What is the Stability Market Design project?

The Stability Market Design project will consider current GB stability arrangements and investigate the best option for an end-to-end stability market design. This could allow the ESO to start to develop a potential stability market and best optimise long term and short-term stability procurement.

Traditionally synchronous generation has provided stability requirements (inertia, Short Circuit Level & reactive power support) as a natural by-product. As more non-synchronous generation enters the system, the ESO needs alternative sources of stability.

The Stability pathfinders allow us to test procurement approaches for long term stability requirements, but the ESO still relies on the dispatch of synchronous generation in the Balancing Mechanism to ensure stability. Whilst our current arrangements ensure security, they are narrow in their facilitation of provider types.

The development of a stability market could offer the ESO a route to access stability services through an open, transparent, and competitive market.


Project approach

This project will be a desk-based study run by ESO, AFRY and wider stakeholders.

The project will: 

  • Set the scene to understand the future world and define the objectives to evaluate different market design options.

  • Develop an enduring solution ensuring that participants can optimise their asset.

  • Assess the different market design options across the long- and short-term timescale; benchmarked against an assessment criterion of facilitating efficient dispatch, investment and provide value for money.  

  • Provide a recommendation of the ESO’s future stability procurement routes.

Stakeholders will be able to input in this project through various workshops and questionnaires. Engagement will take place at different stages of this project to gather feedback on the different options, the assessment, etc. More information on how to get involved within Stability Market Design Phase 2 can be found below.

More information on the stability market design NIA innovation project

Project Timeline

Stability Market Design project timeline

Phase 1

We have concluded Phase 1 of the Stability Market Design project; our conclusions can be found below.

More information about Phase 1

Summary

Phase 1 of the Stability Market Design innovation project explored a potential enduring market design for the procurement of stability services with a critical focus on value for GB consumers.

We kicked-off the Stability Market Design innovation project in September 2021 in partnership with consultants AFRY. Through this study-based innovation project, we explored a potential enduring market design for the procurement of stability services.

The core recommendation of the Stability Market Design Phase 1 was to investigate the combination of a dedicated short-term market (day-ahead) with a long-term market (building on the well-functioning pathfinder approach) for stability services, while retaining the BM option as a backstop.

In the analysis, the status quo (including stability pathfinders 1, 2 and 3) was compared to the recommended approach of a long- and a dedicated short-term market. The assessment indicated the recommended approach will reduce re-dispatching costs (by ~£30m in 2026 and ~£58m in 2030, Two Degrees scenario) and emissions (by ~0.4mtCO2 in 2026 and ~0.3mtCO2 in 2030).

Engagements

First webinar

Our first Stability Market Design innovation project webinar presents the situation, context, and rationale for change as well as discussing aspects of a potential stability market using building blocks approach.

Download slides

Watch the webinar

Second webinar

Our second and final Stability Market Design innovation project webinar shows how the ESO and AFRY used input from our previous survey into our overall assessment of options.

Download slides

Watch the webinar

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Phase 2 

We are currently undertaking Phase 2, Stage 1 of this project which will provide recommendations on the eligibility and contract structure of a potential market design.

More information about Phase 2

Summary

Stability Market Design Phase 2 is exploring the recommendations from Phase 1; the procurement of stability services through a combination of short and long-term markets.

Phase 2 consists of three Work Packages:

  • Work Package 1 - Eligibility: This will be framed around questions such as the role of the TO, the participation within the long-term and short-term markets, and the debate on global vs selective eligibility.

  • Work Package 2 - Contract Structure: This will focus on questions such as the length of long-term market contracts, the contract resolution for the short-term market, and the means of contract extensions.

  • Work Package 3 - Procurement Strategy: This will address questions on the stacking rules for stability contracts, the arrangements which could be employed to mitigate market power within short-term markets, and the role, if any, for a price cap backstop.

Project outputs

Stability Market Design Phase 2 has now kicked off in earnest. We will populate this tab as and when we produce reports stemming from this project.

To be kept updated of any developments, please sign up to Future of Balancing Services mailing list.

Engagement

We are regularly engaging with industry representatives throughout the Stability Market Design Phase 2 project. Our two key mediums are the Stability Market Design Expert Group and Industry webinars.

Stability Market Design Expert group:

The ESO published an Expression of Interest seeking to form a group of industry experts with the experience of providing stability services. In doing so, we now have a range of experts to provide feedback on the progress of this project. Their input is helping us frame the decisions that we are taking.

The minutes and slides of these events are available below.  

Industry Webinars:

With our partner AFRY, we will hold three webinars with the wider industry to update on the ESO’s latest thinking, why we have made decisions and our next steps. We will be communicating our first webinar via the FoBS newsletter so please ensure that you are signed up to this.

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Contact us

Contact us if you have a question, want to share some insight or have feedback.

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