The Imbalance Price Olympics
By Emma Tribe, Market Analyst at ELEXON
The Imbalance Price made a high jump on 17 May 2017 as it rose above £1,000/MWh between 15:30 and 17:00. The high prices seen in this period were significantly different from £48.93/MWh, which is what the average System Price between 15:30 and 17:00 in May 2017 had been prior.
These high Imbalance Prices were set by accepted Offers from one Gas Balancing Mechanism Unit (BMU) and one Coal BMU. Price setting Offers ranged between £1,195/MWh and £1,750/MWh. National Grid accepted these Offers to balance a deficit of energy. A reduction in Wind and Solar generation combined with a planned outage on the 1,000MW interconnector linking Great Britain with the Netherlands reduced the volume of energy available for this day.
In November 2015 the Imbalance Price calculation changed with BSC Modification P305. This change allowed for more marginal Imbalance Prices.
If the Imbalance Price was an Olympic high jumper, this change would be the equivalent of the invention of the Fosbury Flop.
The Fosbury Flop was a high jump technique used for the first time in 1968 by Dick Fosbury to win him the gold medal. This technique allowed him and other high jumpers to jump higher in Olympic competitions than was previously possible under the Straddle, Western roll or scissors techniques.
While the calculation technique is one important factor there are other factors that determine the Imbalance Price. We can compare the prices and volumes of Bids and Offers that go into the Imbalance Price calculation with the nutritional values of the food that the athlete eats. The athlete’s performance reflects the ‘fuel’ they’ve given their body.
Since the implementation of BSC Modification P305, there have been nine Imbalance Prices jumping over the £1,000/MWh mark. Six of these occurred in November 2016 and three on 17 May 2017. Under the previous pricing technique, used between November 2009 and November 2015, the highest Imbalance Price jumped was £480.28/MWh in November 2010.
The highest P305 Imbalance Price bar is £1,528.72/MWh, which occurred on 8 November 2016. The highest the Imbalance Price jumped on 17 May was £1,509.80/MWh, £19/MWh shy of the P305 record.
As part of BSC Modification P305, in November 2018 the Imbalance Price Calculation will change again. The changes will make the Imbalance Price Calculation even more marginal. Perhaps this new technique ought to be named the P305 Pirouette.