Homeowners could take part in this £430m/year market – Ancillary Services

My previous post discussed the real-time actions National Grid Electricity System Operator (NGESO) can take to ensure the safety of the network via the Balancing Mechanism (LINK). NGESO can also take actions in advance of real-time, by offering contracts to power plants/and or demand users which will make them available during times when NGESO forecast that market intervention will be required. NGESO spent ~£430m in 2019 on Ancillary Service contracts (meaning they spent £1bn in 2019 between Balancing Mechanism and Ancillary Services!).

There are a number of different types of Ancillary Services. Two of the main ones are outlined below:

  • Frequency Response (£102m spend in 2019): Firm Frequency Response (FFR) is the firm provision of Dynamic or Non-Dynamic Response to changes in Frequency. National Grid must maintain the level of frequency within ±1% of nominal system frequency (50.00Hz) as part of their licence obligation. The systems infrastructure (power lines, power plants) operate safely within this band – frequency out with the specified level could result in failure of equipment to operate. System frequency varies given a change in generation or demand: when generation exceeds demand, frequency will rise; where demand exceeds generation, frequency will fall. National Grid will therefore pay generators to move up and down on load on a near constant basis to be able to provide system stability.
  • Fast Reserve (£86m spend in 2019): National Grid contract with power plants to remain off-load until such time as they require the power (Fast Reserve). If there is a sudden drop in generation on the grid (i.e. power plant failure) or a significant rise in demand (significant television event) then National Grid will instruct plant who have signed up for Fast Reserve to start producing electricity/reduce their demand. Historically, this market has been dominated by pumped storage units, of which there are four plants of differing sizes across the UK (LINK). These plants are able to generate at full load within a short timeframe[1]. Batteries and demand-side response units have become more prominent in recent years.

With the rise in smart-home appliances and electric vehicles, there is an opportunity for home-owners to provide services (like those described above) to National Grid. At the moment, some electric vehicles owners are actually PAID to charge their cars during times of negative power prices (which can happen when there is too much power on the network)[2]. You may also be paid to turn-on your washing machine and other home appliances when there is excess generation and not enough demand to balance the system. Similarly, some homeowners may be incentivised to reduce home demand for electricity at times when there is a shortage of generation to meet their demand.


[1] Pumped storage units can operate in ‘spin’ mode, whereby the turbines are in operation, however, no water is passed through. At short notice, the water can be released through the already-operating turbines, generating a significant amount of power within a matter of minutes.

[2] https://octopus.energy/blog/cheaper-greener-agile-energy/

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