Executive summary:

In December 2024 the National Energy System Operator (NESO) introduced its Balancing Mechanism skip rate methodology.

In January 2025, between 56 and 213 GWh of battery energy storage volume in Great Britain was skipped in the Balancing Mechanism.

The skip rate methodology has two types: the All Balancing Mechanism skip rate and the post-system action skip rate.

Batteries see higher skip rates for Offers than Bids.

Subscribers to Modo Energy’s Research will find out:

Which stages of the methodology have the biggest impact on battery skip rates.

How skip rate varies by technology type.

What the strengths and limitations of the methodology are for understanding how units are actioned in the Balancing Mechanism.

What the next steps are regarding Balancing Mechanism updates, methodology updates and target setting.

Related article:

A guide to understanding the NESO skip rate methodology

Skip rates help to monitor progress in the Balancing Mechanism

Since 2023 NESO has undergone several updates to its Balancing Mechanism systems to improve efficiency in the control room. For example, in December 2023 it launched the Open Balancing Platform (OBP), which included the bulk dispatch algorithm. In March 2024 the 30-minute rule was also introduced.

In 2024 battery providers increasingly made batteries available in the Balancing Mechanism. As a result of the combination of greater availability of batteries and more efficient control room systems, batteries were dispatched for a record 314 GWh in Q4 2024.

Utilization analysis is crucial for operators to understand how they can best support control room engineers. Since 2023, at Modo Energy, we have used various methods to track the utilization of batteries in the Balancing Mechanism. However, in December 2024 NESO released its own skip rate methodology which could result in a more universal approach for calculating skip rates.

NESO skip rate methodology review in a nutshell

The skip rates methodology and results can take a while to get your head around. As such, here are some of the main points to have in mind as you read this article:

The main focus of the methodology in its current format is to identify how far energy actions are being skipped in the Balancing Mechanism as a result of control room actions.

Therefore, the methodology and the exclusions within it outline the parameters and conditions that impact the feasibility of the control room actioning a unit.

NESO have the best view of how the control room is operated and therefore the factors, whether intentional or not, that lead to a unit being feasible for dispatch.

On the other hand this is also a limiting factor as it relies on industry understanding the underlying principles behind the exclusion stages and can be based on data that industry has no visibility of, such as constraint flows.

However, the main conclusion is that the methodology is a next step towards tangible change.

Root-cause analysis is underway to identify the cause for skips.

This will be within the context of the current systems and parameters that the control room works with. Therefore, there are two things to consider.

How far is volume that is feasible and should have been dispatched being dispatched.

How far is volume being deemed as unfeasible due to the current systems, when in reality it is feasible.

It will be important to ensure that this analysis also highlights how far the current systems and parameters are fit for purpose.

This sentiment is already demonstrated in NESO’s long-term wider balancing programme roadmap and the skip rate methodology is a key milestone towards data-driven decision making.

Skip rates across all technologies have ranged from 8% to 80% so far in 2025

As highlighted in the methodology, there are two skip rates. The All-Balancing Mechanism (All BM) skip rate and the Post-System Action (PSA) skip rate.

Stage 2 is where a difference between the All BM and PSA skip rates is first seen. NESO ‘artificially’ system flags acceptances that are deemed to have been sent for system reasons. It also removes units behind active constraints where an acceptance would worsen the constraint.

Based on the period 1st January to 17th March 2025, at stage 0, both the PSA and All BM skip rate across all technologies was 80%. By stage 5, the All BM skip rate fell to 8%, whereas the PSA skip rate reduced by less than this to 56%.

The control room has the visibility of the All BM skip rate at stage 5 in real time. NESO’s position is that stage 5 All BM skip rate is the true skip rate.

The All BM skip rate was introduced to account for periods where energy actions are a small proportion of all the Balancing Mechanism actions that were taken. In these periods the PSA skip rate would be high.

The All Balancing Mechanism skip rate assumes all system actions are in-merit

Having both skip rates is useful for providing context on how close to perfect NESO is dispatching energy actions, and how significant this volume is compared to all actions taken. However, under the current methodology, system actions are assumed to be in-merit.

In the period 1st January 2025 to 17th March 2025, 3.2 TWh of imbalance system actions (mostly associated with constraint management) was assumed to be taken in-merit for Bids at stage 2. This represents 85% of the imbalance requirement at stage 2 and led to an All BM dispatch rate of 9%, compared to a PSA skip rate of 59%.

The key difference between the All BM and PSA skip rates is the denominator. In All BM, it stays mostly the same across stages 0 to 5 since it still includes system actions. In PSA, the denominator shrinks with each stage due to exclusions. The skipped volume itself stays the same in both methods—e.g., at stage 5, both use the same skipped volume.

This explains why there is a significant difference between the All BM skip rate for Bids and the All BM Skip rate for Offers. System actions made up 85% of the accepted volume for Bids, but 31% for Offers at stage 2.

NESO has stated that it plans to engage with industry on future developments including on the assumption that system actions are in-merit.

There is no real-time public visibility of constraint flows, or artificially system-tagged actions. However, the exclusion dataset states when a unit was excluded from the analysis for being behind a constraint or system-tagged.

Batteries saw the biggest impact on skip rates at stage 2

When looking specifically at battery skip rates, Stage 2 also produced the highest change in skip rates. The total skipped battery volume across Bids and Offers reduced from 637 GWh in stage 1 to 243 GWh in stage 2.

This means the All BM Bid skip rate for batteries fell from 82% at stage 1 to 38% at stage 2. The PSA skip rate for Bids fell to 61%.

Some units require long notice periods before they can sync to the grid. In general, control room engineers are working to short timescales, up to 4 hours ahead of real-time. Therefore, units that have long notices are also removed from the feasible merit stack at stage 2.

Further clarification from NESO on how these units are actioned ahead of time and signposting of these actions within the dispatch stack would be helpful for measuring how these actions are priced and their impact on skip rates.

More details on balancing action time frames can be found in NESO’s Enhancing Storage in the Balancing Mechanism slide pack from December 2024.

Higher battery volume skipped for Bids than Offers at stage 0

Based on stage 0 of the methodology, batteries saw a total of 610 GWh of volume skipped between 1st January and 17th March 2025. At this stage, a higher proportion of this volume was for Bids. However, once constraints and system-flagged actions were taken into account by stage 3, batteries saw higher skipped volume for Offers.

Total skipped battery volume at stage 3 was 204 GWh and 146 GWh at stage 5.

At each stage, in each month, batteries saw higher skip rates than the average across all technologies. However, batteries did not see the highest skip rates overall in the Balancing Mechanism over the period.

Other technologies see higher skip rates than batteries

Skip rates vary by technology type. In the All BM skip rate, across Bids and Offers combined, biomass plants saw a skip rate of 89% at stage 0 - the highest from all technologies. This excludes wind, solar and load response as these technologies only have a Bid or Offer skip rate.

The biomass All BM skip rate reduced to 48% by stage 5. Making it among the highest at stage 5 along with diesel and other gas plants. On the other hand, pumped hydro and CCGTs saw the lowest All BM skip rate by stage 5, at 8% and 15% respectively.

At stage 5 of the All BM skip rate, values range from 8% - 55%. However, there is less variation between technologies in the PSA skip rate. Here skip rates range from 38% to 72%. In the PSA skip rate at stage 5, the technology type with the highest skip rate is diesel. However, diesel accounted for 0.1% of all skipped volume over the period.

In terms of absolute volume, CCGTs saw the highest skipped volume at 2.7 TWh at stage 0 and 0.3 TWh at stage 5. Batteries saw the next highest skipped volume.

Root-cause analysis is underway

Currently, the NESO methodology doesn’t provide insight into why more expensive actions were taken or why cheaper volumes were not dispatched. However, root-cause analysis is set to change this.

NESO is undertaking root cause analysis to identify the reason for skips. It will review aspects from inputs such as forecasting, to dynamic parameters as well as dispatch tools and dispatch data. The analysis will be undertaken in both real-time and post-event.

This is a significant step as NESO is best placed to understand how and why actions are taken to balance the system and therefore the scenarios and systems that may be leading to skips.

Results from the root cause analysis will be shared with industry as they arrive. However, any form of target-setting won’t be achievable until the root-cause analysis highlights areas of improvements. As such, NESO do not have targets in mind at the moment.

The NESO skip rate methodology is a big step in the right direction

Overall, NESO’s skip rate methodology is a necessary step towards highlighting how utilization and cost-effectiveness can be improved in the Balancing Mechanism. The strength of the methodology lies in the five-minute granularity, its reflection of the actual imbalance requirement, and its consideration of constraints in the control room.

On the other hand, there are some technical limitations to the methodology and around assumptions made. For example., Balancing Services Adjustment Data (BSAD) actions are removed from the analysis from stage 0. BSAD actions are taken outside of the Balancing Mechanism control room but are generally related to interconnector actions taken to balance the system.

BSAD actions accounted for 9% of energy and system volume in February 2025 and 18% of NESO’s balancing spend. Therefore, it would be relevant to review how far these actions could be improved via the control room. NESO has stated that it will be considering adding BSAD actions to the methodology in the future.

The methodology was made to reflect the feasibility of dispatch via the control room. However, the systems that lead to a reduced feasible volume should also be reviewed. For example, around constraint management and technical parameters.

As mentioned, NESO already introduced updates to reduce limitations on the control room such as the 30-minute rule, the Open Balancing Platform and the Reserve services. Looking ahead, the storage parameters update (GC0166) and longer term work to enable algorithmic dispatches for constraint management are also part of NESO’s planned updates to improve skip rates.

NESO has already outlined some potential changes to the methodology based on the limitations highlighted in the initial LCP Delta report.

Industry can help make improvements to skip rate methodologies

To engage with NESO on the topic of skip rates you can reach out through this email - Box.SkipRates@nationalenergyso.com.

A range of materials including the full methodology, and the slides and recording from the methodology webinar held on 27th February 2025 can be accessed via the dedicated skip rates page.

At Modo Energy we will continue to monitor and report on Balancing Mechanism utilization through our own methodologies and the NESO methodologies. We will continue to adapt our methodology to ensure that it is also transparent and relevant and welcome industry feedback here too.

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