An investigation now under way into how costs in the Balancing Market for electricity have been spiking reveals how inflexible fossil fuel plants help to drive up costs.
The Balancing Market applies after the gate closes on trades between electricity sellers and buyers (each is expected to cover its customer demand), which happens half an hour ahead of each half-hour market period. It is where system operator NGESO trades to ensure that demand matches supply, but also technology-driven contracts to ensure the system is within frequency, voltage and other system requirements – some of which contracts are location-specific. The prices offered in the Balancing Market differ from those in the regular wholesale market – on some of the days in question in the investigation it hit £4,000/MWh. (But it should be noted that the Balancing Market is much smaller than the wholesale market so holding back plant for the BM may be a losing gamble.)
The need for power is highest at the evening peak between 7pm and 10pm, but the highest usage may be for just 30 minutes or even less time: the system operator has often noted how power use spikes after popular TV programmes as people put the kettle on.
Large fossil plants are not very flexible
Here fossil plants are often brought into play. But here is the point: despite their reputation, large fossil plants are not very flexible. They have to be ‘warmed’ and running in neutral so they are ready to kick in at the peak. That takes up to six hours. What is more, once such a plant shuts down, it has to be down for at least six hours before it can start up again and go through the warming process.
That costs the consumer. If NGESO wants to call on one of these plant it will have to pay it for all the time required to warm up and stand by – even if, in the end, it is not required. If the fossil plant was operating earlier in the day and it might be required later, NGESO will have to pay the plant to stay warm between the two periods, so it does not get caught in the necessary down time.
(It should not be forgotten that as well as the power and warming cost, warming up and operating these units involves carbon emissions. The cost of permits may be covered by the price, but the emissions are real.)
Other options are faster. Small gas engines can warm and operate much more quickly; if the wind is blowing, wind turbines can generate more or less at very short notice; hydro can also respond quickly. But the SO is performing a complex balancing act and other system requirements may mean these are not suitable substitutes for the large fossil plants.
What this shows is that to reduce costs the demand side is absolutely vital. Shifting heating, cooling or vehicle charging by half an hour, or an hour, is feasible and with enough people taking part in such schemes should be entirely voluntary.
A trial now under way with Octopus Energy customers is doing exactly that. Using just a million customers and asking them to turn down for two hours it is hoped the trial will see response of 150MW – about half a large fossil station. Twice as many volunteers would replace one fossil power station – and as we have seen above, that means savings for far more than that two-hour window.
Fossil plant has had a reputation for flexibility for too long. Its time customers were able to show just how efficiently the system can be managed.