00:01:17 – 00:01:39 – Catherine Cleary
Hello and welcome to an extra Roadnight Taylor Connectology® podcast, we’ve got Graham Pannell from BayWa.r.e. with us and my colleague Kyle Murchie. And this is a little bit of a Part 2 because we couldn’t stop talking earlier and so we’ve got a few more thoughts from you Graham on some of the things that you would like to see changes on in the coming years
00:01:40 – 00:02:19 – Graham Pannell
TO cost was an important one close to my heart. The possibility of replacing the DG Forum. I think I did want to talk a little bit about reform national pricing, the delivery, what comes next. There’s a question being wrestled with right now of to what extent is our electricity system planned, and to what extent is it market driven? And I really wanted to bring back this message of—they can harmonise. And we can talk a bit about golf, and how to fix constraints.
00:02:20 – 00:02:23 – Catherine Cleary
You’re going to have to lean to your, you know, the Scottish counterpart there on your right for golf analogies.
00:02:24 – 00:02:25 – Graham Pannell
Golfer, Kyle?
00:02:25 – 00:02:27 – Kyle Murchie
Yeah, it’s been a while, but yeah.
00:02:28 – 00:07:14 – Graham Pannell
No is the answer. Every element of the energy market can send a signal, but they each have a unique time signature. So a build plan, a capacity-market T-minus-four, for example this is a multi-year—I’m sending you a signal four years ahead. TNUoS, Transmission-network charging should send a long-run marginal cost signal. It should be looking years ahead. It is failing in that at the minute, but that’s what—and I think Ofgem would agree—that is what it should be doing. We can move to shorter periods—perhaps for room reserve that NESO might procure a season ahead—right down to price formation a day ahead. This sends a signal intraday—balancing mechanism within half an hour in the last hour and a half sends a signal to what’s needed for an overall operating system. Now the signals that we choose to do on a policy level need to harmonise and need to work in each timeframe.
I use golf in the analogy. You stand at the tee-off point, you need the ball to be in the hole. That’s the endpoint solution. And you start with, you take the ugliest, bluntest wood, your driver, and you whack it as far as you can in roughly the right direction. And for me, that’s what a strategic spatial energy plan does. It gives you a broad sense, does the heavy lifting, it signals both to generation but also important to the network, so you don’t have a runaway long-run massive mismatch between generation and networks, which as an aside is coming, we are a decade behind the optimal grid we should have. On quick numbers I did it myself: £3 billion of annual constraint for 2025 could be mapped to just the B6 boundary alone; the Scotland-England boundary flow. Now if you take the EHVDC eastern-coast cable, look at Ofgem-approved costs, annualise those, inflated 50%, say double cables, one and a half cables so you could carry 6 GW additional secure; the annualised cost would be £0.27 billion per year on RIIO-T2 metrics. So, £0.27 billion to save £3 billion. That’s where we are. Every pound you put into big networks will save you ten. That’s what all conversations about resolving constraints need to start with, we need to catch up on grid. We will also dial out inefficient BM, inefficient constraint management. But let’s not forget network build is a massive prize for efficiency and reduced cost. Going back to the golf—so we did our plan, we hit it roughly as far as we could, and we now need to correct. And this is like the shorter timeframe—this might be day-ahead prices or a flexibility market that’s a week ahead—and that’s like getting an iron on the fairway to go 90 yards, and you’ll overshoot, you’ll undershoot. And then what the balancing mechanism should do, really should be the final piece of adjustment and that is your putter on the green for the last 10 yards; until the whole system is settled and balanced.
What GB has done for constraint management historically in terms of signalling constraints is nothing on timeframes. Nothing on the long term, nothing on the season ahead, nothing on day-ahead or intraday. Everything in the BM. And the analogy is—after even with an SSEP, so we take care on planning long-run view—we are still leaving everything to the BM. In golf, that’s like hitting the fairway and now only using your putter. You are in a bunker using a putter. We need some interstitial approaches of timeframe. Constraint-management markets, however local can send useful signals so actors respond in the right timeframe so we’re not leaving everything to the BM.
I’ve spoken to a very well-known operator of large-scale thermal assets. And I said, “If you weren’t offering purely in the BM for 30 minutes ahead—if you were booked in a block on the day before—would your offer be cheaper?” He said, yes—and significantly so. And it’s logical, right? If you know tomorrow.
I think the Constraints Collaboration Project by NESO—while worthy in its own right—is deeply, deeply unambitious. And a lot more focus needs to be shown on that. And we need to reduce constraints in the short-term—not only because it’s the right thing to do, but also politically as a signal.
00:07:15 – 00:07:23 – Catherine Cleary
Yeah, I mean, it is something—it’s a headline grab, isn’t it? You know, we know that we are talking multi-billion-pound constraint costs every year now, and it’s only going up.
00:07:24 – 00:07:39 – Kyle Murchie
And it’s at such a fast rate. If you go back to 15 years ago, when we were talking about the DG Forum earlier, costs then were insignificant, de minimis, in comparison to now.
00:07:40 – 00:08:12 – Graham Pannell
And inconveniently, I talk about major grid delivery—that catch-up is utterly crucial and hugely valuable. It is also inconveniently going to be a massive release of constraints in 2030, 2031—early 2030s—which is after the next general election. And you’ve seen forces that posed renewable energy not from science, but just because it’s a populist thing to do. We as an industry will need some shorter-term answers to this to maintain clean power—which is a passion I think we all agree on.
00:08:13 – 00:08:27 – Catherine Cleary
I couldn’t think of a better statement to end on, honestly. Thank you very much, Graham. And I think we should maybe take you up on your offer to write an explainer of golf terms versus electricity-market tools—we’ll put it on the Roadnight Taylor website.
00:08:28 – 00:08:32 – Graham Pannell
You should do it. You should also come to my board-games convention in Milton Keynes. It’s called HandyCon.
00:08:33 – 00:08:35 – Catherine Cleary
HandyCon. Okay.
00:08:36 – 00:08:38 – Graham Pannell
You can have three days of uninterrupted gaming as a complete free-your-mind.
00:08:39 – 00:08:45 – Catherine Cleary
Okay, if it’s a grid game, I’ll be there. Fantastic. Thank you so much, Graham, for joining us. Thank you, Kyle, very much. And thank you all.
