Preliminary Outlook: Winter Electricity Margins are Manageable

           Energy Markets

Electricity margins will be “tight but manageable” this coming winter according to a preliminary outlook from the National Grid. The grid operator has issued its 2016/17 Winter Consultation, which seeks views on gas and electricity supply and demand for the coming winter and includes a first look at supply expectations. The consultation responses will be used as an input to the Winter Outlook report, which is due to be published in October. The National Grid is particularly seeking views from sites that take part in demand side response, which plays a significant part in balancing the system during times of peak demand.

At this stage, the margin for power generation is expected to be 5.5%. To put this into context, this is similar to last year’s forecast of 5.1% and is well above the level at which a Notification of Inadequate System Margin (NISM) would be triggered.

The National Grid has already purchased 3.5GW of backup generation via the Supplemental Balancing Reserve to ensure that peak demand can be met. This scheme pays generators to provide backup capacity at times of high demand, and from 2017/18 it will be replaced by the capacity mechanism for which auction rounds have already been held.

Last winter, demand on the electricity transmission system was lower than predicted because there was an increase in both the amount of generation connected to the distribution networks and in the level of demand management implemented by consumers. Local level generation, which only uses the distribution network and not the country-wide transmission network, often includes renewables technologies that are site-specific such as wind turbines or solar systems.

These trends have been reflected in the forecast of total peak electricity demand for Winter 2016/17, which is expected to be 53.6 GW.

Gas supplies are also expected to meet requirements, being obtained from a mix of sources: the UK Continental Shelf, imports from Norway, imports of Liquefied Natural Gas, and imports from the Continent. The preliminary view is that supplies will be sufficient despite the fact that output from the Groningen field in Norway is due to be reduced and that gas storage at the Rough facility could be low this winter. Rough, the long range gas storage facility, has been closed for maintenance, which has prevented injections into the facility ahead of the winter. Injections are expected to recommence in August, but even if Rough is not completely filled ahead of winter, the National Grid’s view is that there will still be enough gas to meet demand.

In compiling this preliminary outlook, the National Grid’s used information from its Future Energy Scenarios 2016 (FES) report, also published last week. The FES report takes a longer term view of energy scenarios for the UK and outlines four credible scenarios for the future of energy out to 2050:

  • Consumer Power: based on a wealthy, market-driven world
  • Gone Green: a wealthy world where environmental sustainability is the top priority
  • No Progression: A world focused on low-cost solutions
  • Slow progression: A world focused on long-term environmental strategy

As well as feeding into the National Grid’s network planning, the FES report encourages debate and assists in decision-making across the energy industry.

The 2016/17 Winter Consultation is open for submissions until 5th August. The full consultation and list of questions for stakeholders can be found here.

Nikki Wilson

Nikki joined Alfa Energy in September 2015 as a Carbon Management Consultant where she advises clients on legislation, compliance, and the implementation of carbon management schemes. She is a Practitioner member of IEMA, has a postgraduate diploma in Environmental Decision Making, and has over 15 years’ experience in energy consultancy.