“Skip rates” measure how often cheaper balancing actions are passed over in favour of more expensive ones in the Balancing Mechanism. In other words, they’re a way to track how efficiently NESO (the National Energy System Operator) dispatches energy in this market.
To date, skip rate estimations have been measured and published by third parties - including Modo Energy - using a variety of different methods.
But in December 2024, NESO released its own official methodology - standardising how skip rates are calculated and shared. The new approach is designed to be more transparent, more detailed, and could form the basis for consistent benchmarking across technologies and units.
So, how does NESO’s new skip rate methodology actually work?
For subscribers to Modo Energy’s Research, this article will cover:
- A walkthrough of NESO’s new skip rate methodology.
- What the related datasets tell us (and don’t).
- How exclusions shape each version of the skip rate.
- What’s coming next in NESO’s skip rate roadmap.
Skip rates are a measure of dispatch efficiency in the Balancing Mechanism
The Balancing Mechanism keeps supply and demand in sync. NESO is meant to dispatch units in merit order - cheapest first, most expensive last. When a cheaper unit is passed over, it has been ‘skipped’.
Skip rates measure how often that happens. Definitions vary, but the goal is the same: to track dispatch efficiency.
Since 2023, Modo Energy used several methods to monitor battery performance in the Balancing Mechanism. But in December 2024, NESO introduced an official methodology - introducing a standardised way to calculate skip rates across the board.