Why Batteries Pay NESO to Regulate Frequency

A service that costs less than nothing

Every day, NESO buys frequency response in its day-ahead auction, the Enduring Auction Capability (EAC). Providers offer capacity, NESO buys what it needs, and everyone accepted is paid the clearing price for each MW they keep available.

One product breaks that pattern. Dynamic Regulation High (DRH) cleared below zero in 89% of its auction windows between April and September 2026, at an average of −£9.18 per MW per hour, and one window in five cleared at −£15 or lower. Across those six months, providers paid NESO roughly £20 million for the privilege of delivering it.

That is not an accounting quirk. NESO's own spend report shows Dynamic Regulation costing it less than nothing in whole months as far back as 2024 — −£0.16m in May and −£0.19m in November. So why would a battery pay to provide a grid service?

What Dynamic Regulation actually does

GB's frequency drifts constantly around 50 Hz as supply and demand move out of step. Dynamic Regulation is the slow, always-on correction for that drift. Unlike Dynamic Containment, which waits for a large fault, Regulation responds to every small wobble.

It comes in two halves:

• DR Low — when frequency falls below 50 Hz, the provider adds power: a battery discharges.
• DR High — when frequency rises above 50 Hz, the provider takes power off the system: a battery charges.

Because frequency spends almost half its time on each side of 50 Hz, those responses add up. We modelled Regulation's response as zero inside ±0.015 Hz, rising linearly to full output at ±0.2 Hz, and ran it over every 15-second frequency reading Elexon published for September 2026. A battery holding 1 MW of DR High absorbed about 0.15 MWh of energy for every hour it was contracted. DR Low delivered almost exactly the same amount the other way.

Who pays for that energy?

Nobody — and that is the whole story.

NESO pays for dynamic response on availability only: winning providers receive the auction clearing price per MW per hour, and there is no separate payment for the energy they move (NESO Balancing Services Spend Report 2024/25).

The energy itself is kept out of the provider's balancing position through ABSVD (Applicable Balancing Services Volume Data): the volumes a unit delivers for NESO are adjusted out of its imbalance account, so it is neither charged nor paid for them (NESO ABSVD methodology, Elexon guidance). Units registered in the Balancing Mechanism have long been treated this way; according to Modo Energy, the treatment was extended to non-BM units in September 2025.

Put those together:

• DR High is free charging. A battery doing DRH ends each block with more energy in it than it started with, and it did not buy that energy. It can sell it later at market prices.
• DR Low is energy given away. A battery doing DRL exports energy it paid for and receives nothing for it beyond the availability fee.

So batteries compete for DRH — bidding its price below zero until the free energy is barely worth having — and demand a premium for DRL. Over the same six months DRL averaged £14–£19 per MW per hour, the highest of any response product.

The fingerprint in the order book

If energy is what drives the price, the effect should scale with how much energy each service actually moves. It does. Looking at every offer in six auctions at the end of September:

Negative offers cluster on the side that charges the battery, and they are most common on the service that charges it most. Dynamic Containment barely moves any energy in normal operation, so its two sides are priced almost the same.

At September's average DRH price, a battery was effectively paying about £57 per MWh for the energy it absorbed. For comparison, the wholesale market index averaged roughly £100–£175/MWh across the day's four-hour blocks in the last week of September.

Why it varies through the day

The discount is not constant. Averaged over six months, by the four-hour block the auction trades in:

Two patterns stand out. Around midday, when solar makes power cheap anyway, free charging is worth less and DRH is only mildly negative. And in the 15:00–19:00 block the discount all but disappears: that window contains the evening peak, when batteries want to be exporting at the day's best prices, not absorbing energy. Straight after it, from 19:00, DRH is at its most negative — the fleet is refilling.

How batteries use it

DRH is rarely just a standalone bet. In the late-September auctions, about a third of the DRH that NESO accepted was offered on its own; more than half came bundled with Dynamic Containment Low or Dynamic Moderation Low. Those low-side services need a battery to hold energy in reserve and seldom use it, so pairing them with DRH gives a slow, paid-for top-up that keeps the battery charged for its main job. Only about one in eight accepted DRH offers came paired with DRL, where the energy in and out roughly cancels.

What it means

For NESO, negative DRH prices are a genuine saving: part of the cost of keeping frequency near 50 Hz is paid by the providers themselves, and DR as a whole is far cheaper than its DRL half alone. For battery operators, the auction's headline prices are only half the revenue picture — the energy that flows during delivery is worth as much as the availability fee, and reading DR prices without it gets them backwards.

It also means DRH prices are sensitive to the rules rather than just to supply and demand. Any change to how response energy is settled would move them immediately, as the September 2025 ABSVD change did for DRL.

You can follow every day's clearing prices, who set them, and why individual offers were rejected on the GB Day-ahead Auction page.

Method and caveats

• Prices: NESO EAC results for auctions 2661–2856 (delivery 1 April – 29 September 2026), volume-weighted per product. Spend figures are clearing price × cleared MW × window hours.
• Offer shares and bundling: every sell order in auctions 2850–2855.
• Energy: Elexon 15-second system frequency, 1–28 September 2026, with the linear response curve described above. Real delivery also depends on each unit's performance and state-of-energy management, so treat 0.15 MWh per MW-hour as an estimate.
• Wholesale comparison: Elexon market index data (APX), 23–28 September 2026, averaged by four-hour block.
• Energy settlement: summarised from NESO, Elexon and Modo Energy sources linked above; individual supply contracts can differ.

Supported by National Energy SO Open Data.