Recently it has been noticed that the National Grid ESO has been paying high amounts to dispose of energy in neighbouring EU countries. This raises concerns over energy management from the grid as the ESO has spent up to £550/MWh to dispose of excess power into other European countries.
Excess power from the national grid ESO is being disposed into countries such as Belgium and the Netherlands. This means that the ESO must pay high prices to offload the surplus energy.
The ESO do this to manage an oversupply of power and reduced generation overflow at interconnectors. This is to stop an oversupply of power at interconnectors.
Since energy prices were so high last summer there has been an uptake of solar panel installations across the UK and many European countries. This has led to much higher electricity generation on sunny days. This along with the generation from power stations has led to an excess of electricity in the grid.
The ESO cannot turn off power stations as they need them to keep the system balanced, therefore, to avoid this price reversal the ESO will have to find a way to encourage consumers to stop generation when there are very sunny days.
If the ESO has to keep doing these price reversals it will lead them to have to pay for high balancing payments, which could eventually be passed down to consumers’ bills. At the end of many the National Grid ESO spent £9.4million on balancing the system by trading and using the balancing mechanism.
What are balancing payments – how do they affect your business?
Balancing payments are made in order to balance the supply and demand of the National Grids network. This could either be paying power plants to turn on when demand outweighs supply or in this case paying to dispose of energy that could overwhelm the grid.
The reason for the national grid usually happens due to adverse weather conditions such as when the temperature drops in winter or it gets too hot in the summer.
Balancing payments when made now and again don’t usually affect consumers too much. However, when these are made often this usually pushes energy prices up as the costs are usually offloaded onto consumers. Balancing payments was one of the reasons that energy prices were so high in the UK in 2022.
Due to this, your business should be aware that if these supply and demand issues continue, it could push up energy prices. If you are due to renew your business energy contract it would be best to do this as soon as possible.
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