviour and reduced industrial activity.
During this time higher levels of renewables output, also registered in the system, which required the ESO to take “a large number of actions to balance the system and ensure system operability”, Ofgem stated in its letter.
During this spring and summer, the ESO introduced three changes to better manage the system.
The first involved contracting with the Sizewell B nuclear power plant to reduce output by half during the spring and summer.
The ESO also procured a new service, Operational Downwards Flexibility, enabling it to access downward flexibility from distributed generation that would not normally provide balancing services.
Lastly the grid operator clarified the emergency arrangements for the disconnection of distributed generation if necessary, though these have not been used.
Among its measures Ofgem will attempt to find out the extent that any of the operability challenges experienced in spring/summer 2020 constituted “known or foreseeable system limitations”.
It will also attempt to understand the extent to which the specific situation this spring and summer was due to the coronavirus pandemic or part of a trend of minimum demand falling year on year and other system trends.
Ofgem said it will also investigate the extent to which the National Grid ESO’s response to operability challenges met the standard required of the ESO, as well as the ESO’s engagement with the market, including transparency of those actions.
Ofgem will also assess the extent to which the actions taken by the ESO delivered value for money to consumers.
It will also look at changes that may be needed to further develop the three amendments to the GB arrangements introduced by the ESO this spring and summer and changes needed to address growing operability issues in the future, as well as “what the evidence suggests about market design and running a carbon free network”.
Ofgem will seek evidence from the National Grid ESO throughout August and intends to hold industry roundtables in early September to gather stakeholder views.
The regulator aims to finish the review by the end of October to coincide with its mid-year review.