Being prepared for winter
National Grid has published its 2014/15 Winter Outlook for electricity and gas, setting out how well placed the UK is to deal with the energy supply and demand challenges of the coming winter. Cordi O’Hara, National Grid Director of Market Operation, explains what the analysis tells us about security of supply.
Being prepared for winter
"There are uncertainties though, including the enduring tensions between Russia and Ukraine, which could potentially lead to curtailment of gas supplies to Europe."
Cordi O’Hara, National Grid Director of Market Operation.
Electricity margins are tighter this year at around 4.5% than in previous years due to planned generator closures and breakdowns as well as some uncertainty regarding generators returning from outage.
Source: National Grid.
Understanding what winter holds for the energy sector can be difficult. The notoriously unpredictable British weather is one unknown of course, but there are also geo-political factors such as the ongoing instability in Ukraine, which could potentially affect the flow of gas into Europe.
The publication of our 2014/15 Winter Outlook Report brings together National Grid’s own analysis of the supply-and-demand situation we’re likely to face this winter, combined with feedback from various people within the energy industry which we gather in the course of compiling our Winter Consultation Report. This exercise allows us to paint the clearest picture possible based on our factual analysis, but it’s worth stating that we’re not making predictions here – there’s no crystal ball involved.
So, why do we produce this report? As system operator, National Grid’s role is very clear: we need to work together with a whole range of stakeholders, including power generators, energy suppliers, Government and others to make sure that we keep the lights on and the gas flowing. We do this by balancing supply and demand in both the electricity system and National Transmission System for gas.
What the outlook tells us
The good news from the report is that the UK can meet demand for electricity and gas during a cold winter. In other words, our security of supply situation is a positive one. We do live in a changing world though, and we’ll be keeping a careful watch on the situation through to next spring.
There are some differences between the supply and demand pictures for gas and electricity. Our analysis and stakeholder consultation has shown that gas demand for winter 2014/15 is expected to be similar to last year. Average cold day demand is forecast at 400 million cubic metres per day (mcm/d) with an exceptionally cold demand forecast at 499 mcm/d. Against this backdrop, gas supplies, storage and network capacity are all well in excess of maximum expected demand, with a maximum supply potential of more than 600 mcm/d.
There are uncertainties though, including the enduring tensions between Russia and Ukraine, which could potentially lead to curtailment of gas supplies to Europe. Although the UK does not receive gas from Russia directly, there is a scenario where the instability between the two countries could have an impact on the flow of gas generally.
We’ve worked with the industry regulator Ofgem, the Department of Energy and Climate Change and the EU to assess what this disruption might mean under different scenarios, including one where all gas flowing from Russia to Europe is disrupted.
In every scenario, we have sufficient transmission network capacity. Only in the most extreme circumstance, where all supplies from Russia are disrupted and it is exceptionally cold, would additional measures be needed such as reduced exports, maximised liquefied natural gas (LNG) imports or actions to reduce demand.
Dealing with tighter electricity margins
Electricity margins are tighter this year than in previous years due to planned generator closures and breakdowns. There’s also some uncertainty as we enter the winter season regarding the output from generators that were temporarily suspended being brought back on to the grid. However, the margins are well within the reliability standard set by Government and are manageable.
As a responsible system operator, our role is to operate the network efficiently and balance the energy market minute by minute, so we can deal with the peaks and troughs of demand that occur during the winter months. Earlier this year, we took steps to procure two new balancing services called Demand Side Balancing Reserve (DSBR) and Supplemental Balancing Reserve (SBR) to manage the risk for this winter.
The aim of these services is to provide additional tools to be used in balancing the transmission system to make sure there’s sufficient capacity available in the market to meet demand. The measures were approved by Ofgem in December 2013.
How the balancing services work
Through DSBR, we sign contracts with large energy users who can reduce their demand at peak times during winter. They sign up voluntarily and receive payments to take part in this balancing process. DSBR allows us to keep energy system costs down for consumers by avoiding the need to build additional power stations to meet peaks in demand.
SBR aims to bring back onto the grid reserves from previously uneconomic generating plant that would otherwise be closed or mothballed.
We launched a DSBR tender in June, which ran for seven weeks and resulted in contracts being awarded to a number of demand-side providers. This will add 319 MW of additional generation across 431 individual sites this winter.
The 2014/15 Winter Outlook underlines that we have taken all the steps necessary to be prepared for whatever winter has in store for the UK. For a more detailed analysis you can read the Winter Outlook 2014/15 report itself by clicking on the link here.