In this contributed article, Mark Macaulay, partner, Adam Brown, counsel, and Roddy Cormack, senior employee, of the project team of law firm Dentons focuses on the market opportunities for pump supply hydropower.
Inertia, an important but complex physical aspect of electricity systems, is the ability to rotate machines, traditionally through thermally driven turbines, to offer system stability by resisting sudden frequency changes.
System frequency stability refers to maintaining the work frequency after disruptions between generation and load – such as peaks in the electricity demand or malfunctions. This is crucial for power delivery and preventing damage to equipment.
Rasters that are fed by traditional thermal power have built in inertia and system frequency stability. This means that the impact of electricity instruments is not felt immediately (if a generator fails, the turbines do not stop immediately) and it is easier for grid operators to act to maintain the frequency.
Solar panels and most wind turbines cannot offer this kind of slowness. As the share of thermal capacity on the grid decreases, the delivery of this built -in “stability service” also takes.
However, it is possible that the demand for this possibility will also fall, because the nature of generating electricity is shifting.
Recently, the GB Electricity System Operator (ESO), with OFEM’s approval, has reduced the minimum inertia for system operation and is considering further reductions – but it has also launched new tenders to ensure that the minimum requirement is met.
Overa, the sensitivity of wind and solar energy to suddenly weather changes, which causes rapid fluctuations in the output, means that schedules must consider carefully maintaining a slowness or functionally equivalent stability services to minimize the risk of large blackouts or other system errors.
A strategic advantage for pumped hydro?
Options in a “zero-cabbage” grid include zero-carbon thermal power (for example nuclear), pumped storage water power (PSH), synchronous condensers (which do not generate electricity but resist frequency changes) and use batteries for rapid frequency response.
PSH can offer system stability through slowness without generating. However, the challenge for zero-carbon gratings is not only to find solutions that work, but to determine which are the most efficient and assign them in the right way for the service they offer.
If PSH projects become more important providers of stability services, this raises the question of how this will influence the competition for “Cap and Floa” support for long -term energy storage (LDES) that is run by gem.
Under Cap and Floor, a minimal turnover floor helps to manage high capital costs and long construction times, while the income cap costs check costs for consumers.
Part of the process of setting the cap and floor is a cost benefits benefits (SMEs), executed by OFGEM with the help of the ESO.
Not something like a free twist?
Thinking of system stability, especially slowness, as a service in itself, is one thing in considering a device or action with the sole purpose of offering that service, and another when considering equipment or behavior that also generates electricity.
It is more difficult to appreciate slowness that is provided in addition to other services.
In connection with its most recent tender for stability services (including slowness), the ESO sets that it will only accept the most competing offers to offer those services if they are not more expensive than what the ESO thinks should pay to achieve the same system stability results through a balance mechanism (which the balance between electricity and request).
For SMEs, the ESO has indicated that it does not propose to model “direct” equipment (such as slowness) “Direct”.
However, it will be aimed at ‘recording’ the potential of projects to earn income (outside the cap and the floor) to deliver subsidiaries.
In short, the SME process could cut both sides for PSH projects.
Ensure that slowness remains a strategic consideration
There is also a question about how orgem can try to recognize the value of slowness in the LDES context.
One approach would be “shadow prices” and assign value to a service without immediately available market price.
But perhaps for the ESO, the value of LDES plantinertia would be partly in a reduced need to tender specifically for stability services (instead possible the balance mechanism).
As an alternative, orgem weighting factors can apply (values for data that are important) on LDES projects that offer clear stability benefits, thereby preventing overprioritization of financial statistics at the expense of the stability needs of the primary schedule.
Weighing criteria for projects that contribute essential system stability would also be a step in the right direction.
Another approach would be to require LDES projects to demonstrate a slowness contribution potential as part of the CAP and floor process, which would help to recognize the value of systems such as PSH without needing a cash figure.
Determining minimal stability contribution criteria is probably the most suitable framework for tuning LDES implementation with only the entire system needs outside of arbitration value.
Non-intention-providing assets may not undermine the resilience in LDES projects, which avoids market distortions in doing this, as well as the encouragement of future market mechanisms to formally recognize inertia in a structured manner.
Although slowness may not be included in cap and floor calculations, its current importance should influence the final assessments and influence the calculations in the future.
Since this is a common care for all ESOs worldwide that manage the transition away from the production of thermal current, orgem can be viewed the approach of OFGM to recognize slowness within the SME framework with interest outside the UK.
