National Grid publish Winter Outlook Report 2016/17

National Grid publish Winter Outlook Report 2016/17

National Grid has published its Winter Outlook Report for the current winter season. Headline figures include an increase in de-rated power margin of 6.6%, up from 5.1% last year.

Winter Outlook Report published

National Grid have published the Winter Outlook Report for the current winter season. The security of stronger power margins – and subsequent reduced risk of blackouts – comes at a heavy cost to consumers. Increased use of balancing tools pushes up non-commodity charges. The tighter supply outlook has pushed wholesale power prices for the winter up more than £10/MWh so far this month. However, without the availability of a contingency reserve, margins would have shrunk to just 1.1%.

The 6.6% margin includes 3.5GW of contingency balancing services. For the first time demand side aggregators and generators not connected to the transmission system are able to participate. This represents an increase on the 5.5% margin published in the Winter Consultation document in July. Additional generation capacity following the delayed closure of the Eggborough coal-fired power station has helped improve margins since then. Extensive maintenance at the East-West Interconnector has also decreased exports to Ireland. This is scheduled to continue until the end of February 2017 and has a positively impacted the UK. However, the interconnector outage is likely to lead to tighter power supplies in Ireland.

Balancing the system

The Supplemental Balancing Reserve (SBR) and Demand Side Balancing Reserve (DSBR) form part of National Grid’s contingency reserve for the upcoming winter. However, the DSBR has been cancelled due to low uptake. Both schemes will be unavailable next year, with the grid transitioning to use of the Capacity Market for 2017/18.

National Grid’s Winter Outlook forecasts peak demand for Winter 2016/17 at 53.6GW. This includes a 0.9GW reserve but excludes any Interconnector exports. This is a drop of 1.5GW from Winter 2015/16. While peak demand last year out turned below National Grid’s forecast peak, without the fall in demand expected for this year, margins would be tighter.

National Grid expects the highest level of system demand to occur in the week commencing 12 December. The lowest level of surplus is forecast for 9 January – the first working Monday in 2017 – as a result of high demand and planned generator outages.

Despite ongoing nuclear power outages in France, National Grid expects there to be net imports from Continental Europe to Britain. French nuclear outages are likely to cause disruption until late December. The margin, however, is expected to remain sufficient for any cold spells.

Winter Outlook for gas

National Grid expects gas demand to be lower than last year, due to lower gas exports to Ireland and Europe. Significantly stronger European gas storage reserves will help to reduce the requirements for exports from the UK. National Grid analysis highlights a potential for significant oversupply with total predicted supply of 602mcm per day. This is available against a 1-in-20 peak demand forecast of 472mcm. The 1-in-20 forecast assumes extreme weather and is the level of daily demand that would be exceeded by just 1 in 20 winters.

Restrictions at the Rough long-range storage site have resulted in a 1.3bcm shortfall at the start of winter, compared to October 2015. However, National Grid expects that imports from Norway, LNG availability and use of the Interconnector with Europe will be capable of making up the shortfall. The Winter Outlook Report expects LNG availability in Europe to remain high this winter. Additionally, all medium range storage sites are operational, in contrast to last year when Hornsea was unavailable. Though imports from the Netherlands could be lower as a result of tighter restrictions at the Groningen gas field announced last month.

Stay informed this winter

Make sure to keep abreast of all the market developments through the winter by taking advantage of the Utilitywise Market Intelligence service. You can also find regular market updates on Twitter and YouTube.

Ross Moffat

Posted by on Monday, the 17. October at 14.37

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.