How does the Balancing Mechanism work?
The Balancing Mechanism (BM) is one of the most important tools which National Grid uses to balance electricity supply and demand in real-time.
When electricity generation and consumption are not in balance, National Grid uses the BM to purchase changes in generation and consumption to correct the mismatch. Unlike balancing services such as STOR, the BM is an ad-hoc market, with no forward commitments, and highly dynamic prices.
Energy customers and small generators have to go through licensed suppliers or utilse the Virtual lead Party (VLP) route to access the BM. However, existing suppliers, many of whom own their own fleets of flexible generators, are conflicted: they have an incentive to trade their own capacity first. Flexitricity does not own any generating assets, which means we always put our customers first.
In 2020 Flexitricity became the first provider to trade in the Balancing Mechanism as a VLP. That means we're now able to offer Balancing Mechanism access for all types and sizes of flexibility - with or without a supply contract.
This is why Flexitricity is ideally placed to trade its customers’ capacity in the BM.
How does it work?
Any licensed generator, licensed supplier or VLP can post prices and capabilities for varying their consumption or generation after “gate closure”, that is, 60 to 90 minutes before real time. Prices are either bids (to consume more, or generate less) or offers (to consume less, or generate more). After the “gate closure” National Grid is the only counter party who can accept these bids and offers - the market is closed for other buyers.
Alastair Martin, Founder and CSO at Flexitricity:
"The BM is about bringing what you have to market. This is why Bid/Offer Acceptances (BOAs) always start from wherever you are, and whatever your schedule says you’re going to do. Your schedule, in this case, is called your Final Physical Notification, or FPN – it’s a statement of intent covering the next hour and a half. If you were planning to ramp up your CHP generators starting at 7am, National Grid can use a BOA to get you to start a few minutes early, at a price which suits your site. If your cold store was already chilly enough and you were planning to ramp down consumption, National Grid can use a BOA to keep the fridge plant running. You’ll overchill the frozen peas by a fraction of a degree, but you’ll earn from doing so. Plus you’ll be able to change your schedule for later in the day, taking advantage of that extra “coolth”.
It's also about setting your own limits. If your asset is a battery, you can ramp as fast as anything on the market, which could give a price advantage in fast-moving events. But you still need to watch the state of charge and the cycling, so you can put limits on that. Similarly, CHPs generally don’t like heat dumping, and they really hate letting heat customers down. Offers and bids made in the BM can take account of space in the heat store and the heat needs of the customers."
Click HERE to find out more about Bid/Offer Acceptances in the Balancing Mechanism.
The BM is a major market opportunity for flexible capacity. By bringing our customers into the BM, Flexitricity is unlocking new revenue for those customers by trading their flexibility, as and when it’s available.
Get in touch today
Book a call with one of our energy market specialists to find out if you can participate and how much your site could earn.0131 221 8100