Utility Week

UTILITY WEEK | 14TH - 20TH SEPTEMBER 2018 | 15 Policy & Regulation But, with the balancing mechanism accounting for such a large chunk of spend- ing by the system operator, it will be prob- ably be a "dominant piece of the puzzle". Included within Limejump's virtual power plant are batteries owned by renewa- bles developer Anesco. The company's com- mercial director, Lily Coles, says the timing of the recent development is serendipitous. Over the past year, the firm frequency response contracts which made up a large part of the investment case for batteries have plunged in value as the market has become saturated. Access to the balancing mecha- nism could more than fill this gap. At time of writing, Anesco's batteries at Clayhill in Bedfordshire and Breach Farm in Derbyshire have been participating in the balancing mechanism for around three weeks. Coles says they are "greatly encour- aged" by their performance so far. Limejump is still trading only during daytime. Once it shis to 24-hour operations in September, things will get even better. She says their fast response times mean batteries are "ideal" for the balancing mech- anism. "They're better suited than conven- tional power stations that have to ramp up and cool down," she says. Coles believes this will translate into lower costs, allowing batteries to grab a big slice of the market. She cites a recent report from Aurora Energy Research (see graph) that forecast batteries will become the domi- nant technology for the provision of upwards balancing actions by 2030. Nygard concurs, saying distributed generation and demand-side response should likewise be able to undercut large power stations: "We should drive a far more competitive market within the balancing mechanism, which is great for the end consumer," When asked whether the changes approved by Ofgem will put them on an equal footing, he responds with a tentative yes: "Time will tell. It's very early days. "But there is nothing that should be able to stop us from being able to compete head- to-head with the large power plants that have been there since the market opened. Nothing." Flexitricity founder and chief operating officer Alastair Martin is similarly pleased with the changes being implemented. The company announced in April that it, like Limejump, had become a licensed sup- plier in order gain access to the balancing mechanism. It plans to launch a new service in October called Flexitricity+ for custom- ers who want to sell their flexibility in this potentially lucrative market. However, Martin says there are still sev- eral kinks that need to be ironed out before there is a truly level playing field with large power stations. For one, companies looking to enter the balancing mechanism through the supplier route will still be required to create a BMU for each of the 14 GSP Groups, whether they intend to use them or not. He says this is a "pointless" layer of addi- tional bureaucracy that will add to costs and "ought to be swept away" in a future code modification. He says they can live with the problem – overcoming it with volume – "but we don't really want to". Furthermore, he says National Grid's sys- tems and processes are outdated. They were set up to deal with a small number of large assets, not fleets of smaller ones, and need to be upgraded accordingly: "It is still quite dif- ficult for National Grid to be fully optimised in their purchase of flexibility." Metering signals from these assets must be fed into the control room so they can "see what they're paying for is what they're get- ting". At the moment, this is challenging. Martin says National Grid is working hard on the problem but wishes changes would come sooner. "To be fair, so does National Grid," he adds. Nygard agrees. He says the requirement to register a BMU for each GSP Group is a "hin- drance" and one he would be very happy to see removed, That said, it's not a problem he worries about much: "I think it works for us as it is." He says Limejump's attention is instead focused on working out how to maximise revenues from the balancing mechanism and catching up with large generators which have years to hone their bidding strategies. For now, he is glad their hard work is starting to pay off: "It makes us feel good, that's for sure." Having spent years shut out in the cold, he is enjoying the warmth inside. TERRE – a new Europe-wide balancing platform TERRE is being developed by the European Network of Transmission System Operators for Electricity (ENTSO-E). The platform will allow the trading of "replacement reserves" – the slowest respond- ing of three categories of reserves set out in the European Commission's 2017 guidelines for transmission system operation. Replacement reserves are used to maintain the frequency of the power grid once a devia- tion from the correct level has already been contained and reversed by faster responding reserves. Not all transmission system operators in the EU use, or will use, replacement reserves. But as one of the ones that does, National Grid is legally required to participate in TERRE under EU regulations which came into effect in December 2017. Other system operators taking part in the scheme include those from France, Spain, Portugal and Italy. The system operators for the Republic of Ireland and Northern Ireland are also observers. The project is currently expected to go live between October and December next year. BATTERIES AND RECIPROCATING ENGINES BECOME THE DOMINANT TECHNOLOGIES FOR UPWARD BALANCING BY 2030 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000 2020 2025 2030 2035 2040 Battery Pumped hydro Thermal Recips/OCGT Other Bid-offer acceptances GWh Long Short Source: Aurora Energy research

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