New Balancing Reserve service approved by Ofgem
9 Feb 2024 - 2 minute read
Ofgem has approved our new Balancing Reserve (BR) service, which we expect to reduce consumer costs by hundreds of millions over the next four years. We expect the service to go live next month.
The BR service will see us move to day-ahead procurement of the energy reserves we need to respond to system demand in real time, rather than the current on-the-day system – reducing costs and improving system security.
We utilise a product called 'Regulating Reserve' to correct energy imbalances (differences between generation and demand) on the GB power system. We currently use optional bids and offers in the Balancing Mechanism (BM) to create Regulating Reserve in real time. The cost of bids and offers has risen significantly and during periods of scarcity procuring reserve through BM bids and offers can be extremely expensive.
The new BR service will allow us to procure Regulating Reserve on a firm basis at day ahead. This will help reduce balancing costs and improve system security as the reserve capacity is guaranteed for the Control Room to access when they need it.
BR will enable the ESO to procure firm Regulating Reserve capacity through a Day Ahead auction, both reducing balancing costs and providing improved system security by guaranteeing headroom (reduced consumption or increased generation) and footroom (reduced generation or increased consumption) for the Control Room to access when needed.
Once the service is live, daily auctions will be run on our Enduring Auction Capability (EAC) platform with a minimum contract size of 1MW.
An August 2023 cost benefit analysis commissioned by the ESO found this will deliver £639m of savings for consumers over the next four years in the base case, and up to £821m in our high case.