Cost of Balancing Electricity Grid up 40%

Ofgem will launch an investigation into National Grid’s energy balancing system after costs rose to £718 million in just five months during the coronavirus lockdown.

Balancing electricity supply and demand this spring was complicated by plunging demand, as the shuttering of offices and schools and suspension of manufacturing pushed power consumption down by fifth, and by high output from renewables, including record contributions from solar power.

To reduce supply, National Grid Electricity Systems Operator (ESO) paid out record amounts in constraint payments to require flexible wind farms to disconnect from the grid and struck a deal—estimated at between £55 and £73 million—with EDF to halve the output from nuclear plant Sizewell B until late September.

National Grid also launched a new serviced called Optional Downwards Flexibility Management (ODFM) and successfully lobbied Ofgem to be given new powers to compel emergency disconnections of distributed generation like wind farms. 

Consequently, between March and July balancing costs were 39% higher than usual during that time of year. Costs for balancing the grid ultimately trickle down to consumers through higher energy bills from their suppliers.

Energy market regulator Ofgem is thus eager to draw lessons from this period and to avoid similar high balancing costs in the future, particularly as the UK’s grid becomes more reliant on intermittent renewables and battery storage technologies.

Ofgem's deputy director of energy systems operation and gas systems, Eleanor Warburton, wrote in a letter published Tuesday: "Given the high balancing costs incurred this summer, it is important that we understand in more detail what happened in this period and identify whether there are lessons for the ESO to learn to manage these kinds of issues in future.”

The investigation will consider both how the ESO acted during the lockdown period and how the market responded and will use the findings to inform future policy decisions. The results of the review will be published in October after evidence is collected and several industry roundtables held in September.

Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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