company position: cash-out
Last updated: 03/01/2012
We are not convinced of the need for significant changes to the cash-out arrangements but welcome further investigation.
We are concerned over proposals for a centralised market for intermittent renewables as it would be contrary to NETA principles and anti-market. The arrangement should be changed to accommodate one generation type; consolidation occurs in the portfolios of existing players anyway.
If we are to remain part of the EU, it is essential that any changes to cash-out are consistent with developments in Europe as cash-out is inextricably linked to the concept of market coupling/ splitting.
gate closure
With Ofgem considering moving gate closure closer to or further from real time to improve overall balancing efficiency, we would question whether “within gate closure” can overlap with market arrangements. We would suggest that there is already sufficient opportunity to trade expected imbalance through APX and BM.
There have been arguments for the separate mechanisms for system and energy imbalances. In reality, it may be hard to differentiate between the two but we would welcome further investigation.
We are not totally opposed to the idea of single cash-out but believe that this concept needs to be better understood in terms of the socialisation it creates. Single cash-out would also further incentivise parties to go long, leading to more inefficient free reserve for National Grid.
The sharing of RCRC in proportion to imbalance rather than market share would be an improvement that does not require going to single cash-out. It would also remove some concerns over moving more energy imbalance out of BSUoS.
When considering the two proposed approaches to reform, we believe that incremental change and radical reform cover all the options conceivable and both approaches should be left on the table and worked through in parallel.
For additional information, please contact us.
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