Background

National Grid have been working with DECC and Ofgem to explore options that would provide consumers with additional safeguards against an uncertain security of supply outlook during the mid-decade period. All three organisations agreed it would be prudent to develop new tools that could provide additional reserves to support us in balancing the system if margins get tight.

Two new balancing services were developed during the latter half of 2013 through an industry consultation process, and these products were approved by Ofgem on 19th December 2013. Ofgem’s decision letter was published on their website.

The new balancing services are Demand Side Balancing Reserve (DSBR) and Supplemental Balancing Reserve (SBR). DSBR is targeted at large energy users willing to reduce their demand during winter weekday evenings between 4 and 8 pm in return for a payment. SBR is targeted at keeping power stations in reserve that would otherwise be closed or mothballed. These services will act as a safety net to protect consumers, only to be deployed in the unlikely and extreme circumstances of there being insufficient capacity available in the market to meet demand.

We identified a requirement for these services for the upcoming winters and recently tendered for a small volume of DSBR for winter 2014/15 as part of a pilot for the new service. The results of this tender will be published shortly.

There have been developments in recent weeks regarding this winter’s security of supply outlook. As a result, we are taking the precautionary measure of tendering for the SBR service for the 2014/15 winter to complement the DSBR procured under the pilot. The volume of SBR procured will depend on how this situation evolves and prices offered in the tender process.

The requirement for winter 2015/16 will be tendered to both DSBR and SBR in the autumn of this year, and early in 2015.

Documentation associated with these services is provided below: