Pricing
28 Feb 2022
Alex Done

2022 outlook for Dynamic Containment requirements

On 24 February 2022, National Grid Electricity System Operator (NG ESO) released its first ‘Frequency response requirements’ update, detailing a forward-looking view of how frequency response requirements are expected to evolve over 2022. This covers the phase-out of FFR, the gradual launch of Dynamic Regulation and Moderation (DR and DM) and an indication of the future of volume requirements for Dynamic Containment (DC). In this article, we’ll be focussing on the latter, taking a look at:

  • New DC high (DCH) and low (DCL) requirements for the rest of 2022 and how they compare to historical procurement.
  • Seasonal and intraday requirement variations.
  • The likelihood of 0 MW DC requirements for the rest of 2022.
  • A more detailed look at expectations for March and April.

DC requirement update

One big change in the latest requirement update is the forecast horizon, with the ESO now providing indicative values for the requirement out until the end of 2022. These figures provide an indicative view of the future of DC requirements based on the ESO’s current assumptions around loss sizes, demand and inertia and are subject to change.

In the following sections, we’ll take a look at the ESO’s long term outlook for DCH and DCL as well as a more detailed look at the March and April requirements.

Long term view of DC requirement

Figure 1 (below) shows indicative values for the ESO’s average EFA block DC requirements per month for the remainder of 2022. For comparison, historical procurement from November 2021 onwards is also shown. DCL and DCH requirements are shown on the positive and negative y-axis respectively.

Figure 1 - ESO DCH and DCL requirement forecast for March - December 2022 and realised requirements since November 2021. Source: NG ESO frequency response requirement update report and DC linear orders respectively.
  • Both DCL and DCH see increases to expected volume requirements over the summer months with highs of 791 MW in DCL (July) and 561 MW in DCH (August).
  • We continue to see asymmetric requirements for the two services, with DCL requirements ~0.5x higher than its high-frequency counterpart across March-December 2022.
  • By comparing requirements for the same month, one year apart, we can look past seasonal variation and begin to understand the longer-term trend of DC requirements. Figure 2 (below) compares December requirements for DCH and DCL in both 2021 (realised) and 2022 (forecasted), with year-on-year requirements growing in both services (+86% in DCL and +92% in DCH)
Figure 2 - December 2021 vs. December 2022 DCL and DCH volume requirements. Source: 2021 (realised requirement) data taken from linear order, 2022 (forecast requirement) data taken from NG ESO frequency response requirement update report.

Intraday variation

Figure 3 (below) shows the distribution of average monthly requirements for both DCH and DCL across 2022 per EFA block.

Figure 3 - Avg. monthly DC requirement distribution per EFA block for March - December 2022. Source: NG ESO frequency response requirement update report.
  • In DCH, the highest requirements occur over EFA blocks 1, 2 and 6, coinciding with the periods where the lowest levels of demand and inertia are experienced. Comparing 2022 DCH requirements to transmission system demand data from the previous year shows a strong negative correlation of -0.82, with demand levels explaining ~70% of the variance in requirement.
  • In contrast, DCL requirements show less variation within the day, (a correlation of -0.56 against historical demand) and appear to be driven less by total system demand.
  • Across the year, DCL requirements show the largest variance over EFA 3 + 4, driven by the need to cover consequential RoCoF losses from the protection settings on embedded generation (specifically solar) over the summer months.

A closer look at March and April

Figure 4 (below) shows the ESO’s average forecasted DC requirements per EFA block for March 2022 - April 2022. DCL and DCH requirements are shown on the positive and negative y-axis respectively, with January-February realised requirements (avg. to date) shown for comparison.

Figure 4 - ESO DCH and DCL requirement forecast for March-April 2022 and realised requirements for January-February. Source: NG ESO frequency response requirement update report and DC linear orders respectively.
  • March’s requirements have been modified since the ESO’s previous update, with upwards revisions to both DCL and DCH. Avg. March DCL requirements forecast sits at 650 MW (previously 505 MW), with DCH requirements of 390 MW (previously 384 MW).
  • Average DCL requirements for April are expected to fall slightly from the revised March figures, with the ESO expecting an average requirement of 607 MW (-6%).
  • April DCH requirements are expected to increase on March’s (revised) figures, growing 3% to 402 MW (avg.)
  • In both services, the ESO expects a non-zero requirement 100% of the time (see figure 5 below).

How likely are 0 MW requirements?

Figure 5 (below) shows the percentage of time across the year that the ESO expects to requirements to fall within a given requirement range for both DCL (top) and DCH (bottom).

Figure 5 - Heatmap showing the likelihood of the ESO procuring in a given requirement band. Source: NG ESO frequency response requirement update report.
  • Indicative ESO requirements suggest a non-zero requirement for both DCH and DCL across all EFA blocks for the remainder of 2022.
  • For DCH, the ESO does not expect to procure above 800 MW at any point over the next 10 months.
  • For DCL, the ESO expects a requirement of at least 200 MW for all EFA blocks until January 2023, with targets in excess of 1 GW targets expected ~3% of the time.

Short term DC requirement forecast

In last month's update, we discussed the ESO’s proposal for a new D-4 (4 days before delivery) DC requirement forecast, expected to launch before the end of February. As of yet, the forecast is yet to be released, with the latest communications (see page. 7) from the ESO suggesting this will be launched by 10 March 2022.


Final thoughts

Expected DCH requirements for March and April remain steady relative to February levels with expected procurement of ~380 MW. DCL requirements from April remain above the 600 MW mark, despite falling on expectations for March levels. To see how these changes will impact BESS revenues, be sure to check in with the Modo Leaderboard at the start of the month.

Thanks to the ESO’s debut ‘frequency response requirements’ update, we now have an indicative view of the longer-term picture for DC requirements. As we move into the warmer months, lower demand and higher consequential RoCoF losses from embedded solar continue to push both DCL and DCH requirements higher, with highs of 791 MW and 561 MW in the low and high services respectively. Moreover, the ESO does not expect any instances of 0 MW requirement for either service over the next 10 months.

Comparing December 2022 to December 2021, we can see an increasing requirement for the Dynamic Containment service, reflective of the longer-term trend of both DCL and DCH procurement (without the effects of seasonality). Undoubtedly this is good news for battery energy storage sites (BESS), with increasing levels of ancillary service contracts to help alleviate market saturation in the face of a rapidly growing storage fleet.

For more details of how build-out of storage and the prevailing view of frequency response requirements interact, keep an eye out for the update to last year’s report on the future of BESS buildout.