Settlement Implications for Suppliers Whose Customers Provide Balancing Services to National Grid (Directly or via Independent Aggregators) |
Guidance Note |
Recent Modifications to the Balancing and Settlement Code (BSC) have introduced arrangements for adjusting the Energy Imbalance positions of Suppliers whose customers provide Balancing Services to National Grid (either directly, or through an independent aggregator):
In December 2019, Modification P344 (
TERRE and Wider Access) introduced arrangements for customers and independent aggregators to accede to the BSC as “Virtual Lead Parties” (VLPs), in order to offer customers’ generation or demand side response into the Balancing Mechanism (BM) independently of the customer’s
electricity Supplier. The P344 solution includes arrangements to adjust
Suppliers’ Energy Imbalance positions in order to ensure that their Energy Imbalance Cashflows are unaffected by their customers’ BM acceptances.
On 1 April 2020, Modification P354 (
ABSVD at the Metering System level) introduces similar arrangements for
Suppliers whose customers are providing non-BM
Balancing Services to National Grid.
This note provides guidance for Suppliers who may be affected by these imbalance adjustments.
2. How do these Modifications Impact Suppliers’ Energy Imbalances?
To illustrate the impact of these changes on Suppliers, consider a customer who uses their generating unit to deliver 10 MWh of balancing energy to National Grid as a non-BM service (such as non-BM STOR). As a result of this action, the site (which normally Imports energy from the Distribution System) becomes a net Exporter. The Settlement Metering System (installed by the Supplier at the Boundary Point) shows 3 MWh of Export and 1 MWh of Import.
Prior to the implementation of Modification P354, these Boundary Point meter readings would be allocated to the relevant Suppliers without any adjustment. Therefore, for purposes of Imbalance Settlement, prior to implementation of P354:
The 3 MWh of Export would be allocated (without any adjustment) to the Export Supplier’s Energy Account. They would therefore receive an Energy Imbalance payment for this 3 MWh of energy (which they would not have received, had the customer not used their generating unit to deliver a balancing service to National Grid); and
The 1 MWh of Import would be allocated (without any adjustment) to the Import Supplier. This Import has been reduced as a result of the customer delivering the balancing service, which means the Import Supplier is also being paid (or paying less) Energy Imbalance Cashflow as a result of the customer using their generating unit to deliver a balancing service to National Grid.
Modification P354 will introduce arrangements for adjusting the Suppliers’ imbalance positions remove the effect of the customer’s balancing service. Specifically, the Settlement process will remove the 10 MWh balancing service volume from the Suppliers’ Energy Accounts:
The 3 MWh recorded on the Export Metering System will be removed from the Export Supplier’s Energy Account, so that they do not receive an Energy Imbalance Cashflow on the 3 MWh of Export the customer delivered to National Grid; and
The remaining 10 – 3 = 7 MWh of delivered volume will be removed from the Import Supplier’s Energy Account, so that they do not receive an Energy Imbalance Cashflow on the 7 MWh of Import reduction the customer delivered to National Grid.
The same process of adjustment would apply if the 10 MWh was delivered as an Offer Acceptance issued to a Virtual Lead Party (under Modification P344).
3. What is the Justification for Adjusting Suppliers’ Energy Imbalance Cashflows in this Way?
As explained in the P344 and P354 Assessment Reports, there are two key reasons for adjusting Suppliers’ Imbalance positions to remove the effect of balancing actions taken by their customers:
1. To ensure a level playing field in the BM and other balancing service markets. For example, when a Primary BM Unit delivers an Offer in the Balancing Mechanism the Offer Volume is removed from the Lead Party’s Energy Account (to ensure the Lead Party does not receive an Energy Imbalance Cashflow in addition to their Offer Payment). If Supplier positions were not adjusted, an Offer delivered through a Secondary BM Unit would lead to an additional imbalance payment, whereas an Offer delivered through a Primary BM Unit would not. This would potentially distort competition in the BM by providing customers participating through a VLP a significant advantage over other participants; and
2. To ensure compliance with Article 49 of the Electricity Balancing Guideline (
Regulation 2017/2195), which requires imbalance adjustments to be applied to the relevant balance responsible parties in relation to balancing services.
4. How do these Adjustments Impact Suppliers?
From a BSC viewpoint, the effect of these adjustment is to ensure that Suppliers’ Energy Imbalance Charges are unaffected when their customers deliver balancing services to National Grid. But Suppliers may need to consider the broader implications of this for their processes and for their contractual relationship with the customer.
In the example above, if the customer had not been instructed to deliver 10 MWh to National Grid, they would have Imported 8 MWh (rather than Importing 1 MWh and Exporting 2 MWh). The P344 and P354 solutions reflect this by ensuring the Import Supplier is treated (for purposes of Energy Imbalance) as if the customer had used 8 MWh, even though their actual usage (as recorded on their meter) was just 1 MWh. The difference of 7 MWh represents energy which the Supplier would have expected to supply the customer, but which in fact the customer did not use (at the instruction of National Grid). In effect the customer has transferred to National Grid (for balancing purposes) energy that the Supplier purchased from the market on their behalf. The Supplier may wish to ensure that their contract with the customer handles this appropriately.
Similarly, the Export Supplier in the example is treated (for purposes of Energy Imbalance) as if the customer had not exported any energy, even though their actual Export (as recorded on their meter) was 3 MWh. This 3 MWh of energy will still be subject to network charges and associated embedded benefits, but is not allocated to the Supplier for Settlement purposes. In effect the customer has sold this Export to National Grid (not the Supplier). The Supplier may wish to ensure that their contract with the customer handles this appropriately.
5. How are Adjustments Reported to Suppliers?
The SAA-I014 Settlement Report will tell Suppliers the total volume of adjustments made to each of their Supplier BM Units:
For adjustments relating to the BM or TERRE (Modification P344), the relevant data item is Period Supplier BM Unit Delivered Volume (N0606), which was introduced into version 009 of the SAA-I014 report.
For adjustments relating to non-BM Balancing Services (Modification P354), the relevant data item is Period Supplier BM Unit Non BM ABSVD Volume (N0636), which will be introduced into version 010 of the SAA-I014 report (in the April 2020 Standalone Release).
The SAA-I014 does not provide information on the adjustments applied to individual
Metering Systems. This information is available to
Suppliers in the
Metering System Half Hourly Volume Adjustments (P0287) data flow, which is documented in both the IDD and the
SVA Data Catalogue.
Note that the P0287 data flow will only include adjustments for those
Metering Systems where National Grid (for P354-related adjustments) or the VLP (for P344-related adjustments) has indicated that the customer consents to
BSC Systems disclosing this information to the
Supplier. Where such consent has not been provided Elexon and its agents will not be able to tell the
Supplier which
Metering System any adjustment relates to. In this case
Suppliers who require this information will need to obtain it through appropriate contractual arrangements outside of the BSC. The
Ofgem decision letter for BSC Modification P354 provides further information on the rationale for this.
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