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The Balancing Mechanism: how flexible energy consumers and generators benefit

Lifting the lid on the Balancing Mechanism; how Centrica Business Solutions is helping organisations across the UK grasp the opportunity.

The UK’s electrical network is extremely complex and one of the biggest challenges is to ensure that supply and demand is constantly balanced. National Grid, the system operator, manages this through a number of programmes, one of which is the Balancing Mechanism (BM).

This article helps lift the lid on the BM and how business and public sector organisations can now take advantage of what has historically been a generators playground.

What is the Balancing Mechanism?

National Grid describes the Balancing Mechanism (BM) as 'the ultimate flexibility market'. It ensures that electricity supply and demand are balanced close to real-time for each half-hour trading period.

The price of electricity varies dramatically in the BM, so customers who are flexible with their power can benefit when the system is particularly long or short. Participants in the BM can submit 'bids and offers' to increase or decrease their generation (or vice versa for consumption), up to one hour before delivery, which can then be accepted by National Grid to help balance the system.

The increase in renewable energy coming on to the system, from solar panels and wind turbines, is making it harder for National Grid to balance the network and this translates to more volatile (higher peaks and lower troughs) in the BM, leading to greater opportunities for those with flexibility.

How is the BM being made more accessible?

Currently, the BM is dominated by large generators; however, recent regulatory changes mean smaller, aggregated units (including Demand Side Response) will now be able to access the market more easily. To support this change, National Grid is building a new web-based system to better manage the dispatch and data flows for flexibility entering the BM.

As one of National Grid’s 'early adopters', who work closely with them to support the development of new systems, Centrica Business Solutions will be one of the first providers to be operational on the new web-based BM platform. This will enable our Virtual Power Plant software to talk directly with National Grid to access the BM, replacing our existing interface.

Who can benefit from the Balancing Mechanism?

The BM applies to any business with flexible power that can provide a fast response. This flexibility could come from energy storage assets (such as batteries), large industrial loads and manufacturing processes, or generation assets.

There should be negligible business disruption from BM as participation can be anything up to 30 minutes and participants can adjust their bid and offer prices based on the opportunity cost of turning units on and off or interrupting processes. Centrica Business Solutions will manage the entire process on behalf of customers as part of our Optimisation services.

What are the benefits?

For businesses with flexible capacity, the BM can provide an additional and significant revenue stream, helping to diversify and strengthen your income – as well as supporting the UK’s infrastructure.

Due to the dynamic nature of the BM, it is difficult to predict precise financial returns. The key variables that impact returns include how competitively participants can price themselves and how important their site locations are to National Grid.

Centrica Business Solutions can provide bespoke analysis for businesses with flexibility to understand the value using historical data and real BM prices.

What are the future opportunities?

From December 2019, National Grid's new web-based systems will offer access to the new Trans European Replacement Reserves Exchange (TERRE). This will enable organisations to further monetise their energy flexibility in a cross-European balancing market.

Why work with Centrica Business Solutions to access the Balancing Mechanism?

  • The largest supplier of electricity and gas to business in the UK via our sister company, British Gas
  • Europe's number one Demand Side Response solution provider
  • Experienced in-house energy optimisation team manages the entire end-to-end Balancing Mechanism process
  • A successful track record of delivering revenue from the Balancing Mechanism
  • Energy trading expertise across 27 wholesale markets with operational structures to support customers in accessing both UK and pan-European balancing markets
  • Dedicated regulatory team and advanced software products to deliver outstanding service and optimise revenues.