Looking ahead to winter 2016/17
National Grid has published its latest Winter Outlook Report, setting out analysis on the security of supply for both electricity and gas for winter 2016/17. As Director of SO Operations Phil Sheppard explains, the report is designed to help the wider industry plan ahead more effectively.
Looking ahead to winter 2016/17
“What we’re talking about here is the buffer that exists between the electricity available and peak demand”
Phil Sheppard, Director of SO Operations, National Grid.
We expect the electricity margin for winter 2016/17 to be similar to last year – 6.6% compared with 5.1% in winter 2015/16.
Source: National Grid.
Each year we look at what the coming winter might hold for the energy industry. Publication of the Winter Outlook Report is part of our licence obligations and it always generates plenty of interest from stakeholders, journalists, politicians and the industry as a whole, particularly in terms of security of supply for electricity and gas.
The report combines National Grid’s own insights with the extensive dialogue that has taken place with stakeholders through our Winter Consultation, which was released in July. So what can we expect to see this winter?
The headline news is that we expect the electricity margin for winter 2016/17 to be similar to last year – 6.6% compared with 5.1% in winter 2015/16. If you read the report in detail there are lots of technical terms, including ‘de-rated capacity margin’ which is what the 6.6% figure refers to. What we’re talking about here is the buffer that exists between the electricity available and peak demand, taking into account things like generator breakdowns and other unforeseen events. It gives us a picture of what security of supply looks like for the whole winter.
When the consultation report was published in July we were anticipating a provisional margin for winter 2016/17 of 5.5%. There are a number of reasons why that figure has changed in recent months. Extra generation capacity has returned to the market at Eggborough power station in East Yorkshire, while we are also forecasting reduced interconnector exports to the Republic of Ireland. This has improved the outlook for the coming winter.
One of National Grid’s key responsibilities is to balance supply and demand on a second-by-second basis, and to do this we buy in a number of balancing services to help us manage the system.
For example, on winter weekdays we can hold in reserve power stations that would otherwise be closed or mothballed through the Supplemental Balancing Reserve (SBR). The published margin includes 3.5 GW of these supplemental balancing reserve services.
We are always planning ahead to manage any supply and demand issues and this year there are some changes in the mix of generation plant under the SBR arrangements. Coal power stations require a longer ‘warm up’ time and we will need to issue start-up instructions to them up to 48 hours in advance if we think they might be needed.
As the electricity market continues to evolve there are also some different notifications that will be used to communicate information on system conditions to the wider industry. More information can be found in the operational toolbar chapter of the report.
The outlook for gas
Great Britain benefits from diverse and flexible sources of gas supply and we’re confident that this range of supply will be sufficient to meet demand this winter.
In terms of demand, in normal seasonal conditions we expect to see lower gas demand for the winter ahead compared with last year’s demand, which was corrected for the weather we had. Total gas demand for the winter is forecast at 49.1 bcm, with a peak demand forecast for a 1-in-20 winter of 472 mcm/d.
There are a couple of major differences to last year’s picture. We expect to see lower exports to Ireland because the new Corrib gas field is capable of flowing at full capacity. We also anticipate a reduction in exports to continental Europe compared with 2015/16, when mild weather resulted in gas prices being higher in continental Europe than Great Britain.
Over the past 12 months we’ve seen fluctuations in energy prices and our analysis of forward fuel prices suggests that gas will be cheaper than coal for electricity generation this winter. The result is an expected increase in demand for gas to meet electricity generation needs.
A changing picture
The energy landscape is continuing to change at a rapid rate. Although our outlook reports focus on short-term security of supply, it’s also important to help industry prepare for the changes ahead. In response to feedback, we’ve included a number of educational spotlights in this year’s report, covering topics like the changing market for gas storage and the introduction of the Capacity Market.
The Winter Outlook Report is just one of the documents in our suite of Future of Energy publications. You can find out more about the evolving energy landscape, and how we’re planning and building networks that are ready to respond, on our Future of Energy webpage.