What happened with margins on 8 January?

At NESO, and formerly ESO, we have a long history of making sure electricity flows safely and reliably across the transmission network from where it is generated to where it is needed.

We operate Great Britain’s evolving electricity network to one of the highest levels of safety and reliability anywhere in the world.

Our control room engineers and the teams of dedicated colleagues that support them 24/7 ensure that supply and demand across Great Britain are mutually balanced every second of the day across the system.

With the colder weather at this time of year electricity demand is at its highest. As a prudent and transparent system operator, ahead of each winter season we produce an Early View of Winter and a full Winter Outlook for the energy industry setting out our analysis on how much margin we expect to have available to manage supply and demand.

It doesn't stop there. Our expert engineers, modellers and data teams continually plan and prepare through to real-time for a wide range of eventualities, and monitor and manage any risks and uncertainties.

As part of our full Winter Outlook published on 8 October we set out:

“We expect to have a sufficient operational surplus throughout the winter when considering the natural variations in demand, wind and generator outages. There may be some tight days, most likely between late November and the end of January, excluding the Christmas period.

“Our analysis indicates that margins will be adequate and within the reliability standard under our base case. Our analysis also indicates that our operational surplus will be sufficient across winter, although there may be periods where we need our standard operational tools, including the use of system notices.”

All year round, we work closely with Government, Ofgem, National Gas and other parts of the energy industry to assess emerging risks and build resilience ahead of winter, including ongoing engagement with neighbouring Transmission System Operators across Europe and Transmission Owners across Great Britain.

On Tuesday 7 and Wednesday 8 January, with very low temperatures, high demand and weather warnings in place across large parts of the country, it was not a surprise that we needed to use our standard operational tools, which were an Electricity Margin Notice and a Capacity Market Notice to inform the market.

There has been some speculation about the seriousness of the situation and how much margin we had available as well as the accuracy of our forecasts and the prices paid to some generation assets.

We do review market activity daily through our independent market monitoring team and are in regular contact with the energy regulator, Ofgem, and the wider energy industry regarding our findings.

As Director of System Operations, I want to share my perspective from NESO’s Electricity National Control Centre, to set out what happened, the actions we took and to share the data that informed them, which is publicly available.

So, what happened before and on the day itself

We monitor the margin between supply and demand continuously but a key timeframe we use is a rolling seven-day lookahead. As you get closer to the day and real-time, the data becomes more accurate as there is more certainty on key factors like demand, weather forecast and market position.

The key challenges for Wednesday evening were a drop of around 2GW in wind forecast and an increase in demand – these were weather driven factors.

There was also roughly 3GW of interconnection to Continental Europe, which were unavailable exacerbating the position between supply and demand, as well as some generators on maintenance outages.

This is not unusual at this time of year, as maintenance is carried out over the Christmas period and returns typically through January. This is why in the Winter Outlook published in early October we highlighted this period as when margins are generally forecast to be most tight.

The Electricity Margin Notice (EMN) – a standard tool in our operational toolbox – was issued at 20:30 on Tuesday 7 January showing a shortfall of 1,700MW compared to where we would want the margin to be for the period 16:00 to 19:00 on 8 January.

The Demand Flexibility Service auction was activated at 09:00 on 8 January; the auction results secured 92MW – 184MW of demand turn down between 16:00 and 19:00. This service, facilitated by energy suppliers and aggregators, pays customers to shift their energy usage outside of a particular time window to lower the level of peak demand.

A Capacity Margin Notice (CMN) was also automatically generated at 12:01 showing a shortfall for the half-hour starting 16:30. The CMN was automatically cancelled at 12:32, as the shortfall had been overcome.

To ensure a strong reserve, we also worked with the Viking Interconnector and Energinet in Denmark, resulting in the full Viking Interconnector capability of 1,400MW being made available from around 14:00hrs.

The EMN was cancelled at 16:15. The evening period demand was 45.8GW. All operational system and balancing requirements were met.

Some graphs on demand and what the margins were

In this first chart, which sets out our demand forecast versus the actual demand, these are closely aligned.

Graph 1 Forecast vs Actual Demand

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In this second chart, you can see the headroom available to us through our various actions and technologies we had available to maintain margin between supply and demand. The lowest available headroom was 3,708.5MW at 17:00. Available headroom remained below 5,000MW between 16:30 to 19:30.

Graph 2: Margin Analysis

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How much did it cost to balance the system on 8 January and how does that compare to the costs for the day the last Electricity Margin Notice issued?

As the electricity system operator, we are always working to ensure our actions consider security of supply, sustainability and cost. Many of the actions we took on 8 January to increase available generation and return domestic, and European transmission lines to service, enabled us to minimise costs while ensuring that at no point the system was at risk.

However, in line with how the system is designed, we would expect on a day like 8 January, when we are using our tools to seek a response from the market, that balancing costs would be higher than on a typical day. The costs NESO incurred for balancing the system on 8 January were £21M. This compares with a cost of £25M on 14 January 2022 – the last time, prior to this, that an EMN was called. 

As with all high price days, our Market Monitoring team will review actions taken by market participants, actions taken by NESO in response, and the associated costs. Any unexplained or unusual activity will be shared with Ofgem for further consideration.

We don’t take any event lightly and always ensure we review, and embed any learnings. That is even for events such as this, where standard operational tools were used. 

I'm immensely proud of the team at NESO for everything they did. In particular, our control room worked professionally, innovatively and most importantly, calmly to ensure at no time was electricity supply at risk.

I would also like to thank all colleagues from across the industry who supported us directly, collaborating and co-ordinating through the day. Electricity is vital for us all in everything we do and we will never take it for granted.

Find out more about

What are System Notices?

What are margins?

NESO Data Portal

All data in graphs above has been sourced from the BMRS.