National Grid Electricity System Operator (ESO) has had its proposal to create a new balancing reserve rejected by Ofgem.
On 18th January, the ESO submitted a proposal to amend the terms and conditions related to balancing, as required by the EU guideline on electricity balancing.
The proposal includes service documentation for the Balancing Reserve (BR) service, a new balancing capacity product.
The ESO believes the introduction of the BR service could bring potential cost savings in system balancing, an estimated £1.5 billion.
The ESO requested Ofgem consider the service documentation for BR, the BR Service Terms and BR Procurement Rules, as part of the T&C.
However, the energy regulator has decided to reject these proposed amendments to the T&C.
The introduction of a BR-type service was previously consulted on in the Call for Input on options to address high balancing costs.
Ofgem said: “We are firm in our view that this should not mean a direct discrimination of units based on their size, especially where this limits the ESO’s access to potentially cheaper providers without breaching the maximum number of units that the ESO can dispatch efficiently.
“We believe design of a BR-type product that does not directly restrict access to the market for certain units based on their size could be feasible and may offer consumer value through a reduction in balancing costs.
“It is clear however that small flexible providers form a key part of the present and future energy system and as such, attempts should be made to prevent barriers to their market entry, wherever possible.”