Summary

• The Local Constraint Market pays people and businesses in Scotland to use excess wind power
• It’s a new trial by National Grid ESO to provide an alternative to turning turbines off (curtailment)
• This happens a few hours a week, and pays ~20p/kWh on average
• Last year, the UK spent ~£1 billion curtailing wind power via the Balancing Mechanism, much of it from Scotland. The LCM opens participation to smaller-scale assets

What is the Local Constraint Market

Sometimes Scotland’s wind farms produce more power than the electricity system can handle. The Local Constraint Market pays people and businesses to use this excess wind power locally in Scotland, as an alternative to curtailment. It’s a new trial by National Grid, and pays an average of 20p/kWh, whenever there is excess wind (typically a few hours per week).

Most of the UK’s wind power is in Scotland, or in the sea. However, most of the UK’s electricity consumption is not in Scotland (or the sea). It’s concentrated in the South East of England, where most of the people are.

As a result, we often have to move electricity from North to South. This requires big, expensive cables, and the pace of wind development has outstripped that of the transmission system. As a result, we often have more wind power than we have cables to transmit it. The particular hotspot for this problem is the B6 boundary: the bottleneck for electricity from Scotland to flow to England.

When we’re generating more wind power than we can transmit, the National Grid ESO pays, via the Balancing Mechanism, for the wind farms to turn off, and pays a (typically gas powered) alternative generator, closer to the demand, to turn on. Consumers end up effectively paying three times for the power they’re getting: the original payment to the wind farm for the electricity, the payment to turn off, and then the payment to the alternative generator. This is costly; last year, this cost the ESO ~£1 billion.

The Local Constraint Market offers a fresh approach. Instead of paying to curtail the wind power, the ESO will instead pay consumers in Scotland to increase consumption. The ESO hopes that this will increase the pool of flexibility providers, provide an alternative to the Balancing Mechanism, and, ultimately, lower costs for the consumer.

How the Local Constraint Market works

The LCM is a new trial, administered by the ESO, which began in April 2023 and is scheduled to run for 2 years. It is a demand turn up product, i.e., electricity consumers increase their consumption for a given period of time. It’s available to any asset above the B6 boundary, which roughly corresponds to the English-Scottish border.

The ESO runs twice-daily auctions; a primary auction day-ahead, and a top-up auction same-day. It sits before the Balancing Mechanism, which takes place close to real-time.

Bids are per 30 minute settlement period, and are pay-as-bid (utilisation only). There’s no minimum bid size.

Events occur whenever there’s excess wind - this could be at any time of day, or not at all.

Participation requirements

Participation is broadly open to any electricity consumer in Scotland with a smart meter able to increase consumption during windy periods. Key participation requirements:

• Eligibility: Scotland only; both consumers and commercial & industrial user
• Registration: via a Registered Provider (supplier or non-supplier)
• Metering: smart meter with half-hourly reads
• Asset metering (e.g., electricity measurement coming from an EV charger or battery): accepted, but must be accompanied by boundary (smart) metering for verification
• Stacking: stacking (providing another balancing service) not allowed during events
• Baselining: volume increase measured against a baseline of energy consumption in the 12 hours before and after an event
• Min bid: no minimum

Which assets are best suited to participate

Assets that aren’t already participating in other balancing services and can flexibly increase or shift demand are best suited for the LCM.

This includes remotely-controllable residential assets like EV chargers, batteries, and electric heaters, and flexible C&I assets that may be too small to participate in standard balancing services.

Meters that are half-hourly settled (typically larger industrial users) get any electricity consumed for free (in addition to payment for participation) via their supplier’s settlement process. Non half-hourly settled users (most residential users) pay their supplier for the energy consumed at the agreed rates. This means that most small-scale assets will participate via load-shifting (shifting consumption to excess wind periods, without increasing total consumption).

How much it pays

The LCM is a new product with small volumes of participation to-date. So far, accepted bids have average ~£0.20/kWh, but there’s reason to believe this will trend downward over time (not least because this is more expensive than the average cost of curtailment in the Balancing Mechanism).

The LCM is only called upon when there’s excess wind. Two-thirds of the days a bid has been submitted, a bid was accepted, but only 29% of total days have had a bid accepted. That works out to ~100 event days per year.

On days where bids are accepted, on average they’re accepted over 2 hours.

The flex capacity for an asset is determined by its characteristics (e.g., its rated power) and its usage behaviour (e.g., how frequently it’s used and at what times). For instance, an EV may not be able to charge for 2 hours in a given night, depending on its initial state of charge.

Flex capacity is also determined by an asset’s baseline; if the asset would have normally consumed energy during an event, it won’t get credited for its consumption.

Indicative revenue for flexible residential assets, by behaviour

Note that prices and availability are subject to (likely to!) change.

How to learn more and get started

You can find all the nitty gritty details from the ESO here.

Axle is a software platform that connects assets like EVs and batteries to flexibility markets, including the LCM. We can help you with the soup-to-nuts of participating, from customer consent through baselining, aggregation, bidding, and delivery.

If you’re keen to learn more, feel free to drop us a note.