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Britain's National Grid to review electricity balancing costs

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By Reuters
Britain's National Grid to review electricity balancing costs
Britain's National Grid to review electricity balancing costs   -   Copyright  Thomson Reuters 2021

By Susanna Twidale

LONDON – National Grid’s Electricity System Operator (ESO) is reviewing the way Britain’s power generators are paid to ensure the market remains balanced after several recent high-cost days, it said on Monday.

British energy prices have reached record highs this year as global gas prices have soared, forcing multiple British energy suppliers out of business since September.

Britain’s National Grid ESO is a separate legal entity within National Grid and is responsible for overseeing the country’s electricity supply.

It uses a balancing mechanism to make sure supply and demand are matched in real time for each half-hourly electricity trading period, paying generators to ramp up power quickly if needed.

“In recent weeks there have been some very high-cost days, driven by generator costs in the balancing mechanism … As those costs are ultimately borne by consumers, it is important to fully understand the factors driving the market,” National Grid ESO said in a statement.

The review will look at recent price spikes, it said, with some generators paid as much as 3,000 pounds ($3,979.20) per megawatt hour for certain periods, compared with recent wholesale day-ahead electricity prices around 200 pounds per MWh.

Analysts at LCP’s Energy Analytics on Monday said the cost of the UK’s balancing mechanism reached 967 million pounds over the three months from Sept. 1, up 294% from the same period last year.

“We have seen the perfect storm of low renewable generation and an increase in global demand for gas, which has put the UK’s limited capacity on the edge, forcing prices to repeatedly break new ground,” said Rajiv Gogna at LCP Energy Analytics.

($1 = 0.7539 pounds)