Date: August 28, 2019
Author: KiWi Power

Reforming Frequency Response: goodbye FCDM, hello FAR

June 2019 saw the end of Frequency Control by Demand Management (FCDM) and the introduction of a new Faster Acting Response (FAR) service. Adiele Ejiofor, Operations Systems Analyst at KiWi Power explains how and why these changes have been introduced as part of National Grid’s ongoing reform of ancillary services.

Frequency Control by Demand Management (FCDM)

FCDM was very similar to static frequency response in its implementation and provided an immediate response to sudden drops in grid frequency – caused by demand exceeding supply – to help prevent it falling below the legal minimum of 49.5Hz.

As with most other static frequency demand programmes the trigger point for FCDM was 49.7Hz at which point businesses were expected to respond in 2 seconds and maintain this delivery for 30 minutes. Businesses would instantaneously shut down part of their processes thereby reducing demand and helping to balance supply and demand.

As one of the older Demand Side Response (DSR) programmes, FCDM was traditionally bought from a few major sectors e.g. aluminium smelters and cement plants. The programme had a minimum delivery requirement of 3MW (which can be a combination of aggregated loads) and the frequency of events ranged between 10 – 30 times per year.

While it was lucrative for businesses who could meet its requirements (up to £30,000/MW/year earnings) FCDM was a very opaque and inefficient programme which was not accessible to the vast majority of demand flexibility providers.

As part of National Grid’s ongoing efforts to reform balancing services and promote market access, it has now been replaced by a new programme called Faster Acting Response (FAR).

Faster Acting Response (FAR)

FAR had its first weekly auction on 13th of June. Like FCDM, phase 1 provides a low frequency static service, responding to negative deviations in grid frequency when demand exceeds supply. However, there are a few parameters which differentiate the two:

  1. FAR has a trigger frequency point of 49.6Hz, rather than 49.7Hz. 
  2. FAR requires a response to be delivered in 1 second instead of 2 seconds, providing faster emergency response at such a low frequency deviation.
  3. This response needs to be sustained according to parameters set in the weekly auction, unlike the 30-minute standard in FCDM.

FAR also introduces important changes to the way the market operates, which should create a fairer and more competitive market for all participants. These include:

Open Auctions – Contracts for FCDM were historically obtained through bilateral agreements with only a few companies holding the majority of these. FAR is bought through an open auction, greatly increasing transparency and reducing costs, to the benefit of consumers.

Minimum Requirement – The 3MW minimum requirement to participate in FCDM posed a significant barrier to entry, effectively creating an oligopoly. FAR reduces this to 1MW, enabling businesses with smaller assets to participate and benefit in a more open and competitive market.  

Weekly procurement – In its first phase, a one year-long trial, FAR is procuring 100MW of capacity on a weekly basis. The move to a weekly auction makes it much easier for flexibility providers and operators of distributed energy resources – for whom it is harder to accurately forecast long-term availability – to participate, again creating a larger and more competitive market.

Pay as Clear – FAR operates according to a pay as cleared mechanism whereby all accepted tenders are paid the market clearing price for that EFA block (EFA is a four-hour period and the first EFA block runs from 23:00 – 03:00). This is done to drive down prices and encourage fairness.

Opportunities for business

So far, the FAR weekly tenders have turned up some interesting results with clearing prices looking attractive for businesses.

Prices – Cleared prices per MW have been fairly consistent since the programme began in June. Prices for EFA 1 and 2 (night time) have remained at or slightly above £5/MWh and EFA 3 – 6 (day time) between £3.33 – £3.35. The only anomaly was Week 6 where the clearing price per MW for EFA 3 and 4 fell to £0.10. National Grid procured a smaller amount of capacity this week, so the lowest bidder set the market price.

Capacity – The cleared MWs in the market gradually increased over the first 7 weeks without reaching the maximum buy limit of 100MW. MWs cleared for EFA 1 & 2 in the first week were about 55MW and increased to slightly over 90MW in week 7. A similar trend can be seen in EFA 3-6 with about 10MWs cleared in the first week as opposed to an average of 45MW in week 8. As mentioned above, less capacity was procured in week 6 where cleared MWs in EFA 1 & 2 reduced from 90MW to 55MW and EFA 3 – 6 cleared between 8 and 13MW. A slight decrease can be seen in week 9 and 10 but the MWs cleared are still above 80MW.

FAR will enter its second phase in September when National Grid will buy symmetrical amounts of primary, secondary and high dynamic response alongside static from the weekly tender.

KiWi Power participation

KiWi Power successfully entered the FAR market on 2nd August and our bids have been accepted for delivery 24/7 since then. With our partner ENGIE we are helping many businesses whose FCDM contracts have ended to earn new revenues from FAR and other applicable programmes. As the market develops our expert team will continue to evaluate the opportunity and develop strategies to help our customers maximise the value of their assets across all DSR markets and programmes.

Get in touch to find out more about how we can help your business benefit from Faster Acting Response and optimise your participation in Demand Side Response.

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