New ancillary service market paves the way to a renewables-led future

renewable energy
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By Paul Buckworth, Principal Consultant at energy market data analyst EnAppSys

A new ancillary service procured by National Grid to manage the frequency of Britain’s electricity system is set to support the country’s green energy transition and provide new opportunities for battery projects.

This new service, Dynamic Containment, is one of three new frequency response services designed by National Grid to help manage system frequency under the conditions of low inertia associated with high amounts of renewable generation. New forms of frequency management are needed because, with renewables now providing a significant share of power generation in Britain (35% of power in 2019), the market is running on its lowest ever share of power from conventional sources.

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Renewable generation

This increase in renewable generation sources has been developing through the past decade but, unlike renewables, conventional power sources, in addition to their active power provision, also have a value for National Grid as a source of inertia resulting from the stored kinetic energy in the spinning mass of the turbines and generators.

In the event of any unexpected loss of generation on the network, the generation of power becomes less than the electrical demand of the system, which will cause the rotational speed ” and hence the system frequency ” to drop. Inertia from conventional generation provides some mitigation to slow the rate at which frequency would drop.

With fewer conventional turbines spinning, there is less resistance to changes in frequency because for renewables in the market, there is either no mechanical generator of power, in the case of solar projects, or there is a decoupling between the mechanical and electrical system, as in the case of most wind farms. As a result, the conventional coal, gas and nuclear plants are currently required to provide this inertia.

As operator of the network, National Grid has led the Future of Balancing Services programme to develop the tools and products needed to meet the challenges of these changes to the system fuel mix.

As part of this programme, the three new frequency response products are being created, with the first of these, Dynamic Containment, launched in October 2020. It effectively adds a set of ” for now ” battery projects that are ready to increase generation in response to any frequency drop to rapidly replace any lost generation. Other technologies may also emerge to provide this service as they evolve over time.

Whilst batteries are non-synchronous generators and cannot provide (real) inertia to slow a frequency change, they can still support system frequency as it is a balance of generation and demand. As they can generate or absorb power quickly, batteries can rapidly step in to help manage this balance when frequency deviates from the target of 50Hz.

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Grid stability

This service is faster than the previous iterations of similar services that it is now operating alongside. This decreases the total loss of rotational speed ” or loss of frequency ” that occurs when a generation loss against demand occurs, because the loss is sustained for a shorter period of time.

Dynamic Containment is also the first service of its kind in GB to be procured via daily auctions, providing an alternative route to market for battery projects that have been unsuccessful in providing frequency response services to the grid in the preceding monthly tenders and weekly auctions. If a unit is not accepted into any of these frequency response services, they are still able to help the system in other ways by running as required in the normal power markets.

The daily Dynamic Containment activity ” volumes and prices per unit ” can be tracked by companies such as EnAppSys, for insights into this new market. As this is a relatively exclusive service ” full delivery must be within 1 second, but no faster than 0.5 seconds ” the price of this new service remains high at à‚£17/MW/h, which represents a premium of ~à‚£10/MW/h over the prices achieved over a similar period in other alternative auctions, though the costs of service delivery may differ.

But although the price is high, the value to the system of delivering this very fast volume is likely to offset any associated costs and daily procurement means that as competition in these markets grow, the price is likely to decrease overall. As more volumes are procured to increase the amount of response delivered, prices should start to reflect the wider market more closely and this could see more peaks and troughs of value that should help to ensure a cost-effective solution.

To date, volumes of ~250MW have been procured against a target of 500MW. Whilst the target is yet to be met, competition is low, meaning that the price premium for Dynamic Containment remains notable. Once the full 1GW of Dynamic Containment intended to be procured by National Grid is online, we expect to see its effects on the amount of inertia National Grid needs to hold on the system, along with effects on balancing to reduce largest points of loss.

As the first of these new ancillary (grid stability) services launched by National Grid to create a framework of services that meets the challenges of integrating a higher percentage of renewables on the grid, it begins a new era for how power networks are managed.

In these interesting times, the auction appears to have been successful in delivering a service at commercial prices that will attract entrants to participate in it. Over time, we need to see how it evolves because currently only a limited amount of volume is being procured through this service, but the indications are promising for the future.

Dynamic Containment also illustrates the potential for revenue to be gained by being flexible and actively monitoring these markets for potential opportunities. Although active monitoring may be more labour-intensive than the work needed to secure a full month’s activity in a single tender, the value for generators as they support the needs of the system is likely to make that work worthwhile, further evolving the way the market operates and reacts around changing renewable positions. Over time, the market is expected to migrate from the current framework of monthly and weekly auctions to daily and, eventually, four-hourly auctions, further highlighting the value of flexibility for revenue potential.

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