Posted: 15 June 2017

What to expect this winter

National Grid, 2016/17 Winter Review and Consultation, Capacity Market, electricity, margins, supply, generation, interconnectors, underlying demand, transmission demand, distribution, stakeholders, feedback

Every year National Grid works with the wider energy industry to analyse the security of supply picture as we look ahead to next winter.

 

National Grid has published its Winter Review and Consultation 2016/17. The document gives a first look at the expected generation margin for electricity over the coming winter. Cathy McClay, Head of Commercial, Electricity explains what the figures mean for security of supply and what is changing this year.

Cathy McClay, Head of Commercial, Electricity.

Having access to secure supplies of electricity matters to all of us, whether we run a business or simply want to switch on the lights at home. Every year National Grid works with the wider energy industry to analyse the security of supply picture as we look ahead to next winter.

Cold, dark winter nights might seem a long way away at present, but publishing this information now helps to stimulate debate and means that everyone involved can prepare effectively.

New world of the Capacity Market

One of the biggest changes affecting the electricity market this year is the start of the first full year of the Capacity Market, which runs from 1 October 2017 to 30 September 2018.

The Capacity Market aims to make sure that Great Britain always has enough electricity generation on the system to meet demand.

In recent years there has been a significant increase in solar and wind generation. The output of this plant is highly weather dependent and it is important to ensure that we have enough generation at peak to meet demand, even if the wind is not blowing. Last year, through the Supplemental Balancing Reserve (SBR) we contracted about 3.5GW of generation to be held in reserve if needed. But this could only operate if instructed to do so by National Grid.

By contrast, the first year of the Capacity Market will see around 53GW of generation having capacity contracts. These generators operate in the market as normal and also receive a payment for having their capacity available and generating at periods of system stress, where the margin between generation and demand is low.

As this is the first winter with the Capacity Market in place, there is increased uncertainty about how some generators will operate. In particular, there are some generators which do not have capacity contracts but are currently available to generate this winter. It is not clear if these will be available come October and so we are quoting the margin as a range this year.

How the margin is calculated

The margin – the buffer between capacity and peak demand – has increased from last year which is encouraging as we enter the first main delivery year of the Capacity Market.

Traditionally we have presented the system margin as a gigawatt figure and as a percentage of transmission system demand. This is the demand that is met by generation connected to the National Grid transmission network. Any generation connected to the distribution system is seen as a reduction in this demand.

A key limitation of our current approach to expressing the percentage margin is that the figure depends not only on the total generation and demand but also on the proportion of generation that is connected to the distribution system.

This is misleading and makes it difficult to compare percentage margins between years as the proportion of distribution-connected generation is increasing. Analysis for our Future Energy Scenarios in 2016 showed that 23% of installed capacity is now connected to either the distribution networks or to domestic, commercial and industrial buildings.

This limitation can be overcome by treating transmission-connected generation and distribution-connected generation in a consistent way. To achieve this, the margin is presented as a percentage of the underlying demand (demand consumed by end users) rather than as a percentage of transmission demand. This underlying demand is compared to the total generation.

The expected winter margin and what it means

The forecast de-rated margin range for winter 2017/18 is 3.7GW to 4.9GW compared with 3.4GW last year. On an underlying demand basis which treats all generation consistently, this equates to a margin range of 6.2% to 8.2%.

Looking at the margin from a transmission demand perspective, as used in previous years, the margin range is 7.2% to 9.9%.

We want to hear your views

Insight and feedback from industry are vital in helping us to develop accurate analysis of the electricity market. In the next few weeks we are inviting stakeholders to give us their views through a set of consultation questions.

Your answers will help to shape our 2017/18 Winter Outlook Report and ensure that we provide a well-informed outlook to industry.

The document can be completed online by visiting our website. Responses can also be emailed to us at marketoutlook@nationalgrid.com

Thank you in advance to every stakeholder who gets involved. We rely on your support and it is very much appreciated.

Stage set for flagship competition
β€œThe first year of the Capacity Market will see around 53GW of generation having capacity contracts”

Cathy McClay, Head of Commercial, Electricity.