Energy explained: the costs of balancing Britain’s electricity system to keep you powered

Great Britain’s electricity system quite literally powers our lives.

It underpins everything we do – from giving us the modern conveniences we expect in our homes and tech in our businesses, to powering the trains and vehicles we use to get around and the life support systems in our hospitals.

But ensuring electricity is always there when we need it is a delicate balancing act that NESO overseas every second of every day.

But what exactly do we mean when we say a balanced electricity system?

And how is the increasing shift towards clean low-carbon power and the rising demand for electricity affecting this?

Balancing the system, in simple terms

Balancing the electricity network essentially means ensuring we have a steady, stable supply of electricity for everyone who needs it - wherever they are in Great Britain, 24/7, 365 days a year.

Demand fluctuates throughout the day, and is influenced by everything from what day of the week it is, the time of year and even the weather.

NESO therefore has a range of tools at our disposal to ensure the system delivers effectively, and economically for consumers.

The Balancing Mechanism  

The most important of these is the Balancing Mechanism, which allows us to balance electricity supply and demand in real time.

Operating as a continuous auction, it allows us to buy or sell power from registered providers like wind and solar farms, or store it/release it from batteries, to address differences between generation and demand that energy suppliers may not have foreseen.  

While this inevitably comes at a cost, it ensures electricity supplies are always stable - and that supply always meets demand.

This interactive game gives a sense of the complex and vital work our control room does.

The physics bit

But when it comes to electricity, our job isn't only about ensuring that when you flick a switch the light comes on. We also have the responsibility of delicately managing the way electricity travels.

Our electricity network operates at a frequency of 50 Hz, meaning electric current cycles in cables 50 times a second. If it changes from this level, then it can put supply at risk – something we constantly guard against. 

At NESO, we take great care in closely monitoring and adjusting the voltage (the power level) and frequency of the electricity flowing into your home.

This process ensures that all your household appliances, from your refrigerator to your TV, receive the exact amount of power they need to function safely and efficiently.

To do this we need something called inertia, which keeps the network stable. This historically meant turning on a gas power station, but now increasingly means turning on a battery.

So as Britain’s system operator, our job is just as much about managing the way electricity travels through the cables – introducing inertia, managing voltage and ensuring the cables don’t overheat. 

Unfortunately, we can’t do this for nothing. NESO’s work in keeping our grid stable and safe is covered as part of our electricity bills, in a portion known as ‘balancing costs’.

Balancing costs

In a typical year, these amount to 4.3% of electricity bills for an average domestic consumer.

That’s roughly £3 a month on a typical domestic electricity bill – about the price of one flat white coffee each month for keeping the lights on.

Sounds pretty reasonable, right? So why do we sometimes hear people complaining about balancing costs?

Constraint payments 

Unfortunately, balancing costs are increasing and are predicted to go up from around £2bn a year now to as much as £8bn by 2030.

That’s because over 60% of these costs are what we call ‘thermal constraints’. These typically come about when we need to take action to manage high amounts of wind generation in the north because it's unable to reach demand in the south. Put plainly, the cables don’t exist yet.

To prevent the existing cables from overheating and catching fire due to excessive current flowing through them, NESO acts to turn down wind output to avoid a power outage.

The only way we have of doing that is paying the wind farm compensation to switch off (known as a ‘curtailment cost’), and then paying for an alternative energy provider - typically in the south - to turn on to support demand needs there.

What is NESO doing to control this increase?

NESO cares passionate about bringing overall balancing costs down, and our actions have saved consumers £1.2bn in recent years.

We are doing everything we can to control them further.

So much so, we helped Britain become the first country in the world to introduce a Demand Flexibility Service, which now allows energy suppliers to reward customers with things like money off bills for turning up their electricity use when we have too much renewable power on the system.

Our Balancing Cost report, due to be published in Autumn, will provide a detailed breakdown of how NESO projects constraint costs and the work underway, via RNP and other industry programmes to minimise both balancing and wider consumer costs.

How can NESO bring this projected increase in balancing costs down?

NESO can’t reduce balancing costs alone.

The single biggest thing that needs to happen to control the increase in balancing costs is for the transmission network owners (National Grid, Scottish Power Transmission and SSE Transmission) to expand the network as quickly as possible, in line with government policy.

As we shift away from large power stations to smaller low-carbon renewables, and as we move to consume nearly triple the amount of electricity we use today for our electric cars, heat pumps and data centres, that expansion of Britain’s grid becomes vital. 

Britain needs around 620 miles of new high-voltage onshore power lines and roughly 4,000 miles of undersea cables to meet its 2030 decarbonisation targets. It’s the biggest energy infrastructure upgrade our country has seen in 70 years.

And the faster those who own the network can do this the better for bill payers. Expanding the grid removes bottlenecks, helping transport electricity from renewables-rich areas in the north to high demand areas in the south – helping save billions in annual balancing costs.

That way, NESO can continue to keep your world powered, as cheaply as possible.