Pricing
19 Jul 2023
Shaniyaa Holness-Mckenzie

Firm Frequency Response: August’s prices settle as required volumes fall

At the beginning of this year, Firm Frequency Response revenues were high. In fact, the service provided more than a third of all battery energy storage revenues in January. The service is due to be retired by November, and procurement targets will drop every month until then.

For the first time this year, Firm Frequency Response prices are significantly lower than Dynamic Containment prices.

National Grid ESO has just published the results of the latest monthly Firm Frequency Response tender - for delivery in August 2023. So, let’s take a look.

What are the headlines?

  • 📉 The reference price for August 2023 drops 7% from July - to £5.45/MW/h. The median bid price was £7.49/MW/h.
  • 📊 Contracted volumes fall to 200 MW per EFA block - following announcements on the final stages of the service.
  • ⏳ Expected retirement of monthly Firm Frequency Response: two months.

Firm Frequency Response will be no more from November 2023

The phase-out of Firm Frequency Response - and subsequent ramp-up of Dynamic Regulation - has been dependent on a change to IT systems, to ensure visibility of non-Balancing Mechanism-registered assets.

That change is on track to take place in July. With that now confirmed, June’s Frequency Response Market Information Update outlined the final details of the planned phase-out.

  • Required volumes will be cut by 50 MW each month, between now and October’s auction (which takes place in September).
  • This auction, for 100 MW, will be the final monthly Firm Frequency Response auction.
  • At the same time, Dynamic Regulation requirements will go up by 30 MW each month.
  • By November, average Dynamic Regulation requirements will be 350 MW.

90% of August’s bidded volume was rejected

  • An average 1,995 MW bid into the service across the six EFA blocks.
  • This completely filled the 200 MW requirement in every block. This was down from 250 MW, required from April to July.
  • These lower requirements also meant that more volume was rejected than ever before - an average of 1,794 MW per EFA block.

There were fewer bids of big volumes

  • The median bid volume from all bids for August delivery was 19 MW. July’s median bid volume was 20 MW.
  • The median volume of accepted bids was 9 MW - no change from last month’s auction.
  • The largest bid across all EFA blocks was 33 MW. This was down from 44 MW the previous month.

Winning contracts dropped as low as £1.50/MW/h

So, how did accepted prices differ by EFA block?

  • The reference price for August’s tender round was £5.45/MW/h - 7% lower than July’s price of £5.83/MW/h.
  • The highest-priced contracts were awarded in EFA blocks 5 and 6. Anesco’s 3 MW bid was the highest - accepted at £8/MW/h.
  • August’s auction also saw one of the lowest prices ever awarded in the service - a 1 MW contract was awarded at £1.50/MW/h.
  • The median price across all bids in August’s auction was £7.49/MW/h. In July’s auction, the median price across all bids was £7.21/MW/hour. This suggests bidders had the similar expectations.

Bids for 10 MW or less won more contracts

Most of the contracts awarded in this auction were for bids of 10 MW or less. This makes sense, given the reduction in requirements - smaller bids were more likely to fill the requirement, without exceeding it.

Therefore, the highest price contract for August delivery was awarded to Anesco - 3 MW at £8/MW/h.

Anesco and Gresham House got the highest prices

So, who got the highest prices this time around?

Highest accepted dynamic FFR bid price (£/MW/h) per EFA block group for August 2023 delivery. Note this considers only bids made for weekdays (excl. weekends/bank holidays).
  • DSF stands for Demand-Side Flexibility - and is understood to include behind-the-meter battery storage.
  • Anesco secured August’s highest-value Firm Frequency Response contract. It also secured the highest price across EFA blocks 1 - 4, too.
  • Contracts for larger volumes have been less successful in getting high prices in recent months, but Gresham House’s Port of Tyne earned a 33 MW contract at £5.99/MW/hour. This was the highest-value contract awarded for 24-hour delivery in August.

Want to see what happened in previous auctions?