On 1 April, National Grid ESO commenced procuring Short Term Operating Reserve (STOR) at the day-ahead stage, reviving the STOR procurement service since it was halted back in December 2019.

On 1 April, National Grid ESO commenced procuring Short Term Operating Reserve (STOR) at the day-ahead stage, reviving the STOR procurement service since it was halted back in December 2019.

The roll-out of this new post-fault response service aims to help respond to frequency events faster. It should see the ESO make fewer interventions to manage frequency, with the stated aim to lower overall balancing costs.

A few weeks into the revival of STOR, Cornwall Insight has examined the new service to see how it faired.

Key findings
• Over the opening seven days of the new service, we have seen 15 individual parties participate in the auctions (across 144 units), with daily submitted volumes averaging 2,490MW.
• Daily accepted service volumes have averaged 1,311MW, meeting the service requirement in the opening auctions.
• This has been largely met by Uniper, RWE and Centrica, with portfolios predominantly made up of Open Cycle Gas Turbines (OCGTs), such as Uniper's Killingholme and gas reciprocating engines.

Joe Camish, Analyst at Cornwall Insight, said:

"One of the major changes to the service compared to its previous arrangement will see availability payments for day-ahead STOR settled using a pay-as-clear mechanism, rather than a pay-as-bid.

"The opening auction saw the availability price clear at £3.00/MW/hr, with the price set by Flexitricity. Over the opening seven days, the auction clearing price has averaged £2.17/MW/hr, peaking at £4.65/MW/hr on 6 April (set by Uniper's Ratcliffe 15MW OCGT unit).

"The current price point that the availability price is clearing at is similar to the prices observed back in the original STOR service, except for 6 April. In 2019, the average annual availability price was ~£2.0/MW/hr.

"The CEP and European Balancing Guidelines (EBGL) state that the price of balancing energy must not be pre-determined in balancing capacity contracts and allows providers to change their utilisation prices up to 90 minutes before the window closes.

"Some market participants expressed concern that this would lead to ‘gaming' (i.e., submitting a low availability price to get accepted and then ramping up the price for utilisation).

"However, in theory, such a structure should reduce a unit's market power due to the competition in both the availability and utilisation pricing phases. Allowing for utilisation prices to be submitted and changed up to 90 minutes before the window should mean utilisation prices align with market prices and reflect scarcity.

"When the ESO requires additional capacity, they will consider all the options available to them, not just contracted STOR providers, factoring in economic and technical parameters.

"If a STOR provider were to submit high utilisation prices, they would ultimately sit higher in the stack. Therefore, they will be utilised less frequently than alternative providers with lower utilisation prices (assuming they have similar technical parameters).

"Due to the flexibility in confirming utilisation prices, these parameters are not included in the day-ahead auction tender results. For context, the annual average utilisation price back in 2019 was ~£214.0/MWh."

-Ends