Ofgem looks to crack down on firms ‘manipulating’ electricity market

[AE-NMidlands]

https://www.theguardian.com/business/20 ... GTUK_email

The energy regulator Ofgem is preparing to crack down on UK power firms to prevent them from “manipulating” the market with a manoeuvre that has bolstered their profits by millions of pounds.

The practice, which does not break existing market rules, involves generators warning the electricity system operator that they are turning their power plants off at times of peak demand and subsequently offering to keep them running in exchange for a “balancing” payment.

In some cases, the electricity system operator, which is owned by National Grid, has been left with little option other than to make payments of significantly above the market price to keep power plants from turning off and avoid the risk of winter blackouts.

The balancing payments, which are passed on to consumers in the form of higher bills, add up to millions of pounds. An analysis by Bloomberg claims some power plants have received £525m in extra revenue from using the “off-on manoeuvre” between 2018 and 2022.
etc...

Which bears out what I just said in the Graig Fatha thread...

[Moxi]

Also proves that the current model for privatised electricity whole sale markets is not fit for purpose. Ofgem as a regulator have been very lacklustre in their tenure.

The whole market needs either a significant overhaul OR a complete rethink/ replacement.

We also need some investigative journalist to produce a program to shame the power companies and raise public awareness.

Moxi

[Swwils]

A significant chunk of these are due to intermittent energy sources...

NGESO are not surprised that more actions are taking place because renewables are comming online.

If you introduce a fair node price market suddenly wind and solar aren't going to be worth anything.

[Fintray]

A significant chunk of these are due to intermittent energy sources...

NGESO are not surprised that more actions are taking place because renewables are comming online.

If you introduce a fair node price market suddenly wind and solar aren't going to be worth anything.

Can you explain?

[nowty]

In other words, locational pricing.

https://www.nationalgrideso.com/news/ne ... 20location.

https://www.ofgem.gov.uk/publications/l ... assessment

https://es.catapult.org.uk/report/locat ... er-market/

[Fintray]

Thanks Nowty but how does that then make "wind and solar aren't going to be worth anything"?

[nowty]

Thanks Nowty but how does that then make "wind and solar aren't going to be worth anything"?

Swwils said, "If you introduce a fair node price market suddenly wind and solar aren't going to be worth anything."

If you substitute the word "fair" with "draconian" it might mean something very different or the same depending on your viewpoint. In other words its a meaningless statement or a very biased view.

[Swwils]

The UK currently uses a pricing system called the Uniform Balancing Mechanism for its electricity market. UWhere the price for electricity is uniform and does not vary from one location to another.

Nodal pricing, also known as locational marginal pricing (LMP), is a method used in some electricity markets to determine the price of electricity at specific locations (nodes) within the grid. In the context of the UK energy grid and wind curtailment, nodal pricing could help manage the challenges posed by the integration of large amounts of wind energy.

Its being heavily suggested I think by NGESO, you can look at their P3A which is pretty strongly worded. https://www.nationalgrideso.com/documen ... 1/download

Nodal pricing can help address curtailment by reflecting the true cost of delivering electricity at different points in the grid. It considers various factors, such as transmission capacity, congestion, and the cost of generating electricity at each node. When there's a high level of wind generation, the LMP at the wind farm's location may be low or even negative due to oversupply. This sends a signal to wind generators that their power is less valuable at that time, and they may choose to curtail their output. On the other hand, regions with higher demand or less congestion will have higher LMPs, encouraging generators in those areas to increase their output.

If we did switch to full nodal pricing then you would see the value of any future wind projects in Scotland collapse for instance as they already have far too much in that context.

Essentially in full nodal pricing:

Developers might be incentivized to build wind farms in areas with higher locational marginal prices (LMPs) due to better grid connectivity and higher demand, resulting in higher revenues - this hopefully balances development across the country and makes the NIMBY south more attractive.

Investments would need to directly consider the LMPs and transmission capacity at potential wind farm sites - This might encourage investment in grid infrastructure upgrades, energy storage solutions, and other technologies to improve grid flexibility and reduce the need for wind curtailment.

Revenue predictability declines as you introduce additional uncertainty for project developers and investors, necessitating more sophisticated risk management and revenue forecasting strategies.

By providing more accurate price signals that reflect the true cost of electricity delivery, nodal pricing could lead to more efficient grid integration. Which might not be good for your Scottish Wind Farm 2035.

[Moxi]

So in simple terms it means that the Nimbys would actually have to have generation facilities in their back yard.

But wasn't this where the CEGB were in the 60's and 70's with the Prince of Wales coal fired power stations that were located in and around towns and cities to feed local demand?

Moxi

[Swwils]

The NIMBYism doesn't go away it simply makes it more financially viable to fight them.

Its a significant change just after everything settled from the last major change, so naturally hesitation as the big players have memories. The Electricity Market Reform (EMR), sector privatisation and OFFER/OFGEM, NETA and BETTA are not "so" long ago.

Mature wind rollouts elsewhere have shown that even favourable conditions on both investment and population acceptance turbines aren't co-located near places that need them anyway for whatever reason.

The best way to visualise this is to not think of energy outputs as annualized figures, but instead from the POV of the grid minute by minute so the task is managing real-time challenges effectively. i.e. stability.