UK: NESO looks to tackle BESS repetitive re-trading  

It’s a situation that is causing issues because it is pushing up the bills for everyone else. While the bidding and energy release process was designed to balance and stabilise the grid, it has turned into what some call a ‘cash cow for private investors’ at the expense of other energy consumers—a point that is argued by the Prospect trade Union. 

For many years RTT was mainly an issue with long duration assets, such as pumped storage, that could take advantage of high prices and export for long time periods, but the number of batteries now attached to the grid has meant that BESS are causing RTT issues as well.  

So, why does RTT actually happen? 

RTT happens when energy storage assets are located behind a constrained area of the transmission system. A discharge energy constraint is a part of the transmission system that caps how fast stored energy can be released from assets into the grid. The most common constraint is a thermal transmission constraint, which manifests when the amount of energy trying to flow through a power line exceeds the physical capacity of the line without causing thermal issues, such as overheating. 

Asset owners will notify the grid operators that they intend to discharge their assets (due to excess supply or high wholesale prices), which is accompanied by a bid—a price for that energy. This bid is then accepted, and the storage asset can theoretically be discharged.  

However, when there is a thermal constraint in the network, the National Energy System Operator (NESO) for Great Britain will reduce the output of attached storage assets by turning down the previously accepted bid and accepting a bid in the Balancing Mechanism. This then increases the output of an asset (or assets) elsewhere in the system that are not behind a constraint to replace the lost power.  

This leads to a curtailment in energy of the assets trying to sell from behind the constraint because the bids to sell the power at the high price are rejected and the energy is supplied from elsewhere that is not behind a constraint. In this scenario, the asset owner has still gained money from their bid, but they still have their stored energy. The money gained is the difference between the bid price and the wholesale market price. Under Transmission Constraint Licence Condition (TCLC) rules, the profit can’t be excessive and be roughly what would have been made if the constraint wasn’t there, plus any additional costs associated with the bid being turned down—but one could argue that it is effectively free money, and it is currently a legitimate way of bidding for energy dispatch. 

Bids are made in intervals (often half-hourly), but if the constraint still exists, asset owners can continue to bid and get paid without discharging their asset, creating a cycle that enables asset owners to continue to make money of the same stored energy—as NESO has to continue to accept bids and then turn them down when the constraint is still ongoing, a process known as ‘bidding the unit down’. Only when the constraint ends does the RTT cycle finish and the asset finally releases its stored power to the grid as it is no longer prevented from exporting. 

RTT is a consequence of the existing market design because asset owners are expected to optimise their own storage and discharge schedules based on the national wholesale prices, and when they potential gains are high, owners will schedule to release the energy. Aside from higher balancing costs, RTT can also cause inefficient discharge patterns. 

RTT is also not a new issue, and there are many areas of the network that are regularly constrained, so some storage asset owners have had significant numbers of bids accepted in constraint periods for years, which is why there is a lot of industry discussion on the topic.  

The amount of storage connected to the grid, and actions required by NESO to manage constraints, continues to grow. 

Aside from storage asset growth, there has also been a significant growth in renewable energy systems connected to the grid. Because of this growth, the transmission network around Great Britain has many areas that regularly get congested. This includes north-to-south power flows, export constraints in east England, import constraints in south England, and in north Scotland where there are many wind farms. These constraints can last from hours up to days, meaning that some asset providers can continue to sell-not-sell their energy for long time periods. 

NESO’s RNP call for input estimated that RTT costs consumers £136 million. In previous years, pumped storage accounted for 80% of all balancing costs, but the costs from battery assets are starting to increase. Between April 2024 and March 2026, the balancing costs from battery assets alone rose from £0.09m to £3.9m. As BESS installations grow, the number is only likely to increase.  

RTT solutions being proposed by NESO 

NESO are considering short-term intervention solutions centred around two proposals called NESO Options 3A and 3AA, as well as a longer-term intervention coined Option 3C. Option 3A is currently the proposal being pushed the most by NESO, but Option 3AA has a lot of industry backing. Option 3A aims to completely ban storage from being bid down in the balancing mechanism behind a constraint whereas Option 3AA allows assets to keep charging behind a constraint when no wholesale export is scheduled but bans the discharge.  

NESO believes that 3AA would be harder to implement than Option 3A because the control room will need to ensure only bid to import actions are available at appropriate times in the bid options.  

Option 3C in the long-term looks to cap storage assets to one re-trading cycle per day. There is also an Option 6C for the long-term, but this is not an active control room enforcement policy and is more centred around creating guidance on what would constitute an appropriate number of daily cycles for BESS assets that take part in energy trading. 

With Option 3A, it would mean that the battery would be idle during a constraint and couldn’t store renewable energy, but 3AA would still allow the battery to store renewable energy when the constraint is active. Option 3A is seen as a much quicker solution and would involve changing the Balancing Principles Statement (BPS), whereas 3AA is more complex and would take longer to implement. However, because a lot of constraints happen when there’s excess renewable energy, it would mean that a lot of energy would be lost during a constraint, hence there’s pushback from the industry. One of the issues that NESO has highlighted with Option 3AA is that a BESS asset could redispatch to export following a bid offer acceptance (BOA) to charge, and the discharge would not be curtailed—which could then lead to cycling throughout a constraint and extending the constraint. 

It’s been suggested by NESO that implementations could occur within 6 months of a decision being made following a BPS consultation on Option 3A, and slightly longer for 3AA because more process changes are involved. NESO has also stated that any changes to the BPS will be consistent with their licence obligations to not distort competition or create inefficiency across the wholesale electricity market and Balancing Services markets. The changes wouldn’t need to be approved by Ofgem, but NESO has stated that they are engaging with them. 

It’s also been suggested that the NESO could limit the pricing of re-trading actions rather than limiting the number of re-trading cycles. However, NESO has said that this is less practical as it would require a lot more real-time work taking place in the control room. NESO has also stated that Option 3A will be more beneficial for scheduling and will be easier to implement than 3C/6C as that will involve tracking the number of cycles per constraint period or per day