Balancing Services and Mechanisms

Generate income and reduce rising energy costs by participating in balancing services to maintain and optimise the National Grid.

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?

  • A Distribution Network Operator (DNO) is a company licensed by Ofgem to distribute electricity and operate cables and towers that carry power from the National Transmission Network (NTN) to homes and businesses.
  • Independent Distribution Network Operators (IDNO) are licensed by Ofgem to develop, operate, maintain and retain ownership of new electricity distribution networks.
  • Independent Connections Providers (ICP) are accredited companies that carry out works on electricity networks. These networks are owned by DNOs and IDNOs.

What are DUoS?

  • Distribution Use of System (DUoS) charges cover the cost of maintaining the distribution network. They’re paid in addition to your kWh unit charge.
  • Ofgem’s P272’s Half Hourly (HH) metering policies dictate how charges are passed on to customers based on the volume of electricity they consume.
  • We can help identify which rates apply to your business by establishing the Line Loss Factor set by your Distribution Network Operator (DNO).
  • Rates vary depending on region, time of day, and consumption and are represented by the Red (Red Band), Amber, and Green scale of charges.
  • The Red Band typically applies to consumption between 16:00-19:00, Monday to Friday, when the National Grid is experiences most demand. DUoS charges are highest this time.

What are TNUoS?

  • TNUoS charges recover the costs of building, operating, and maintaining transmission systems and are paid in addition to your kWh unit tariff.
  • Charges are based on your share of demand on the grid during Triad periods. These occur between 1st November and 28th February each year when demand is at its highest.

What are BSUoS?

  • Balancing Services Use of System (BSUoS) fees cover the services associated with balancing the transmission system and are paid by both generators and suppliers.
  • BSUoS levies recover costs incurred as opposed to a fix allowance and are paid by users of the transmission system. 

What are GDUoS?

  • Generator Distribution Use of System (GDUoS) charges apply to the positive charges and negative credits associated with the local distribution of exported electricity on to the grid.
  • GDUoS levies are enforced by Distribution Network Operators (DNOs) that cover the operation and maintenance of networks. Charges range from negative charges through to positive charges across the UK and are calculated on an annual basis by local DNO and suppliers.

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