The low short-run cost of low carbon power and the high variability of power from renewables will increase the importance of system balancing services both as a means of ensuring operability of the electricity system and providing revenues to investors in electricity system assets.

As the technology used in the generation and import of power on the electricity system changes – notably, with less use of synchronous generation plant and more use of power fed into the system and controlled via power electronic converters – the set of services that the Electricity System Operator (ESO) will need is being changed. In Britain, quite how they will be defined and procured is the subject of work by the ESO and others in the industry and academia (e.g. Gross et al., 2010; Nedd et al., 2019). One result of this is that future revenues for investors in generation plant are highly uncertain.

This project will assess future need for balancing services as a source of revenue that can drive investment in new generation and, in particular, its flexibility. For example, as the use of weather-dependent renewables with variable availability of power increases, flexible, schedulable generation or storage will be needed to help ensure that demand can still be met as output from wind farms and solar PV changes. Alternatively, flexible demand can help enable the need for electricity to be closely matched, minute-by-minute and hour-by-hour, to the availability of generation and interconnectors to other countries can allow surplus power to be exported and deficits to be met by imports.

The project will make comparisons between types of asset that might provide services, such as flexible, schedulable generation, storage, ‘synchronous compensators’ and interconnectors, and consider the different market arrangements that might be necessary to ensure demand for electrical energy can be fully met even during relative ‘wind droughts’ lasting one or two weeks. These comparisons will allow the definition of different revenue models to feed into the agent-based investment modelling being undertaken in Project 4.2d.