A British industry taskforce has recommended that the system for recovering grid balancing costs should be changed to a fixed charge on final demand, rather than the existing system where they are levied on both suppliers and larger generators based on half hourly costs.
The Second Balancing Services Charges Task Force, established by National Grid ESO at Ofgem’s request, has said the charge should be fixed over 14/15 month periods based on forecasted costs, with similar notice periods in advance of its recovery.
A final report proposing the changes has now been sent to Ofgem.
A key driver of the move away from the existing system has been the conclusion of an earlier task force that the current BSUoS (Balancing Services Use of System) charge did not provide any useful forward-looking signal to influence market behaviour, and was hard to forecast, complex, and increasingly volatile.
It also concluded the current system adds a risk premium, increasing costs. The proposed future system will see the ESO take over the risk for gaps between forecast and actual balancing costs.
The second task force has also recommended further work analysing impacts on other markets such as the capacity market.