Bidding into Dynamic frequency response auctions isn’t as simple as you might think. Bids can come in different shapes and sizes, and they can be combined in various ways. (By “Dynamic frequency response services”, we’re specifically referring to Dynamic Containment, Dynamic Moderation, and Dynamic Regulation.)
Your bidding strategy can have a big impact on your chances of success in any given auction. So, what are the different types of Dynamic frequency response bids? And how do they all work?
Are you a Modo Plus or Enterprise user? Head to our latest Deep Dive to find out how each of these bidding strategies impacts revenues.
Dynamic frequency response bids come in three different flavors - known as “block codes”
If you want to bid into a Dynamic frequency response service, you need to assign a “block code” to each bid. Block codes determine whether that bid is a “parent bid”, a “child bid”, or a “looped bid”.
But what do each of these different bid types mean?
C01 - “parent bids”
A “parent bid” (block code C01) is the simplest option available. It says, “Here’s the volume (MW) I want to provide, and the minimum price I am willing to be paid.”
If the volume offered means that National Grid ESO won’t exceed its requirements for the service, and your price is beneath the clearing price, it will be accepted.
A C01 bid can cover multiple EFA blocks - but it can only cover either the high-frequency service or the low-frequency service in question, not both.
You can make simultaneous C01 bids in both the high- and low-frequency services for the same time periods, but they are not linked. One can be accepted while the other is rejected (or both accepted, or both rejected).
The ESO can only accept a “parent bid” in full - it can use all of the megawatts offered, or none of them. If the volume offered is going to mean that the ESO ends up with more volume than it actually needs, the bid will be rejected. Therefore, we say these bids are “non-curtailable”.
C02 - “child bids”
A “child bid” (block code C02) can be attached to your “parent bid” - to give you more options. It cannot stand alone - i.e. you can’t make a C02 bid without first making a C01 bid.
And the “child bid” can only be accepted if the “parent” is. This allows you to split your bid into two different blocks - offering different volumes, at different prices.
These bids usually look like this:
- The C01 “parent bid” is for more volume, at a lower price. The low cost makes the bid more likely to be accepted.
- The C02 “child bid” attachment is usually for a lower volume, but at a higher price.
- This is often called a “hockey stick” bidding strategy - because, when plotted on a graph, it vaguely resembles the shape of a hockey stick.
- If accepted, the higher priced “child bid” pushes up the clearing price - and makes the megawatts tied up in the C01 bid much more valuable.
- That’s because frequency response auctions are “pay-as-clear” - the most expensive accepted bid sets the price for everything else.
A child bid is fully curtailable. This means that the ESO can decide to use all or some of the megawatts bidded in. These bids do get curtailed sometimes - on average, they are accepted at 96% of their volume.
C88 - “looped bids”
“Looped bids” (block code C88) allow you to connect bids for both the high-frequency and low-frequency directions of the same service. These bids can cover multiple EFA blocks.
A bid in one direction can only be accepted if the bid in the other direction is also accepted - e.g. your Dynamic Containment Low bid can only be accepted if your connected Dynamic Containment High bid is accepted (and vice versa).
When making “looped bids”, you’ll bid at separate prices for the high-frequency and low-frequency services. However, in reality, the likelihood of your “looped bids” being accepted depends on the combined price of both bids.
As long as the combined price of your high- and low-frequency bids is lower than the combined clearing price of the services, you should get accepted - to provide both.
This sometimes results in statistical oddities - bids that exceed the clearing price in one direction can still be accepted, provided that the “looped” bid in the other direction was cheap enough to mean that the total value of both bids saved the ESO money. (This makes it harder for people like us to work out who’s actually setting the prices in frequency response services!)
By default, C88 bids are non-curtailable - but you can essentially choose whether or not you are willing to be curtailed, and by how much, when making your bid.
“Looped bids” now make up more than half of the Dynamic Containment market
There are pros and cons to using all of the above bid types - but “looped bids” have become particularly prominent in Dynamic Containment (the biggest source of battery energy storage revenues in Great Britain) over the past few months.
Want to find out more? Modo Plus and Enterprise users can read our latest Deep Dive - to find out how each of these different bidding strategies affects revenues.