Pricing
20 Jan 2022
Alex Done

Monthly FFR - February ’22 auction results

On 19 January 2022, National Grid Electricity System Operator (NG ESO) published the results of their first FFR tender of the year for February delivery. In this article, you’ll find:

  • A summary of accepted volumes and participating technologies.
  • The prices secured in the latest monthly FFR tender (for February delivery).
  • What this means for Dynamic Containment (DC) saturation.

Volumes

Figure 1 (below) shows the procured and rejected dynamic FFR volumes, in addition to the ESO’s procurement targets for January and February delivery.

Figure 1 - Accepted, rejected and targeted monthly dynamic FFR volumes for tender rounds 144 (January delivery) and 145 (February delivery). Volume excludes bids rejected under rejection code 4 (i.e. bids where multiple tenders were received for the same unit).
  • Dynamic FFR procurement levels for February have remained steady, relative to the previous month. There is an average procurement of 371 MW across the day (down 1% from January).
  • EFA blocks 5 and 6 remain unfilled, relative to the ESO’s volume requirement, with capacity rejected on grounds of exceeding price caps.

Figure 2 (below) shows February’s contracted volume by technology type.

Figure 2 - Accepted dynamic FFR volumes for tender round 145 (February delivery), split by technology type.
  • Battery energy storage systems (BESS) continue to dominate the technology mix for dynamic FFR (~90% of accepted bid volume), following BESS migration back into the service in November 2021 - more info here.

Prices

Figure 3 (below) shows the range of accepted bid prices compared to the market reference price (volume-weighted average accepted bid price), for both January and February delivery.

Figure 3 - Reference price (volume-weighted average accepted bid price) and price range for dynamic FFR, in tender rounds 144 (January delivery) and 145 (February delivery).
  • Daily (volume-weighted) average FFR prices remained fairly static from last month with a slight increase of £0.82/MW/h (+4%) from January to February.
  • Sembcorp secured the highest contract for an individual EFA block, with their newly commissioned site Battery Lane (10 MW) - accepted at £42.90/MW/h for both EFA 5 and 6.

What does this mean for Dynamic Containment (DC)?

Figure 4 (below) shows the DC-eligible BESS capacity, excluding sites tied into other frequency response contracts (i.e. FFR and EFR), alongside ESO-forecasted DCL and DCH procurement targets.

Figure 4 - Remaining eligible DC capacity, not locked into monthly FFR/EFR contracts. Eligible DC capacity is calculated based on current installed BESS capacity (1392 MW), EFR contract capacity (201 MW) and FFR capacity (detailed in Figures 1 and 2).
  • The remaining DC-eligible BESS capacity continues to exceed the ESO’s average February requirement for both the high (DCH) and low (DCL) services.
  • However, DC requirements have increased from January levels (see here for more info) which will decrease competition and exert upward pressure on prices.

Key takeaways

February FFR prices and volumes have remained remaining largely unchanged from January levels, with the service still proving to be a lucrative revenue stream for BESS. Moreover, service requirements continue to provide some relief to the ongoing market saturation in DC.

FFR has helped buoy the revenue stack for storage over Q4 2021, but its phase-out (and eventual retirement) is due to begin in April 2022. With available revenues from frequency response consequently falling off, merchant strategies will become even more vital to BESS monetisation strategies.