06 Jan 2022
Alex Done

A look at procurement targets for DC in February 2022

In November 2021, the Dynamic Containment (DC) market underwent significant changes, with new procurement targets playing a starring role in how clearing prices have evolved. At the end of last year, National Grid Electricity System Operator (NG ESO) released its February 2022 market information report, detailing the most up to date forecasts of requirements for the Dynamic Containment service. In this article, we’ll take a look at:

  • New DC high and low requirements for February and how they compare to January’s figures.
  • The falling likelihood of 0 MW DC requirements.
  • How the ESO requirement forecasts stack up against reality.

February DC requirements

Figure 1 (below) shows the ESO’s average, forecasted DC requirements per EFA block for January 2021 - February 2022. DC low (DCL) and DC high (DCH) requirements are shown on the positive and negative y-axis respectively.

Figure 1 - ESO DCH and DCL requirement forecast for January-February 2022. Source: NG ESO market information reports.
  • Based on the ESO’s latest forecasts, February DCH requirements are expected to increase significantly from January, with avg. requirement across the day increasing from 31 MW to 245 MW (+690%).
  • DCL requirements are also expected to increase into February with an additional 192 MW (avg.) requirement for the low-frequency service.
  • Rising targets across both services will alleviate some of the market saturation we expect to see in January.

How likely are 0 MW requirements?

Figure 2 (below) shows the percentage of time across the month the ESO expects to procure DC volumes within a given range, in addition to the monthly average requirement (across all EFA blocks). Here we compare the changes in expected requirements from January to February for both DCH (left) and DCL (right).

Figure 2 - ESO DCH and DCL requirement band forecast for January-February 2022. Source: NG ESO market information reports.
  • Looking first at DCH (left), we see a substantial drop in the percentage of time with a 0 MW service requirement as we move into February. In fact, the ESO expects to have a non-zero requirement for all EFA blocks in February.
  • DCH also sees an increased likelihood of a requirement in the range of 300-600 MW, with average procurement increasing by 214 MW.
  • For DCL, the ESO predicts a higher likelihood of procuring at the top end of their historic requirement, with February showing requirements exceeding 900 MW ~10% of the time.
  • DCL also sees a drop off in 0 MW requirements, with the ESO expecting to procure some capacity for 90% of February.

Expectations vs. reality

With decisions to enter legacy frequency response markets (i.e. FFR) occurring month-ahead, understanding the value available in DC is of paramount importance for owners of battery energy storage sites (BESS). And given that volume requirements play an important role in the price dynamics in DC, understanding how well the ESO’s forecasts stack up against reality is an important consideration.

Figure 3 (below) compares how the ESO’s forecasts of requirements have compared to their actual requirement for every EFA block in the last two months of 2021 (requirements are ranked from smallest to largest). DCL and DCH values are shown above and below the x-axis respectively.

Figure 3 - A comparison of the forecast and realised DCH and DCL requirements across November-December 2021. Source: ESO’s market information reports (requirement forecasts) and linear order data (realised requirements).
  • DCL requirements have been broadly in line with forecasts. However, historically there have been fewer instances of 0 MW requirement than predicted by the ESO.
  • Across November-December 2021, the requirement for DCH has significantly exceeded the ESO’s forecasts and is particularly noticeable over periods in which a 0 MW requirement was expected. The ESO stated in its February market information report “[typically] there is more uncertainty in our requirements for DC-HF than for DC-LF [due to] uncertainty in our expectations of demand, inertia and outfeed loss size”.
  • This discrepancy between forecasts and realised requirements may explain the significant increase in the expected DCH requirements as we move into February.
  • With higher requirements for symmetric DC across the end of 2021 (and the opportunity to stack both high and low services), BESS has been able to monetise both import and export capabilities. For more information on how this has impacted energy storage revenues, be sure to check out the Modo Leaderboard.

The falling likelihood of 0 MW requirements and increased volumes on the demand side, is great news for BESS. With lower levels of market saturation and more opportunities for symmetric service delivery, DC looks set to continue to be a key component of the BESS revenue stack as we move into February. However, the ESO’s challenges in forecasting DC requirements (especially for DCH) may prove challenging for optimisers when deciding which markets to enter at the month-ahead stage.

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