Policy update report – National Grid publication on System Needs and Product Strategy
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This report presents Aurora’s reflections and explores the potential implications of the National Grid documents.
Key messages to emerge from the analysis are:
- The outlook provided by National Grid is generally a positive message for providers of balancing services. The system need for services is expected to increase by as much as 100% in some areas over the next five years while the availability of traditional service providers is expected to fall.
- With the expected volatility of system needs, the flexibility of contracting services near real time will be valued by National Grid and will likely command a premium. Providers targeting contracts with less lead time would likely achieve higher payments, especially as balancing needs are usually highest when traditional providers are less available.
- Current design of balancing services is unsustainable. Patchwork of overlapping products with arbitrary criteria lead to lack of market transparency and unclear price signals.
- The detail provided on the future of balancing services is less than many had expected and hoped. National Grid has not released anything concrete. They have instead explained their principles and methodology for simplifying their balancing services products.
- Methodology provided for product simplification suggests the future services strategy will likely create deeper and more liquid markets. By standardising and/or merging products, future balancing services products will likely procure larger volumes per tender and see more competition amongst technologies.
If you would like to discuss the reports findings, or are interested in finding out more about our Distributed and Flexible Energy Service please get in contact Sebastian.Just@auroraer.com