Back in April, we celebrated a significant milestone: the 1,000th successful auction cleared on the Enduring Auction Capability (EAC) platform. This achievement is the result of a close collaboration between the National Energy System Operator (NESO) and N-SIDE, which brought its expertise to design and build the advanced optimization algorithm at the heart of the platform. It is also proof of a fundamental transformation in Great Britain's electricity balancing markets. This shift is delivering remarkable cost savings and enhancing the security and resilience of the entire energy grid.
The initial announcement highlighted some impressive figures: a 32% reduction in costs and a 52% increase in market volume for Frequency Response services. Now, let's examine how the EAC platform achieves these results and addresses two of the most significant challenges in the energy sector: managing costs and mitigating grid stability risks.
Like many modern energy systems, Great Britain's grid is undergoing a massive transformation. The rapid integration of intermittent renewable energy sources, such as wind and solar, is essential for decarbonization, but it also introduces new complexities. Before the EAC, the system for procuring ancillary services, which NESO uses to balance the grid in real-time, was fragmented and inefficient.
Providers faced several challenges:
Market Uncertainty: Participants had to guess where to offer their capacity, resulting in some services being oversubscribed while others were left undersubscribed.
Inflexibility: Assets were often locked into a single service, unable to leverage their potential across different market needs fully.
Inefficient Procurement: The system struggled to determine the most cost-effective mix of services, resulting in higher costs for the system operator and, ultimately, for consumers.
These limitations not only drove up costs but also introduced risk. An inefficiently balanced grid is less resilient, making it more vulnerable to disturbances and reducing its reliability.
The EAC platform was designed by N-SIDE from the ground up to address these inefficiencies, and the results in terms of cost have been remarkable. By implementing a sophisticated co-optimized market design, the platform has unlocked exceptional levels of efficiency.
The numbers speak for themselves. In its first year of operation, the EAC platform has:
Reduced the total cost of ancillary services by 32%, even while the total volume of services procured increased by 52%.
Lowered the Weighted Average Price (WAP) across all Frequency Response services from £3.99/MWh to just £1.77/MWh, a 56% decrease.
Transformed the market for specific services like Dynamic Regulation High (DRH), which saw its average price plummet from £1.93/MWh to a negative price of -£4.68/MWh.
This shift to negative pricing is a powerful example of the EAC enabling greater market participation by unlocking co-optimization: the platform allows providers to offer positions in multiple services simultaneously. They are willing to pay for this greater flexibility because they can more economically utilise their assets. One example of this phenomenon is in battery systems, where it is more profitable to take advantage of the valuable opportunity to recharge when the grid has surplus energy. This complex bidding, managed by N-SIDE's Power Matching Algorithm, ensures that the most economically efficient combination of bids is always selected, delivering millions in savings for UK consumers and industries.
Beyond the impressive cost savings, the EAC platform's most significant contribution may be its impact on risk management. A secure and stable grid is the bedrock of a modern economy, and the EAC enhances this security in several key ways.
Future-proofing the grid: The EAC platform was designed to be modular and adaptable, ensuring its ability to evolve with changing needs. Since its launch, it has already integrated new services like Balancing Reserve and Quick Reserve. This flexibility ensures that as the energy transition continues, Great Britain's grid will have a market platform ready to handle the challenges of a zero-carbon future, further mitigating long-term risks.
Increased liquidity and diversity: By increasing traded volumes by over 50%, the EAC has created a deeper, more liquid market. This gives NESO more options to balance the grid, reducing its reliance on a small number of large, traditional assets. Furthermore, with the continued development of the platform, including the addition of the Slow Reserve service, volumes and participant numbers are expected to continue increasing.
Resource optimization: The platform’s co-optimization feature enables a single asset to provide frequency response one moment and reserve capacity the next. This ensures that every resource is used to its maximum potential to meet the grid's real-time needs. This holistic view prevents shortfalls and ensures the system has the right tools at the right time, significantly improving overall system reliability and security.
Unlocking the power of batteries: The platform has played an essential role in integrating battery storage into the grid balancing equation. Today, batteries provide the vast majority of frequency response services and a significant portion of reserve services. Batteries can respond almost instantaneously to grid fluctuations, making them an ideal tool for managing the intermittency of renewable energy sources.
The success of the EAC platform demonstrates that it is possible to build an energy market that is both economically efficient and exceptionally resilient. By tackling the dual challenges of cost and risk head-on, the EAC platform is not just an innovative piece of technology; it's a critical component of Great Britain's journey towards a secure, affordable, and sustainable energy future.
The collaboration between NESO and N-SIDE has created a model that can be replicated in other markets facing similar challenges. It proves that with smart market design and powerful optimisation, we can build the energy systems of tomorrow.