Terms and Conditions related to Balancing

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1 Natasha Z Smith Head of Wholesale Markets Electricity Ofgem 10 South Colonnade Canary Wharf London E14 4PU Kyla Berry Markets & Balancing Development Manager Kyla.Berry@nationalgrid.com Direct tel. +44 (0) June 2018 Dear Natasha and Conditions related to Balancing In accordance with Article 18 of COMMISSION REGULATION (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, the Transmission System Operators (TSO) of a member state are required to propose and Conditions related to Balancing. This obligation was assigned to National Grid as National Electricity Transmission System Operator (NET SO) in your TSO allocation dated 10 January This proposal is provided on behalf of National Grid Electricity Transmission plc (NGET). NGET owns and operates the high voltage electricity transmission system in England and Wales and, as National Electricity Transmission System Operator for Great Britain, also operates the Scottish and offshore high voltage transmission systems. The existing and Conditions for Balancing for the synchronous area of Great Britain are comprised of the Balancing and Settlement Code (), Statements and Methodologies, Grid Code (especially the Balancing Code sections) and the relevant sections of the Connection and Use of System Code (CUSC). These and Conditions have been created under the Electricity Act 1989 and National Grid s Transmission License. In addition, also exist for Balancing services. National Grid Electricity System Operator (NG ESO) are currently developing both new and existing balancing services products to best meet the needs of the electricity network, and standard contract terms will be updated as these changes are introduced. Since their creation the and Conditions for Balancing have been repeatedly modified to both improve their application, and to adapt to evolution within the GB Electricity market. The modification process has continually taken customer and stakeholder views into account through workshops and consultations, and in many cases under industry governance processes where modifications have been proposed by market participants to correct perceived defects. All changes are subject to robust governance processes, and where appropriate regulatory approval. Our proposal is that the and Conditions relating to Balancing continue to be held in the existing frameworks and that updates required for European Network Code compliance and organic industryled changes are reflected within them. It is important that the Article 18 terms and conditions are able to adapt as and when necessary and this approach will allow them to do so under the robust existing change processes that govern the GB frameworks. In taking this approach to the proposal for the and Conditions related to Balancing, we are following the principle set out in Ofgem s open letter of 18 December 2014 (Implementing the Electricity EU Network Codes), to only make changes to the existing framework where necessary to ensure compliance with the new Regulation.

2 Table 1 in Annex A is provided to help show that the existing and Conditions for Balancing in GB meet, and are compliant with the requirements of Commission Regulation 2017/2195 (EBGL) Article 18. The table maps the EBGL requirements for the and Conditions for Balancing to the existing GB Frameworks; this has been developed and reviewed with stakeholder input through EB GL code mapping sessions held in October 2017 as well as a webinar setting out the approach in April As this proposal for the and Conditions related to Balancing utilises the existing frameworks, there is no need for implementation following approval. Similarly, Article 5 (5) of the EB GL states that the proposal for terms and conditions should include a timescale for their implementation. The governance processes in place for the existing frameworks already encompass implementation timescales and therefore it is not necessary to propose anything additional in this respect. This proposal is expected to have a positive impact on the on the objectives of EBGL as, through the requirements in C3 (), C10 (CUSC), C14 () of the Transmission licence, an objective of each code is compliance with the Electricity Regulation and any relevant legally binding decision of the European Commission and/or the Agency. If you have any queries regarding this proposal, please contact Sophie Tilley on +44 (0) or Sophie.Tilley@nationalgrid.com. Yours sincerely Kyla Berry Markets and Balancing Development Manager

3 Annex 1 Mapping of EBGL Article 18 National and Conditions requirements to the existing GB Electricity Market frameworks

4 . Please note: This table provides mapping to all of the obligatory requirements set out in Article 18, contained in articles , as well as the non-mandatory requirements under article The requirements set out in article 18.8 apply only to TSOs applying a central dispatch model, and therefore do not apply to GB. Article Text Code Section 18.2 The terms and conditions pursuant to paragraph 1 shall also include the rules for suspension and restoration of market activities pursuant to Article 36 of Regulation (EU) 2017/2196 and rules for settlement in case of market suspension pursuant to Article 39 of Regulation (EU) 2017/2196 once approved in accordance with Article 4 of Regulation (EU) 2017/2196. OC9.4 section G part a define reasonable and justified requirements for the provisions of balancing services; NG license - applicable objectives of the C3 - b, c, & d Procurement Guidelines, A Balancing Principles, A Procurement Guidelines B1 CC b allow the aggregation of demand facilities, energy storage facilities and power generating facilities in a scheduling area to offer balancing services subject to conditions referred to in paragraph 5 (c);, Grid Code K3 Modifications P344 and GC0097 (Implementation of project TERRE into the GB Frameworks) 18.4.c allow demand facility owners, third parties and owners of power generating facilities from conventional and renewable energy sources as well as owners of energy storage units to become balancing service providers; Procurement Guidelines B1 CC.8.2 K d require that each balancing energy bid from a balancing service provider is assigned to one or more balance responsible parties to enable the calculation of an imbalance adjustment pursuant to Article 49. ABSVD T The terms and conditions for balancing service providers shall contain: a the rules for the qualification process to become a balancing service provider pursuant to Article 16; J3 and K

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6 Article Text Code Section 18.5.b the rules, requirements and timescales for the procurement and transfer of balancing capacity pursuant to Articles 32, 33 and 34; Not a current feature of the GB market. Framework will be updated in accordance with EB GL obligation date. Not a current feature of the GB market. Framework will be updated in accordance with EB GL obligation date. Procurement Guidelines B c the rules and conditions for the aggregation of demand facilities, energy storage facilities and power generating facilities in a scheduling area to become a balancing service provider;, Grid Code CC.8.2 K3 Modifications P344 and GC0097 (Implementation of project TERRE into the GB Frameworks) Section O 18.5.d the requirements on data and information to be delivered to the connecting TSO and, where relevant, to the reserve connecting DSO during the prequalification process and operation of the balancing market; DRC 3 Fast Reserve e the rules and conditions for the assignment of each balancing energy bid from a balancing service provider to one or more balance responsible parties pursuant to paragraph 4 (d); ASBVD T f the requirements on data and information to be delivered to the connecting TSO and, where relevant, to the reserve connecting DSO to evaluate the provisions of balancing services pursuant to Article 154(1), Article 154(8), Article 158(1)(e), Article 158(4)(b), Article 161(1)(f) and Article 161(4)(b) of Regulation (EU) 2017/1485; Sections L, O & Q DRC 3

7 Fast Reserve g the definition of a location for each standard product and each specific product taking into account paragraph 5 (c);,, Not a current feature of the GB market. Frameworks will be updated in accordance with EB GL obligation date h the rules for the determination of the volume of balancing energy to be settled with the balancing service provider pursuant to Article 45; ABSVD T3 T, U 18.5.i the rules for the settlement of balancing service providers defined pursuant to Chapters 2 and 5 of Title V; 3 Fast Reserve - Sections 4 & 5 U 18.5.j a maximum period for the finalisation of the settlement of balancing energy with a balancing service provider in accordance with Article 45, for any given imbalance settlement period; 4 Section 5 Fast Reserve - Section 5 H3, W, Z + A k the consequences in case of non-compliance with the terms and conditions applicable to balancing service providers. 3 Section 3 & 4 Fast Reserve - Section a The terms and conditions for balance responsible parties shall contain: the definition of balance responsibility for each connection in a way that avoids any gaps or overlaps in the balance responsibility of different market participants providing services to that connection; - - K 18.6.b the requirements for becoming a balance responsible party; A, J, K 18.6.c the requirement that all balance responsible parties shall be financially responsible for their imbalances, and that the imbalances shall be settled with the connecting TSO; N, T, K 18.6.d the requirements on data and information to be delivered to the connecting TSO to calculate the imbalances; Section O, Q

8 DRC 18.6.e the rules for balance responsible parties to change their schedules prior to and after the intraday energy gate closure time pursuant to paragraphs 3 and 4 of Article 17; P 18.6.f the rules for the settlement of balance responsible parties defined pursuant to Chapter 4 of Title V; T4, U Article Text Code Section 18.6.g 18.6.h 18.6.i 18.6.j the delineation of an imbalance area pursuant to Article 54(2) and an imbalance price area; a maximum period for the finalisation of the settlement of imbalances with balance responsible parties for any given imbalance settlement period pursuant to Article 54; the consequences in case of non-compliance with the terms and conditions applicable to balance responsible parties; an obligation for balance responsible parties to submit to the connecting TSO any modifications of the position; NG license: Schedule 1 - Specified Area Great Britain, the territorial sea adjacent to Great Britain and in any Renewable Energy Zone. H3, W, Z + A5.2 U P 18.6.k the settlement rules pursuant to Articles 52, 53, 54 and 55; T4, U 18.6.l where existing, the provisions for the exclusion of imbalances from the imbalance settlement when they are associated with the introduction of ramping restrictions for the alleviation of deterministic frequency deviations pursuant to Article 137(4) of Regulation (EU) 2017/1485. Deterministic frequency deviation is a continental European concept and is not a characteristic of the GB system. Therefore this requirement does not apply to GB. 1 N/A Non- Mandatory elements Article Text Comment 18.7.a a requirement for balancing service providers to provide information on unused generation capacity and other balancing resources from balancing service providers, after the day-ahead market gate closure time and after the intraday cross-zonal gate closure time; this from Balancing Service Providers b where justified, a requirement for balancing service providers to offer the unused generation capacity or other balancing resources through balancing energy bids or integrated scheduling process bids in the balancing markets after day ahead market gate closure time, without prejudice to the this from Balancing Service Providers, except where balancing capacity or energy has been contracted. Participation in the 1 For more information on this phenomenon please click here

9 18.7.c 18.7.d 18.7.e 18.7.f 18.7.g possibility of balancing service providers to change their balancing energy bids prior to the balancing energy gate closure time or the integrated scheduling process gate closure time due to trading within intraday market; where justified, a requirement for balancing service providers to offer the unused generation capacity or other balancing resources through balancing energy bids or integrated scheduling process bids in the balancing markets after intraday cross-zonal gate closure time; specific requirements with regard to the position of balance responsible parties submitted after the day-ahead market timeframe to ensure that the sum of their internal and external commercial trade schedules equals the sum of the physical generation and consumption schedules, taking into account electrical losses compensation, where relevant; an exemption to publish information on offered prices of balancing energy or balancing capacity bids due to market abuse concerns pursuant to Article 12(4) an exemption for specific products defined in Article 26(3)(b) to predetermine the price of the balancing energy bids from a balancing capacity contract pursuant to Article 16(6) An application for the use of dual pricing for all imbalances based on the conditions established pursuant to Article 52(2)(d)(i) and the methodology for applying dual pricing pursuant to Article 52(2)(d)(ii). Balancing Mechanism is voluntary and although defaulting rules apply if data is not updated, there is no legal requirement for parties to offer unused generation capacity or any other balancing resource. this from Balancing Service Providers, except where balancing capacity or energy has been contracted. Participation in the Balancing Mechanism is voluntary and although defaulting rules apply if data is not updated, there is no legal requirement for parties to offer unused generation capacity or any other balancing resource. this from Balancing Service Providers. No party is required to contract to match its Final Physical Notifications (FPNs). this exemption. Such data is published on BMRS. Such an exemption is required to be requested by 18 th June NG ESO shall consider if there is a requirement for this exemption in accordance with these timescales. NG ESO does not expect to apply for the use of dual pricing for all imbalances. A single imbalance price was adopted by the GB market in November 2015.