The National Grid Summer Outlook 2018 predicts that electricity demand this summer will be lower than last year. As a result, National Grid is confident that there will be sufficient generation and imports to meet demand throughout the summer months.
A recent downward trend in demand can be largely attributed to increased levels of distributed generation. That is, generation that is connected to the distribution network, or at the point of consumption, which translates as lower demand on the transmission network. This is typically in the form of wind or solar generation.
A combination of more distributed generation and the variability of generation from renewables creates an operational challenge for National Grid. For example, at times there may be more generation that required, and it may have to ask inflexible generation to reduce their output in order to balance the system.
While reduced demand can put downward pressure on wholesale electricity prices, volatility can lead to price fluctuations. The National Grid report underlines the fact that the marked swings in intra-month power prices seen over the last 6-12 months are highly likely to continue through the summer.
Overall, gas demand this summer is forecast to be slightly lower than in 2017, with gas from the UK and Norwegian Continental shelf expected to be the dominant source of gas supply. While reduced power demand correlates to lower levels of gas-fired generation, weather patterns can have a significant impact.
At points last summer, combined solar and wind met over 50% of UK power demand. Where this output fluctuates, there is a significant increase in the requirement for gas-fired power that can result not only in volatility on the prompt but also for monthly prices due to the fundamental relationship between the two.
While total gas supply is predicted to be in excess of requirements, National Grid anticipates an increase in transit gas demand on the network as surplus gas is exported to the continent.
