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Energy analysis: Energy company Limejump recently entered the Great Britain (GB) Balancing Mechanism (BM) market, which has traditionally only been accessible to larger generators, using a portfolio of different energy storage/generation/demand assets. Elisabeth Blunsdon, of counsel at Orrick, provides comment and analysis on this development.
First published in LexisPSL. Click here for a free trial. LexisPSL includes a Practice Note introducing the Balancing Mechanism, which may be of particular interest in the context of this article.
Why is the BM of value to generators and demand, and why historically has it only been available to larger, transmission connected generators?
The BM is an integral part of National Grid's toolkit when it comes to keeping the lights on in GB. It allows National Grid (as GB system operator) to procure electricity (or demand reduction) very close to real time so as to ensure that the system is physically balanced. Participants in the BM make bids (to buy energy) and offers (to sell energy) based on the volume of energy they are prepared provide or withhold in respect of a specified Balancing Mechanism Unit (BMU), and price. Bid/offers are then accepted on a least cost basis by National Grid. The detailed rules governing the BM are set out in the Balancing and Settlement Code (BSC), associated BSC procedures and the Grid Code. National Grid's actions in the BM are regulated to ensure the BM works as efficiently as possible.
A BMU is a trading unit under the BSC. One way to think of a BMU is as a node where electricity flows into and out of the system. When National Grid is managing the physical balance of the system, it looks at BMUs to understand what the flows are, and are predicted to be. Physically, BMUs are collections of plant and equipment, typically either a generating unit (where electricity
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