What are Balancing Services?
The National Grid’s three core goals are to decarbonise, decentralise, and digitalise the UK’s transmission and distribution networks by encouraging investment in low carbon technology. Balancing Services (BS), or Balancing Mechanisms (BM), are employed by the National Grid through the Capacity Market to safeguard the security, quality, and reliability of gas and electricity supply and curb Distribution and Transmission Losses by offsetting demand.
Balancing Services – including Embedded Benefits (EB) – reduce non-commodity charges (e.g. GDUoS, TNUoS, BSUoS, and DUoS) on your electricity bill, mitigate the rising price of energy, decrease reliance on fossil fuels, prevent power outages, thwart system fault events, and flatten energy market volatility. The National Grid procures BS from a wide variety of “prosumers” (generators, suppliers, or providers) that can rapidly reduce or increase their own demand on the grid when instructed or use onsite power generation installations to feed renewable energy back to the grid.
Distribution Network Operators (DNO) and Independent Network Operators (IDNO) are licensed by the National Grid to distribute electricity from the National Grid to your metering point via their local network. DNOs and IDNOs are responsible for how customers are charged for maintaining electricity connections and their contributions to balancing mechanisms.
It’s very important to understand the differences between these non-commodity charges to mitigate their impact on your bills. Give us a call today to understand how your business can avoid these hefty fees or read on to learn more.
How do I become a “prosumer”?
A prosumer “consumes and produces value either for self-consumption or consumption by others and can receive implicit or explicit incentives (additional revenue or tax relief) from organisations involved in the exchange”. Examples of BS include load shifting during times of peak demand (e.g. Triad avoidance) or supplying renewable energy in the form of photovoltaics, wind, hydro, anaerobic digestion, biomass, and combined heat and power (CHP) to meet demand and improve efficiency.
What are some examples of balancing services and how will I be paid?
Examples of Balancing Services include Demand Side Response (DSR), Short Term Operating Supply (STOR), and Static Firm Frequency Response or Dynamic Firm Frequency Response (SFFR and DFFR). To participate, providers negotiate long or short-term contracts with the National Grid depending on location and load capacity.
These contracts stipulate renumeration for services (generally £/MWh), the volume of energy that must be made available, when it must be delivered, the duration of time it must be made available, and penalties for noncompliance. Suppliers often receive discounts on non-commodity charges for contracting with smaller embedded generators, the majority of which are passed onto smaller embedded generators in the form of payments from suppliers. Smaller embedded generators establish direct contracts with the National Grid to receive these payments or avoid the charges that larger generators face.
An example of these contracts are Power Purchase Agreement (PPA). PPAs are long-term bilateral agreements made between businesses in energy-intensive industries (EII) and suppliers. They minimise market volatility and offer financial incentives to encourage investment in renewable energy installations.
“Embedded Benefits” are transmission charging arrangements (including balancing system charges) for smaller (sub 100MW) embedded generators (those connected to the distribution network) verses larger generators.
How is energy supplied, produced, and paid for?
Suppliers purchase electricity from generation companies on your behalf and are charged by the National Transmission Network (NTN) and Distribution Network Operators that deliver electricity to your premises. These costs are known as TNUoS, BSUoS, and GDUoS charges and can account for up to 60% of non-commodity charges on your utility bills. To minimise the impact these hefty non-commodity levies, it’s essential that businesses understand the role of DNOs, IDNOs and the differences between GDUoS, TNUoS, BSUoS, and GDUoS.
What are DNOs, IDNOs, and ICPs?
What are DUoS?
What are TNUoS?
What are BSUoS?
What are GDUoS?