UK energy balancing charges increase amid Covid-19 lockdown

Yoana Cholteeva 25 June 2020 (Last Updated June 25th, 2020 11:53)

Fall in energy demand, caused by the UK Covid-19 lockdown, and high penetration of renewables on the transmission system has seen the activity on the Balancing Mechanism reflected in increased balancing use of system (BSUoS) charges, used to recover the cost of day-to-day operation of the transmission system.      

UK energy balancing charges increase amid Covid-19 lockdown
The average half-hourly BSUoS charge rose to £4.93/MWh and £5.75/MWh in April 2020 and May 2020. Source: Leandro Leleco from Pexels

Fall in energy demand, caused by the UK Covid-19 lockdown, and high penetration of renewables on the transmission system has seen the activity on the Balancing Mechanism reflected in increased balancing use of system (BSUoS) charges, used to recover the cost of day-to-day operation of the transmission system.

The average half-hourly BSUoS charge in April and May 2019 was £2.82/MWh and £2.56/MWh respectively, before it rose to £4.93/MWh and £5.75/MWh in April 2020 and May 2020, according to Cornwall Insight, the energy consulting company.

Cornwall Insight analyst Lee Drummee said: “The fall in energy demand because of the Covid-19 lockdown was always expected to increase the £/MWh rate of demand-based industry charges with total costs levied against a lower charging base. However, the addition of the overall rise in Balancing Mechanism volumes and other balancing services actions has pushed BSUoS even higher.

“With exceptional market conditions and the Electricity System Operator noting up to £500m in additional BSUoS costs over the summer period, on 19 May SSE Generation raised CMP345 to defer the additional Covid-19 BSUoS costs.

“The CMP345 sought to defer the additional BSUoS costs arising from Covid-19 that are incurred in 2020/21 (between 1 May and 31 August 2020) to the 2021/22 Charging Year.

“This was approved by Ofgem, with a £15/MWh price cap applied on balancing services used in each settlement period between 25 June and 31 August 2020.

Cornwall Insight has expressed views that the deferment of additional BSUoS costs would be a welcome relief to suppliers and transmission connected generators.