Healthy supply margins expected as National Grid issues 2017/18 Winter Outlook

Healthy supply margins expected as National Grid issues 2017/18 Winter Outlook

National Grid has issued its Winter Outlook report for the 2017/18 season, with forecasts for a sizable 6.2GW electricity capacity margin.

National Grid has issued its Winter Outlook report for the 2017/18 season, with forecasts for a sizable 6.2GW electricity capacity margin. The margin has increased from between 2.9GW and 3.4GW in the 2016/17 winter and equates to 10.3% of underling demand. This covers total underlying demand on the transmission and distribution system and margin includes capacity contracted as part of the 2017 Capacity Market early auction.

Transmission system demand is expected to peak at 50.7GW, during the week between 11 and 18 December 2017. The peak demand consists of national system demand (49.1GW), generation station demand (600MW) and baseload interconnector exports (1GW). The latest view of average cold spell (ACS) peak demand is unchanged from that published in National Grid’s Winter Review and Consultation, at 62.3GW.

An ACS is – as the name suggests – the demand estimated during a particularly cold winter. National Grid needs to assess the system’s ability to cope with extreme conditions, as well as those that have been more common in recent years.

Interconnectors 

There is forecast to be a total of 3.6GW of interconnector capacity for imports, and 4GW for exports. The IFA power link with France is expected to be at full capacity, apart from two weeks between 26 March and 6 April 2018. The BritNed (linked with the Netherlands) and the Irish Interconnectors Moyle and East-West are expected to be at full capacity throughout the winter season, helping to provide flexibility in supply and demand. The Winter Outlook stated that forward prices throughout Europe are higher this winter than during 2016/17 and that the British market price will remain higher than those on the Continent, which will encourage UK imports.

Gas 

Total gas demand for the winter is forecast at 51 billion cubic meters (bcm) which is expected to be slightly lower than experienced last year. Peak demand for the coldest weather conditions (or a 1-in-20 winter, meaning exceptional demand on a winter day which statistically occurs once every 20 years) is forecast at 502mcm/day, with the gas system capable of supplying in excess of 600mcm per day.

However, for a more tempered forecast, the average cold day demand is expected to be 419mcm/day. The non-storage supply forecast is 354mcm/day, to which 92mcm of storage can be added, giving a total of 446mcm/day.

Gas exports through the IUK to Continental Europe are also expected to be marginally lower year-on-year. However, imports from the BBL pipeline with the Netherlands are expected to continue to fall. Flows through BBL may be hindered even more in the event of a decision to further reduce production at the Groningen gas field, Europe’s largest. A decision is due in November.

Long-range storage? 

Supplies from Norway are expected to be similar to winter 2016/17. With no long-range storage available for injections National Grid are expecting more cycling of gas through the medium-range storage (MRS) facilities throughout the winter. Cushion gas stays in the site to maintain the operating pressure required to allow working gas to be injected and withdrawn. However, now the Rough facility has been closed, cushion gas is currently being removed at a rate of 12mcm/day. Should this rate continue, reserves will be emptied by January 2018 and operator Centrica will need to apply for regulatory approval to withdraw more cushion gas.

Given the announced closure of Rough, National Grid expects MRS to remain high until Q1 2018 with significant withdrawal and re-injection, a process called cycling. MRS will typically cycle many times during the winter and can even cycle during a gas day. This means facilities are capable of being constantly replenished to ensure maximum supplies throughout periods of high demand.

Liquefied Natural Gas (LNG) 

On LNG, National Grid says the deliveries of LNG have been lower in every month this year than the corresponding month last year, but there is no indication that LNG deliveries will be interrupted by the diplomatic crisis in Qatar.

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 Tuesday, the 17. October at 8.00

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.