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Balancing Mechanism Charts

Any power system must balance supply against demand after accounting for line losses and the GB power market does so by allowing units to place 5 bid pairs and 5 offer pairs that allow the system to adjust the units output as required based upon a price and volume for each of the pairs.

The way this works is that one hour ahead of the start of a settlement period (gate closure) a unit must have committed to five sets of prices and volumes (with undo prices and volumes) by which they are willing to reduce their output from their planned levels of generation and five sets by which they are willing to increase their output from their planned levels of generation.

When accepting these prices the system can use any combination of these pair and so will take the maximum volume at the cheapest price before taking the next volume at the next cheapest price until they have reduced output at the unit sufficiently.

Typically units will place bid price that make it expensive to take them offline (since they will then have to start again, which can take a few hours for some stations) but will be happy to be bid down by a small volume for a small value over what they would gain by generation. Units that generate infrequently will require high offer prices to come online to cover their base costs from fewer hours and will be less willing to be bid down.

When an offer is accepted the unit will receive the offer price as payment for that generation. However, when a bid is accepted the unit must return to the grid the value of that bid price to essentially return their variable cost component adjusted to derive a benefit from going offline. For instance a unit might have sold the power for £45/MWh day-ahead and then might have a bid price of £25/MWh accepted, after which £25/MWh of the day-ahead price is returned to the grid, but the unit retains the £20/MWh difference despite not generating and despite burning no fuel.

When a wind farm is bid off they lose a ROC and still get paid to generate so would typically expect to be paid by the grid to compensate for the value of the ROC with no monies going to the grid in such cases as they have nominal variable costs.

As such bid prices are typically expected to be minus £50/MWh for onshore wind farms and minus £100/MWh for offshore wind farms although there may be additional costs involved in the wear and tear that occurs when wind farms are repeatedly shutdown and brought back online when there is sufficient wind to generate power.

This additional wear and tear might be expected to take expected prices to minus £65/MWh and minus £110/MWh.