Cross Border Balancing - 2Hr Product

1. Cross Border Balancing - 2Hr Product NGET and RTE Paper

2. Overview • NGET & RTE action at 22nd March FUI IG meeting to provide a summary paper on 2hr product addressing – • NGET requirement for a 2hr product • Assessment of the impact of BALIT solution without a 2hr product • RTE’s concerns with a 2hr CBB product • Propose Alternative Solution

3. NGET Requirements for Long Duration (> 1hr) Products • The current CBB Interim arrangements are utilised for Energy, Margin, Contingency and Constraint management considerations • Provisions allow agreement of ‘non-rigid’ transactions which may be > 1hr - • Avoids commitment of alternative high cost actions e.g. additional generation synchs • Allows peak demand points to be efficiently managed • CBB transactions play an important role in managing Southern Network constraints, including London security, due to the strategic location of IFA • Dayahead exchange of data allows CBB to be ‘firmly’ assumed in Operating Plans to offset other contingent actions e.g. warming

4. NGET Proposal for a 2Hr CBB Product • The BALIT 1 hr arrangements would allow CBB to be utilised against other in-gate BM actions but not against long notice actions or longer duration requirements. • NGET proposed inclusion of a 2 Hr product with a 2 hrs lead time to increase the opportunities for BALIT to be utilised for broader system balancing purposes - • 2 hrs duration being generally sufficient to cover most operational requirements • 2 hrs Lead time would allow opportunity to avoid commitment of alternative actions

5. NGET Assessment if no 2hr Provisions Available • Lack of 2Hr Provisions could be managed through reliance on alternative actions but would result in increased costs – • Increased Operating Plan Contingency costs in the form of generation warming • Assessment of 09/10 Plans has highlighted a £6.98m saving through inclusion of CCB as contingency in SOPs • Increased BMU commitment for margin and/or constraint reasons • Assessment of 09/10 Plans substituting CBB with replacement generation, allowing for a typical minimum run time of 3.5, would have increased the full year operating costs by £27m

6. Concerns of RTE • 2hr product in parallel with standard 1hr product would • Jeopardize further extension of standard mechanism to other borders • Lead to over-inflated prices and make standard product offered to other TSOs more scarce • Could lead to sub-optimal operation of Balancing Management in France and, in some particular cases, to endanger the Security of Supply of the French Transmission System

7. Alternative Solution – ‘BALIT Extension’ • New proposal to achieve 2 hr delivery through enhanced obligations around the BALIT arrangements - • TSO to inform as soon as possible if the ‘BALIT Extension’ service is to be withdrawn in keeping with the existing good practices • Acquiring TSO gives notice of intent by no later than 2 hours ahead • Acquiring TSO activates BALIT volume in the first hour • Ifno BALIT volume in 2nd hour then Delivering TSO will deliver energy through the ‘BALIT Extension’ service and settle at a pre-agreed Excess Energy price • With these enhanced obligations CBB can be assumed in Operating Plans unless rejected at the requesting stage. • It is proposed to maintain this ‘BALIT Extension’ service until 1st April 2012 • This will allow a detailed review to be undertaken after 1 year • It is proposed that the service will terminate on 1st April 2012 such that any extension of these arrangements beyond this date would require common agreement between Ofgem, CRE, NGET and RTE

8. Alternative Solution – ‘BALIT Extension’