Edinburgh Napier University

  Recent reforms to the energy markets of Great Britain (GB) have aspired to reduce barriers for smaller assets to participate in grid services via a variety of routes. In this paper, we study the participation of a small asset owner in the British Balancing Mechanism (BM) with demand response capabilities. The study takes the point of view of the asset owner, not the operator or wholesale trader.
A trading algorithm is proposed based on the direction of system imbalance and price differential between market price and import tariff. A probabilistic assessment of the likelihood of success in trading is derived and applied in the trading algorithm and finally a case study is presented. The proposed strategy is designed to be risk-averse to reduce chances of consumers being penalised. Operating after gate closure also improves the quality of forecasting, which in turn reduces risk.
We found that the asymmetry of the market structure makes trading by lowering demand (offers) more attractive than trading by increasing demand (bids). Also the consumer’s import tariff plays a significant role in how feasible trading is; the closer to the median of market prices the better the revenues are. The main challenge from modelling’s point of view is to include the plethora of market participation rules into a manageable, yet accurate algorithms and to account for the high uncertainty in market prices over the long run.
The proposed model can be readily extended to integration of renewable energy assets in BM trading, by aggregating the traded volume as a combination of demand and generation. This will be useful for small asset owners to evaluate the feasibility of market participation independently of trading intermediaries. The risk averse nature of the algorithm will provide a conservative estimate of potential revenues, averting potential ‘buyer’s remorse’ after participation.