What are bids and offers in the Balancing Mechanism?
In Great Britain's Balancing Mechanism, an offer is a price to increase generation or reduce demand, and a bid is a price to reduce generation or increase demand. NESO accepts bids and offers to balance the system and manage grid constraints, and each accepted bid or offer is settled at its submitted price.
What is the Balancing Mechanism?
The Balancing Mechanism is the market NESO uses to keep supply and demand in balance and to manage constraints on the network. It runs in half-hour settlement periods. Before each period, participants tell NESO what they plan to generate or consume, and the prices at which they're willing to change that plan.
Plans and prices are fixed at gate closure, one hour before each settlement period starts. After gate closure, NESO uses the Balancing Mechanism to make any changes it needs.
What is the difference between a bid and an offer?
| Offer | Bid | |
|---|---|---|
| What the unit does | Generates more, or uses less | Generates less, or uses more |
| Typical role in a constraint | Generators on the far side of the constraint increase output | Wind farms behind the constraint reduce output, or flexible demand behind it increases use |
| What the price means | The amount per MWh the unit wants to be paid | The amount per MWh the unit will pay to make the change. A negative price means NESO pays the unit |
What is a Bid-Offer Acceptance?
A Bid-Offer Acceptance (BOA) is NESO's instruction accepting a bid or offer. It tells the unit how much to change its output or demand, and when. The unit follows the instruction, and the volume is settled at its submitted price.
Why do wind farms submit negative bids?
Many wind farms earn subsidy income for every megawatt hour they generate, for example under the Renewables Obligation. Reducing output means losing that income, so their bids are often negative: NESO pays them to reduce output. How a generator prices its bids decides what it earns each time it's curtailed.
How can independent generators take part?
Large transmission-connected generators take part directly. Smaller and embedded generators have several routes:
- through their supplier or offtaker, who includes the site in its own Balancing Mechanism units
- through a Virtual Lead Party, which groups sites into secondary units
- directly, under a Bilateral Embedded Generation Agreement with NESOSource 1
Since November 2024, Virtual Lead Parties can also trade aggregated flexibility in the wholesale market.Source 2 Which route fits depends on your site's size, its connection and your existing power purchase agreement.
Where can you see Balancing Mechanism data?
Elexon publishes Balancing Mechanism data, including submitted bids and offers and accepted BOAs, through its Insights Solution, also known as the Balancing Mechanism Reporting Service (BMRS).Source 3 NESO publishes system and market data, including balancing cost data, through the NESO Data Portal.Source 4 Both are free to access.
How can AI improve bidding?
Pricing bids well means predicting when your boundary will be constrained, how much output NESO is likely to need to remove, and what other units are likely to bid. AI models can combine weather forecasts, network data and historical Balancing Mechanism records to forecast these. They can then recommend prices that balance the chance of acceptance against the revenue at stake.
How does Nodal Shift help?
Nodal Shift Bid Copilot is being built to do this for independent generators, as an adviser or, within limits you set, on autopilot.