Ofgem greenlights new Balancing Reserve service

The energy regulator has approved a new Balancing Reserve service expected to cut consumer costs by hundreds of millions over the next four years

Ofgem has given the green light to a new Balancing Reserve (BR) service, slated to go live next month.

This approval follows expectations of significant cost reductions for consumers over the next four years.

The service will adopt day-ahead procurement of energy reserves, replacing the current on-the-day system, thereby enhancing system security and reducing operational costs.

The transition to this new approach will involve the utilisation of a product called ‘Regulating Reserve’ to address energy imbalances in the GB power system.

By procuring Regulating Reserve on a firm basis a day ahead, the BR service aims to guarantee reserve capacity for the Control Room, thus mitigating balancing costs and improving system security.

Daily auctions will be conducted on the Enduring Auction Capability (EAC) platform, with a minimum contract size of 1MW.

A cost benefit analysis commissioned by the ESO projects significant savings for consumers, with up to £821 million expected in the high case scenario.

Ofgem said: “We will continue monitoring the progression of these actions to ensure all processes are clear for market participants. We expect the ESO to remain mindful of its duties to operate the system economically and efficiently.

“We further understand that the ESO is currently consulting on changes to include BR in the relevant balancing documentation in line with requirements under its C16 licence condition and the relevant balancing services guidelines.

“The ESO should ensure that consultation on these matters is completed in a timely manner. We note that the ESO plans to launch the service towards the end of February 2024, with first service delivery expected in mid-March 2024.

“We expect the ESO to clearly inform the industry about exact dates and timings as soon as practical.”

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