Discussing the severity of the UK’s winter weather is something of a national pastime. However difficult the conditions, National Grid’s role as system operator does not change: it’s our job to work together with power generators, energy suppliers, government and many other stakeholders to make sure that we keep the lights on and the gas flowing.
As part of our plans to be fully prepared for the winter ahead, we’ve gathered an enormous amount of information and insights that will help people across the energy industry to make well-informed decisions over the coming months.
Our Winter Outlook 2014/2015 brings this research together in one place and combines our own analysis and data with feedback from a wide range of stakeholders.
The Winter Outlook assesses energy supply and demand and sets out a number of scenarios for the winter ahead. We don’t have a crystal ball, so we’re not making predictions; it’s really about giving a factual analysis of the energy sector as we currently see it.
So what does the report tell us? The fundamental message is positive on security of supply: the country is able to meet demand for both electricity and gas through a cold winter. However, we all recognise that we live in a world that can change quickly, so we’ll continue to monitor the situation closely through to spring next year.
In terms of the gas market, our analysis suggests that demand for winter 2014/15 is likely to be similar to last year. At the same time, gas supplies, storage and network capacity are well above expected demand, so we’re in a healthy position.
The continuing tensions between Russia and Ukraine mean that there is uncertainty about the stability of gas supplies from eastern Europe, which could potentially lead to disruption of supply.
Although the UK does not receive gas directly from Russia, there is the possibility that this situation could affect the general flow of gas to Europe. 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. For all these scenarios, we have sufficient network transmission capacity.
We also factored in the variables of an average UK winter and a more severe cold winter.
We would only need extra measures under the most extreme conditions, involving full disruption of supply from Russia and a really cold winter in the UK. These measures might include reduced exports to the continent, maximised liquefied natural gas (LNG) imports or actions to reduce demand.
Turning to the electricity sector, margins are tighter this year due to planned generator closures and breakdowns, plus the fact that the new plant to replace them is not coming on line as quickly as expected.
There is also some uncertainty about generators returning to the grid as we enter the winter period, but the overall message is that the outlook remains manageable and well within the reliability standard set by the government.
However, in light of the tighter margins, National Grid has taken the sensible precaution of securing additional generation reserve and demand reduction measures to bolster our position.
What does this mean in reality? Our goal is to balance the network so that supply matches demand. To do that, we’re procuring two new balancing services called Demand Side Balancing Reserve (DSBR) and Supplemental Balancing Reserve (SBR) to manage the risk for this winter.
Through the DSBR, large energy users with the flexibility to reduce their demand at peak times in the winter months can sign up voluntarily to participate in this balancing process in return for a payment. 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 plants that would otherwise be closed or mothballed. Together these measures will provide us with an additional buffer against peaks in demand. In June we successfully secured 319 MW of DSBR. Meanwhile, the SBR tender process is well under way.
In summary, we live in an uncertain world and there will always be unexpected events. But by working with stakeholders across the industry we do know one thing for sure: we’ve taken steps to make sure that we’re ready and can comfortably deal with whatever the weather may bring.
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