System needs and product strategy consultation

We published our first system needs and product strategy consultation on 13 June. In a rapidly changing electricity market, the document is aimed at existing and new market participants who could provide future balancing services to the system operator. Cathy McClay, Head of Commercial Operations (Electricity), explains what it’s all about.

As the pace of change in Great Britain’s energy sector increases, potential investors and current market participants alike need clarity. Where will future commercial opportunities come from? How is the market changing? What are the technical requirements? How will we, as system operator, work with the industry to create an electricity system that ensures best value for consumers while opening up opportunities for innovation and fresh ideas?

These are all valid questions. By publishing our first system needs and product strategy consultation we aim to progress this conversation with industry. The goal is to provide a clear picture of the types of balancing services we will need to buy in the future to maintain secure and affordable electricity supplies.

So, what do we want to achieve by publishing this consultation? There are three core objectives: Increase clarity of our system needs, outline our initial plans for the future of balancing services, and give new and existing service providers an opportunity to get involved with our strategy development.

The launch of the publication is the start of this conversation and will be made available on our new Future of Balancing Services webpage. This platform will provide better market information and transparency about how we plan to change and how we operate the system. It will also clarify our view of our future system needs and provide a way to debate the evolution of markets.

The system needs and product strategy publication is closely linked to the system operability framework (SOF), which we also publish. The SOF sets out the future requirements to operate the GB electricity network. The next logical question is: how do we address those requirements? The system needs and product strategy will help us to find the answer to that question by working collaboratively with the wider industry.

A revolution in electricity

It’s worth putting all this into context. Great Britain’s electricity sector is undergoing a rapid transformation. The change to a smarter and more flexible energy system is already under way. Large conventional power plants are closing and renewable generation is growing fast – today it accounts for around 30% of installed capacity.

There are lots of new smaller players emerging to play their part too. These businesses are typically located closer to demand and they rely more on balancing service revenues. By 2020, we expect to see the number of smaller players increase significantly. Decarbonisation and decentralisation mean that system needs are also changing.

Managing a system with a growing number of participants and lots of new sources of energy is complex. As the GB system operator, we increasingly need to call on many different technical and commercial tools so that we can optimise resources and balance supply and demand on a second-by-second basis.

Feedback: the need to simplify

We talk regularly to stakeholders about their concerns and ideas. One of the regular themes is that markets are too complex and not transparent enough.

Over time the number of balancing services procured by us has grown to more than 20, ranging from Enhanced Frequency Response, to Demand Turn-Up, Reactive Power, and Black Start.

We plan to simplify these services, first by removing any obsolete products and then standardising the way that contracts work, improving market information and trialing new ways of procurement.

We will work with industry to achieve this. It might involve combining services into fewer, deeper markets or developing new standardised products. We’ll also be talking to industry about different market design options.

Closing thoughts

Publication of the system needs and product strategy consultation is the start of an ongoing conversation with the electricity industry. There is a lot of work ahead and I see it as an exciting opportunity to work together to shape the future of Great Britain’s electricity system.

Read the strategy consultation

You can download the system needs and product strategy document and read further on the Future of balancing services page.

If you would like more information, or to be involved in the development of future services, get in touch with us at [email protected]