The effects of the fall in energy demand due to the COVID-19 lockdown accompanied with a high penetration of renewables on the transmission system has seen the activity on the Balancing Mechanism (BM) increase.
This increase in accepted volume on the BM is reflected in BSUoS charges. The average half-hourly BSUoS charge in April and May 2019 was £2.82/MWh and £2.56/MWh, respectively. This has risen to £4.93/MWh and £5.75/MWh in April 2020 and May 2020*, shown in the below graph.
Lee Drummee, Analyst at Cornwall Insight, said:
“The fall in energy demand because of the COVID-19 lockdown was always expected to increase the £/MWh rate of demand-based industry charges with total costs levied against a lower charging base. However, the addition of the overall rise in Balancing Mechanism volumes and other balancing services actions has pushed BSUoS even higher. In fact, the total daily BSUoS charge has increased from £2.9mn in May 2019 to £5.2mn in May 2020.
“With exceptional market conditions and the Electricity System Operator noting up to £500mn in additional BSUoS costs over the summer period, on 19 May SSE Generation raised CMP345 to ‘Defer the Additional COVID-19 BSUoS Costs’.
“The CMP345 sought to defer the additional BSUoS costs arising from COVID-19 that are incurred in 2020/21 (between 1 May and 31 August 2020) to the 2021/22 Charging Year. The Code Administrator Consultation was open between 9-12 June, with implementation planned for 23 June 2020, to be backdated and effective from 1 May 2020.
“This was approved by Ofgem with a £15/MWh price cap applied on balancing services used in each settlement period between 25 June and 31 August 2020
“With increased BSUoS costs coming at a time of difficulty in the market, the deferment of additional BSUoS costs would be a welcome relief to suppliers and transmission connected generators alike.”
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
