Getting reformed national pricing right: Regen's response to NESO's call for input

Summary of Regen's views on NESO's proposed balancing reforms:

• Lower the threshold for mandatory balancing mechanism participation. Regen is broadly supportive of this measure, as it is likely to encourage greater competition, flexibility and efficiency. We think it would be proportionate to make participation down to 10 MW mandatory, with voluntary participation for smaller assets down to 1 MW – mindful of the additional administrative, forecasting and operational burdens that BM participation might place on small generation, particularly community owned projects.
• Align market trading deadline with gate closure. Regen is against this measure. We see this as a retrograde step from the current system which would make it harder for market participants to respond to market signals and provide flexibility.
• Make Final Physical Notifications match traded positions. Regen supports the goals of this reform, but not the approach. There is a case to encourage greater FPN forecast accuracy but a firm rule that the FPN must match the traded position at (one-hour) gate closure would be regressive. Regen’s preferred approach would be to implement a forecast accuracy incentive – which is already available via the 'Information Imbalance Charge'  – and to allow FPN updates after gate closure.
• Unit Level Bidding. More information is required around the proposals on offer here. Overall, we find the proposals unclear and are concerned that some of the implications (particularly for NESO's 'option 2') go well beyond the scope set out by the reform, moving towards a centralised pool with centralised dispatch, which has already been dropped in REMA.
• Introduce shorter settlement periods. Regen is supportive of this measure - but notes the complexity of implementation. A shift to shorter settlement periods should bring increased market efficiency and reduced cost. However, the devil is in the details and the implementation. This reform will require significant system and process changes for many market participants, some of whom have expressed concern over the complexity and system upgrades that may be required. Implementation could be staged, potentially to 15 minutes at first.

Dispatch Reforms

The Call for Input also covers dispatch reforms, though with less specific detail on the exact measures proposed. While more detail is needed, Regen is supportive of the principle that NESO should be enabled to take forward actions, trade, and procure flexibility outside of the gate closure window. These forward actions should, however, be via market mechanisms, for example, via flexibility and constraint markets or new response market products. Regen, and most of the industry, is opposed to a move to more centralised dispatch or a centralised pool dispatch. We note that the case for change for dispatch reform did not support a return to central dispatch, nor did REMA.

Repetitive Re-trading

Finally, a key point raised in the Call for Input is the issue of repetitive re-trading: where energy behind a constraint is repeatedly sold in the wholesale market and subsequently turned down in the balancing mechanism across successive periods, increasing system costs without resolving the constraint. Regen supports the need for a practical and timely solution for this, and believes that this issue can and should be dealt with urgently via a combination of regulatory (TCLC) clarification, monitoring and dispatch reforms. We note that there is an ongoing dialogue with the industry on this topic and hope that a solution can be proposed within months.

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