Electricity generator SSE has been fined almost £10m after overloading the National Grid to cut production when it was needed to help balance the grid, breaching the terms of its licence. The FTSE 100 energy company has agreed to pay £9.78m into an industry compensation fund after Ofgem said it had breached terms of its licence. This comes as consumers face rising costs to manage the electricity grid and among the concerns about the prices charged by some plants in times of great need.
Grid balancing is becoming more complicated given the growth of wind and solar generation which are intermittent and less predictable.
Generators would face “significant consequences” if they attempted to gain “excessive benefits”, says Ofgem. SSE is a company with a fleet of gas-fired power plants, wind turbines and hydroelectric plants and made profits of £2.2bn in the year to March.
Electricity supply and demand must constantly be matched, and National Grid irons out any imbalances by paying generators to ramp up or down on short notice. Often this is necessary because there is not enough capacity on the cables to move the electricity from where it is produced to where it is needed. In Scotland, for example, there may be an excess of electricity produced by turbines when the wind is strong, but not enough capacity to move electricity south based on demand.
Grid balancing costs are billed back to consumers via bills and have risen to more than £4bn in 2022 compared to £1.2bn in 2019, according to a recent industry analysis. The licensing terms are designed to prevent companies from overcharging National Grid to balance the market.
In a statement, Ofgem said SSE in May 2020 decided to “significantly” increase the amount charged to National Grid for cutting output from its Foyers hydroelectric power station in Scotland. SSE did so based on what it believed other hydroelectric plants were charging and to “boost profits,” Ofgem said.
Ofgem stressed that it had not seen “any evidence” suggesting that SSE deliberately breached the terms of its license and that SSE cooperated with the investigation.
In March, Grant Shapes, the energy secretary, called on Ofgem to go “further and faster” after a Bloomberg investigation said some generators were withholding power supplies to sell in the balancing market at higher prices.
## The Future of the Grid
The UK has pledged to reduce its greenhouse gas emissions to net-zero by 2050, a target that cannot be achieved without fundamental changes to the way the country generates and distributes energy. One of the key components of this change is the development of “Smart Grids”, a system that uses digital technology to connect small-scale generators of electricity such as solar panels and wind turbines directly to the wider grid.
One of the biggest challenges in creating this smart grid is the need for a sophisticated monitoring system capable of balancing supply and demand at a granular level. To achieve this, the National Grid is investing in a series of pilot projects across the country, testing new technology that can balance local supply and demand.
The use of big data is a crucial aspect of the Smart Grid. By collecting data on usage patterns, the technology will be able to forecast consumption and ensure that supply meets demand. This technology is key to reducing energy waste and ensuring that small-scale distributed energy generators can participate in the energy market, creating a more diversified and resilient energy system.
## Conclusion
The UK’s National Grid is the backbone of the country’s energy system, responsible for balancing supply and demand in a complex and rapidly changing market. The rise of renewable energy has made grid balancing more important than ever, with wind and solar farms adding unpredictability to a system that was already hard to manage. Companies such as SSE that breach licensing terms contribute to rising costs to manage the electricity grid, which has risen to more than £4bn in 2022 compared to £1.2bn in 2019.
However, the development of Smart Grids provides a glimpse into the future of the energy system in the UK. By creating a system that is more responsive to local supply and demand, the country can reduce its reliance on large-scale energy generation and transition to a low-carbon, more resilient future. In summary, while grid balancing remains a complex and costly process, the Smart Grid technology offers a glimmer of hope for a future that is both sustainable and efficient.
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One of Britain’s biggest electricity producers, SSE, has been fined almost £10m after it overloaded the National Grid to cut production when it was needed to help balance the grid.
The FTSE 100 energy company has agreed to pay £9.78m into an industry compensation fund after Ofgem, the energy regulator, said it had breached terms of its licence.
It comes as consumers are face rising costs to manage the electricity grid and among the concerns about the prices charged by some plants in times of great need.
Grid balancing is becoming more complicated given the growth of wind and solar generation which are intermittent and less predictable.
Cathryn Scott, director of enforcement at Ofgem, said generators would face “significant consequences” if they attempted to gain “excessive benefits”.
SELFwhich has a fleet of gas-fired power plants, wind turbines and hydroelectric plants, it made profits of £2.2bn in the year to March.
Electricity supply and demand must constantly be matched, and National Grid irons out any imbalances by paying generators to ramp up or down on short notice. Often this is necessary because there is not enough capacity on the cables to move the electricity from where it is produced to where it is needed.
In Scotland, for example, there may be an excess of electricity produced by turbines when the wind is strong, but not enough capacity to move electricity south based on demand.
Grid balancing costs are billed back to consumers via bills and have risen to more than £4bn in 2022 compared to £1.2bn in 2019, according to a recent industry analysis.
The licensing terms are designed to prevent companies from overcharging National Grid to balance the market.
In a statement on Tuesday, Ofgem said SSE in May 2020 decided to “significantly” increase the amount charged to National Grid for cutting output from its Foyers hydroelectric power station in Scotland.
SSE did so based on what it believed other hydroelectric plants were charging and to “boost profits,” Ofgem said.
“Its revised prices were expensive compared to several relevant comparators and did not comply with the [licence condition]Ofgem added.
“The offers presented resulted in higher balancing costs, ultimately increasing costs for consumers.”
Ofgem stressed that it had not seen “any evidence” suggesting that SSE deliberately breached the terms of its license and that SSE cooperated with the investigation.
SSE said: “We aim to comply with the regulations at all times and we believed we did in this case. We cooperated fully with the investigation.
“Following the investigation, we are updating our relevant procedures accordingly.”
Ofgem and National Grid have looked into increase in balancing costs in 2022, amid concerns that the generators were driving up prices in a tight market.
Ofgem found “no conclusive evidence” of generators breaking the rules, but expressed concern about “the behaviors of some generators that appear to be excessive”.
In March, Grant Shapesthe energy secretary, called on Ofgem to go “further and faster” after a Bloomberg investigation said some generators were withholding power supplies to sell in the balancing market at higher prices.
https://www.ft.com/content/56dca051-b333-4613-af12-c1e07350f753
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