UK Energy Market
How the GB electricity market works
Overview
The Great Britain (GB) electricity market is one of the most liberalised in the world. It operates through a combination of bilateral trading, exchanges, and a balancing mechanism run by the National Grid Electricity System Operator (NESO).
Key Concepts
Settlement Periods
The GB market operates in half-hourly settlement periods. Each day has 48 periods (46 on short clock-change days, 50 on long days). Period 1 starts at 00:00, Period 2 at 00:30, and so on.
All energy volumes and prices are settled per half-hour, making this the fundamental time unit for trading and imbalance calculations.
Balancing Mechanism
The Balancing Mechanism (BM) is how NESO keeps supply and demand in balance in real-time. Generators and suppliers submit bids and offers to increase or decrease output/demand.
When there's a shortfall, NESO accepts offers (paying generators to increase output). When there's excess, NESO accepts bids (paying generators to reduce output).
Imbalance Settlement
If a party's actual position differs from their contracted position, they pay (or receive) the System Price. This is the cash-out price that reflects the cost of balancing the system.
There are two prices: System Sell Price (SSP) for long positions and System Buy Price (SBP) for short positions. Since 2015, these have been calculated as the same value (single cash-out).
Key Players
| Organisation | Role |
|---|---|
| NESO | National Energy System Operator. Balances supply/demand in real-time, publishes forecasts. |
| Elexon | Runs the Balancing and Settlement Code (BSC). Calculates imbalance volumes and prices. Publishes settlement data via BMRS. |
| Ofgem | The regulator. Sets market rules, price caps, and oversees fair competition. |
| LCCC | Low Carbon Contracts Company. Manages Contracts for Difference (CfDs) for renewables. |
Trading Timeline
Forward Markets
Bilateral contracts and futures for baseload, peak, and shaped products.
Day-Ahead Auctions
Hourly auctions on N2EX and EPEX set reference prices by 11:00 D-1.
Intraday Trading
Continuous trading until 1 hour before delivery (Gate Closure).
Balancing Mechanism
NESO accepts bids/offers to balance the system. Imbalances settled at System Price.
Where We Get Our Data
Elexon BMRS
Official source for settlement prices, balancing data, and physical notifications.
- System Prices (SSP/SBP)
- Imbalance volumes
- BOAs and FPNs
National Grid ESO
Real-time and forecast data for grid operations.
- Carbon Intensity
- Generation by fuel type
- Demand forecasts