Getting the balance right

Balancing supply and demand in electricity markets is vital to maintaining a stable electricity system and avoiding blackouts. 

While ancillary frequency control markets manage short-term fluctuations, different mechanisms are needed for larger, longer-term imbalances that occur over market trading periods. The design of these mechanisms is closely linked to the type of dispatch model used: self-dispatch or central dispatch. Let’s look at a couple of examples.

Australia’s NEM

The National Electricity Market (NEM) operates under a central dispatch model. Generators submit their offers to supply electricity, and the electricity system operator (AEMO) centrally co-ordinates the dispatch of electricity based on these offers and real-time system needs. 

The NEM uses a real-time co-optimised dispatch approach, which means both energy supply and ancillary services (FCAS) are continuously optimised together. 

The central co-optimised dispatch model ensures the most efficient dispatch of energy resources taking into account offer prices, system needs, and transmission constraints. 

For an introduction to the National Electricity Market, check out this short NEM intro video from Gridcog's Flexibility Markets Lead, Alex Leemon.

GB Electricity Market

In contrast, the GB electricity market operates primarily on a self-dispatch model. 

Here, market participants (generators, suppliers, and large consumers) are responsible for scheduling their own generation or load based on wholesale market trading that may occur across different trading venues and across different time scales. This promotes deep, liquid, and transparent energy markets.

As we explain in this week’s video, National Grid ESO is responsible for managing imbalances between supply and demand using the Balancing Mechanism. This is a post-market management approach, where participants submit data indicating their intended physical position and their availability to deviate from it, and the ESO makes requests for them to do so based on the system requirement.

Dispatch Models Shape Balancing 

The distinction between central dispatch (as in NEM) and self-dispatch (as in GB) is key to understanding how energy balancing mechanisms function. 

In central dispatch systems like the NEM, the system operator has greater control, enabling real-time co-optimised balancing of both energy and ancillary services. 

In self-dispatch systems like GB, energy market participants bear more responsibility for forecasting their needs and contracting with each other to meet those needs, and post-market mechanisms resolve imbalances later.

All Energy Australia, 23-24 October

All Energy Australia is just one week away. In addition to Fabian Le Gay Brereton 's panel on Building Grid Resilience: Battery Energy Storage Systems (BESS), our Flexibility Markets Lead, Alex Leemon is doing a presentation on Big battery revenues in the NEM.

Alex will explore revenue optimisation for large-scale battery storage in the National Electricity Market (NEM), focusing on energy arbitrage, volatility management, and frequency control services. View the full lineup of guest speakers here.

Visit us at stand XX142 to meet the Gridcog team and learn how we're helping our customers achieve their renewable energy projects. You can book a free demo call with one of our energy experts by clicking the button below. 

Industry Insights: Capacity Market Notices in GB

On Monday the 14th of October NESO issued their first Capacity Market Notice of winter 2024. Capacity Market notices are issued when the Loss of Load Probability exceeds a certain margin. Throughout the afternoon we saw the system operator execute a number of forward BSAD trades, reversing flows on the interconnectors to decrease the probability of loss of load. Unsurprisingly, the Capacity Market notice was cancelled early in the afternoon. 

In fact, we have never seen a Capacity Market Notice through to completion in GB (they’re always cancelled). It will be interesting to see when, if ever, an event actually occurs. If there was a Capacity Market event any asset with a CM contract that was not already delivering a BM action (via their PN) or an ancillary service would be obliged to export at the volume of their CM contract for the duration of the notice.

Product Corner: Value Flow Designer

In Gridcog, the Value Flow Designer allows the asset ownership and commercial arrangements of your project to be modelled, sharing costs and revenues between different project participants. The value flows are all fully accounted for in project optimisation to accurately reflect asset behaviour under different commercial scenarios.

That’s all for this week. If you’d like to see how Gridcog can model your energy projects, click here to book a call with our team.

Or, if you have any interesting project use-cases you’d like to see modelled in Gridcog, email our marketing magician dan.pearson@gridcog.com and we’ll spin it up!