Posted: 6 January 2015

How we manage risk

Risk, management, contingency, supply, demand, reserves, balancing, electricity, generation, weather, wind, winter, margins, capacity, consumers, market, interconnectors, network
Colleague Vida Odoi in National Grid's Electricity Transmission Control Centre.

Colleague Vida Odoi in National Grid’s Electricity Transmission Control Centre.

‘Risk management’ might seem a pretty dry subject for debate, but in fact understanding and mitigating the risks to a secure and reliable supply of electricity is a crucial aspect of National Grid’s role as system operator. Nigel Williams, Head of Electricity System Operations, explains how we plan ahead to keep the power flowing.

Dealing with risk is one of the most important elements of National Grid’s responsibility to manage the UK’s electricity transmission system. That risk can come in many guises: the vagaries of the British weather, for example; surges in demand during major events such as a Royal Wedding; changes in interconnector flows; or generation unexpectedly coming off the grid.

Nigel Williams, National Grid's Head of Electricity System Operation.

Nigel Williams, National Grid’s Head of Electricity System Operation.

The fire at Didcot B power station in October was an example of a major incident that put the contingency plans we have in place to the test. Although the fire caused substantial damage and reduced the generating capacity of Didcot B, there was no adverse impact on electricity supply as a whole. That’s because we were able to quickly assimilate and absorb the additional generation required across the rest of the network.

Our electricity transmission system is actually incredibly finely-tuned; it operates at a reliability level of 99.9999%. We’re proud of that performance, although not in a self-congratulatory way. It provides some important context when discussing potential risks to supply and the well-publicised fact that our electricity margins this winter – the buffer between expected supply and demand – are tighter than they have been for some time.

National Grid’s remit is to ensure that supply and demand are matched from one second to the next. However, we’re not responsible for making sure that there is enough generation available to meet demand; that is the energy market’s role backed by policies and supporting frameworks.

So, how do we go about managing this challenge?

Managing the grid in real-time

The UK’s electricity network is like a living, breathing organ. It is constantly flexing and changing in response to a large number of variables such as whether the wind is blowing, the impact of demand changes in mainland Europe and consumer behaviour in homes around the country.

We have a team of people based in our National Control Centre whose job is to constantly monitor and adjust flows of electricity in real time so that we keep the whole system in balance.

This fine-tuning of the system is risk management in microcosm. As an example, we receive detailed weather and wind forecasts several times a day which enable us to monitor the supply/demand situation against our operational requirements.

Wind output is a specific focus and, at about four hours ahead of real-time, it’s vital that we understand what we believe will be available to us and what our risk looks like. This is particularly important for managing the peaks and troughs of demand.

As more wind power is connected to the network in future, the variations in output we face will increase,  although this variability will be counter-balanced to some extent by the geographic dispersion of the wind farms around the country.

The weather also has an indirect effect on the interconnector flows that link the UK’s electricity network to those in France, the Netherlands and also Northern Ireland.

There’s a complex system of electricity trading that underpins the interconnector system. In particular, Germany has a significant proportion of wind and solar energy connections. This can be a major factor because the weather conditions there can have a knock-on effect on the ‘spot price’ of electricity on the continent, which in turn affects trading activity.

Planning for the unexpected

It’s not really possible to mitigate against every conceivable event that might have an impact on electricity supply in the UK, nor would it make economic sense to take this approach for what might be a ‘once a lifetime’ circumstance.

What we can do is be prepared so that, if a serious disruption to supply does occur, we have the plans in place to restore power quickly and effectively.

To put this into context, every single day we have situations where providers are coming off the network through unplanned events, but we are able to deal with these situations by having a clear view of demand and by building in appropriate reserves.

We also have what we call our ‘Black Start’ contingency plans. These would be brought into effect should we experience a partial or total shutdown of the transmission system causing extensive loss of supplies, for example across London.

Under our Black Start process, the country is divided into six zones, with three generating sites in each zone. If a major shutdown occurs, isolated power stations can be self-started individually and demand is gradually re-connected into ‘power-islands’. These ‘power-islands’ are then gradually re-connected to each other again, restoring power as quickly as possible but in a structured way.

Dealing with tighter margins

We work very closely with stakeholders including the Government, regulator and generation companies to maintain security of supply. Part of this formal planning process includes the actions we will take if supply margins tighten beyond a set standard.

We can communicate these shortfalls to the market in a number of ways. The first of these is called a Notification of Insufficient Margin or NISM, which tells players in the market that our usual ‘safety cushion’ is not as large as we would like. The next stage in this ‘early warning system’ is High Risk of Demand Reduction or HRDR, which is used when we don’t have much time to notify the market of a shortfall.

The final level is Demand Control Imminent (DCI), which is a notice indicating to the electrical distribution networks operators (DNO’s) that demand reduction is required in short notice.  Once instructed, this might involve a slight reduction in voltage – for example, consumers might notice the lights dimming – but in the case of a very severe supply disruption the distribution companies may need to implement controlled power cuts to homes and businesses.

So, what’s the underlying message here?

First, that we have an extremely reliable, well-functioning electricity transmission network that is managed very carefully by highly trained control-room operatives every minute of every day.

Second, that while we cannot second-guess every single eventuality, we take and apply risk management very seriously and it is at the heart of how we operate the system successfully 365 days a year.

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"The UK’s electricity network is akin to a living, breathing organ. It is constantly flexing and changing in response to a large number of variables."

Nigel Williams, Head of Electricity System Operations.