Britain grid operator expands payments for demand cuts as power balancing needs grow

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Grid operator demand cut payments

Highlights

Since mid-April, National Energy System Operator paid consumers for 4,739 megawatt-hours of demand cuts, equivalent to 693,000 households’ daily use.
On July 9, during a heatwave, Neso paid £47,288 for 233 megawatt-hours of reduced demand between 5pm and 11pm as grid stress peaked.
Neso faces scrutiny after Claire Coutinho alleged failures on June 23, prompting a legal review by Eversheds Sutherland into operational procedures and audit trails.

Demand flexibility use rises in summer balancing

As reported by Financial Times, the National Energy System Operator is paying consumers on multiple occasions since mid-April to cut electricity use at certain times to help manage the grid and avoid blackouts. The reduction of 4,739 megawatt-hours through last Tuesday is equivalent to roughly the daily consumption of 693,000 households, with payments made to suppliers such as Octopus Energy, which then pass incentives on to customers.

On July 9, during very hot weather, Neso issues a market call for extra electricity supplies and pays £47,288 for a cumulative 233 megawatt-hours of reduced demand between 5pm and 11pm. The demand flexibility service was first introduced during the 2022 energy crisis to curb peak winter demand, but it is now becoming a routine tool for operating the system.

For the first time this year, Neso is also able to offer payments to households to increase electricity use at certain times, such as periods of strong solar output. Its data shows those offers are made on several occasions, but consumers receive payments for only 0.5 megawatt-hours of extra demand because other solutions, including battery charging or electricity exports to the continent, generally meet the need.

Renewables shift and scrutiny of operations

Grid flexibility is expected to play a larger role in the government’s push to decarbonise electricity supplies by 2030. A Neso spokesperson says flexibility is becoming increasingly important in running Britain’s electricity system and that participation so far shows households and businesses are willing to help balance the grid by moving their power use to key periods.

Noémie Baud, an analyst at market data provider Montel, says the demand flexibility service has an important role within Neso’s toolkit as it provides added flexibility for a more volatile electricity system. She says the need is no longer confined to winter and is also present during summer.

Neso is also under intense scrutiny after Claire Coutinho, Britain’s shadow energy secretary, claims in parliament this month that the operator fails to meet security standards on a hot day on June 23 and that operational decisions are being made on live documents without an audit trail. Neso says it has called in lawyers from Eversheds Sutherland to investigate the allegations, while a spokesperson says operational decisions are taken by authorised personnel under established procedures and that the priority remains the secure operation of the GB electricity system.

Our earlier article on strain in Britain’s electricity system during the June heatwave explained how Neso faced scrutiny after a June 23 incident that saw exports curtailed and an emergency supply call issued as grid frequency dipped below operating thresholds. We also outlined how the shift from coal and gas to wind, solar and batteries is reducing system inertia, increasing reliance on fast-response assets, and fuelling debate over Neso’s decision to lower minimum inertia levels despite stability concerns.

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