The road to net zero electricity markets
25 Feb 2021 - 3 minute read
National Grid ESO are at the forefront of how electricity is changing in Great Britain. As the system operator we're finding new ways to keep the grid balanced, helping to meet net zero emissions targets and minimize costs for consumers.
Head of Markets Kayte O’Neill explains how the markets we manage are evolving and why the industry needs to work together to deliver further progress.
The energy sector is undergoing massive transformation. Zero carbon sources have gone from making up 20% of electricity in Great Britain in 2010, to 48% last year. A new landscape is emerging, with different types of electricity generation, more participants in the electricity market and changing consumer behaviour.
Ancillary services, the balancing mechanism and the capacity market are the bedrock of the electricity system, processes and markets that make megawatts flow around the country to keep the power system stable and balanced. As the electricity mix changes, so must they. A diverse set of solutions will be needed in a zero-carbon future.
The journey has already begun
Our aim is to be able to operate the grid at zero carbon by 2025. It’s a fundamental change to how our system was designed to operate; integrating new technologies right across the system. It means new systems, services and products as well as competitive marketplaces to source these as efficiently as possible.
It’s an exciting time and the journey has already begun. Last year saw the launch of Dynamic Containment, the first in a suite of new fast-acting frequency products, which are boosting the network’s ability to respond rapidly to disturbances in the flow of energy around the grid.
We’ve begun widening access to the electricity markets too, with the launch of our wider access API allowing smaller providers to take advantage of our changes and access the balancing mechanism for the first time.
The regulations and codes which underpin all market activity for participants are undergoing deep reform, and we’re leading on changes that maintain efficient and fair markets while decarbonising our electricity and breaking down barriers to participation across the whole energy system.
More efficient outcomes and benefits for consumers
Evolving ancillary services markets, the capacity market and the balancing mechanism is nothing new and is part the role National Grid, and now the ESO, have been playing for a number of years.
But it’s clear the pace and volume of required change has increased. That’s why we’re connecting the dots of all the different workstreams that are changing the markets in which we operate, engaging with the electricity industry to share more on what we’re doing and how we can collaborate to deliver the change required.
We believe that by working together these markets can evolve – delivering a greener, zero carbon electricity system at a lower cost to consumers. A key focus is enabling whole system flexibility through the markets which we operate, unlocking the opportunities of DSR, storage and distributed generation.
This is estimated to have the potential to deliver £3.2 billion to £4.7 billion of annual consumer benefits in a 2030 system meeting a carbon emissions target of 100CO2/kWh, and up to £7.8 billion of consumers benefits in a 2030 system meeting a target of 50gCO2/kWh.
Driving competition and opening access to the markets we manage is key too. The diversity of participants in our markets is growing, and where there are hundreds of participants today, there will be thousands in 2030. These markets must work for everyone – new players and current stakeholders alike.
There are many more reforms ahead and redesigning these electricity markets is no small feat, but, through collaboration and an open discussion, is possible – and a key part of the transition to net zero.