Glossary

Elexon implements Modification P467 to help NGESO with security of supply

Elexon implemented P467 ‘Enduring solution for cash out price calculation in the event of a Gas Deficit Emergency’ on 27 June to mitigate the risk to National Grid ESO ensuring security of supply, in the unlikely event that a gas deficit emergency (GDE) occurs.

Protecting gas-fired generators from significant imbalance charges

The wholesale gas price spikes following Russia’s invasion of Ukraine resulted in an increased risk of a GDE during the winter of 2022/23. To assist in managing the risk, Elexon implemented BSC Modification P448 ‘Mitigating Gas Supply Emergency Risks’ in September 2022. It protects gas-fired electricity generators from significant imbalance charges if they were unable to fulfil contracts agreed prior to receipt of load shedding instructions during a GDE.

Essentially P448 allowed Load Shedding instructions to gas-fired generators by National Grid Gas during Stage 2 of a GDE (or higher) to be treated as electricity bids for BSC purposes. Bids in the BSC are where normally a generator agrees to reduce the amount of electricity it produces if National Grid ESO asks it to.

P448 was developed and implemented quickly as an urgent Modification. Following implementation, Elexon agreed to work with the industry to fully review all possible interactions between P448 and the electricity cash-out arrangements.

Suppression of imbalance prices resulting from P448

The main concern was that if a GDE occurred, the impact of P448 would essentially supress the cash out prices, leading to the market being unable to correct itself. This would lead to parties that are short potentially deciding to pay the suppressed cash-out price instead of trading out of their position. In turn that may increase the possibility of NGESO not having enough energy available, potentially causing a demand disconnection event.

Load shedding instructions would be removed from imbalance price calculations

Implementation of P467 ‘Enduring solution for cash out price calculation in the event of a Gas Deficit Emergency’ means that load shedding instructions would still be treated as electricity bids. However, they would be removed from Elexon’s imbalance price calculations. Essentially this would mean removing the Bids from the ‘System Sell’ actions that are used to calculate the electricity imbalance prices.

This will help ensure that the correct signals are sent to the market during a GDE, in all scenarios, while not removing the intention of P448 to protect gas-fired generators’ imbalance positions and recovery of reasonable costs.

Remaining vigilant on security of supply

Commenting on the implementation of P467, Peter Stanley, Elexon’s Chief Executive Officer, said:

“Britain has a resilient energy system and the likelihood of either gas or electricity shortages occurring is low. However, as a sector we always need to be vigilant and well prepared ahead of any winter. Imbalance prices need to send strong signals to the market to manage supply and demand, and implementation of P467 will increase the ability of NGESO to manoeuvre through the management of emergency situations.”

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