Demand Side Investment Planning

Transmission Planning Code Workshop 2

1st May 2008

Introduction

Supply assumptions for planning were discussed in Workshop 1 (3rd April)

Aim of this presentation to describe how demand forecasts and Offtake Capacity Statement (OCS) information are used for investment planning

Basis for Investment Planning

Gas Act 1986 (as Amended by the Gas Act 1995) Economic and efficient

Standard Special Condition A9. Pipe-Line system Security Standards

Firm demand is likely to be exceeded (whether on one or more days) only in 1 year out of 20 years.

Special Condition C2 Long Term Development Statement Identify likely developments over a 10-year period

Special Condition C8E. NTS gas exit incentives, costs and revenues

Respond to requests for incremental capacity

Gas Safety (Management) Regulations 1996 (GS(M)R). Deliver appropriate pressure at offtake

Demand Information

Provided by Customers Contracted quantities

Direct connects Offtake Capacity Statements

From DNs Firm commitment for 4-years (to

2011/12) Indicative for 1- year (2012/13)

Section H - OAD Indicative load duration

information from DNs Pressures

ANOPs for direct connects Within OCS for DNs

Provided by National Grid Internal forecasts

At least 10-years Annuals, Peaks, Load duration

curves Sectoral analysis Econometric modelling

Demand Forecasting Methodology

Describes National Grid’s approach to developing demand forecasts

Peak Day forecasts Load Duration Curves e.g. 1 in 50

(severe), average

Published on National Grid’s website

Gas Demand Forecast

0

200

400

600

800

1000

1200

1400

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Th

rou

gh

pu

t (T

Wh

)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

DN Firm DN Interruptible NTS Industrials NTS Pow er

Irish Exports Continental Exports Grow th DN Grow th

Gas Demand Forecast

2007 saw another fall in DN demand Higher prices Energy efficiency Demand destruction

2008 Forecasts significantly lower Continued high prices Loss of demand in large firm / interruptible sectors in

early part of forecast Demand slightly higher in early part of 2008 Uskmouth Power station – LDZ connection

Offtake Capacity Statement data

OCS process runs in parallel to TBE process Initiated 1 June each year OCS agreed by 30 September for the approaching gas year (Y) to

year Y+3 DNs may revise bookings in future years

UNC TPD Section B: Offtake Capacity Statement process Signals DN 1 in 20 peak day requirements for Offtake Capacity and

Agreed Operating Pressures

UNC OAD Section H: Long term demand forecast data DN off-peak forecast data Used to inform TBE demand forecasts Split of offtake flows used as input to network analysis for off-peak

analysis

Timeline for Investment Planning - Exit

May June July Aug Sept Oct Nov Dec

June-July

OCS requests and

DN offtake forecasts

Aug-Sept

Analysis of requests and

discussions with DNOs end Sept

DNOs notified of Offtake Capacity

holdings and AOPs

Exit analysis confirmation of annual Plan

May-June

initial TBE Base Case available

Dec

investment proposals

published in TYS

Transporting Britain’s Energy (TBE) process

Annual consultation process with industry

Consensus on likely supply and demand patterns over the ten year planning horizon

Conclusions published in Ten Year Statement each December

Base Case scenario Range of potential supplies Range of potential demands

Interaction between OCS and NG Forecasts

OCS info limited to 5-years But requirement is for a 10-year plan

For the first 5-years OCS provides the definitive measure of DN 1 in 20

requirements NG forecasts analysed as a sensitivity

For the last 5-years NG forecast is the only source of information

Demand Scenarios – Balancing Assumptions

Investment planning analysis must start from a balanced supply/demand position for any demand day being studied

If available supply exceeds total demand Supplies are reduced using balancing/rank/range assumptions

If total demand exceeds available supply After taking into account potential new supplies

Power station load is reduced Where OCS data is used, DN loads will be reduced for Plan Years 5+

before power station load is reduced* Exceptions are power station loads at extremities of network

*This corresponds to the indicative (5th) year onwards in the OCS

Hierarchy of analysis

1. Flat (10-year horizon) NG forecast

2. Flat (OCS)

3. Flex (OCS)

4. Pressure (OCS)

5. Off peak analysis (10-year horizon)

Flat Capacity Uncertainties

Demand patterns are generally better understood than potential supply patterns

Population centres and CCGT demands and locations are reasonably stable

Supply distribution has a major impact on ability to deliver demand side requirements

Sensitivities What if Grain does not flow into the South East? Milford – South West? Storage – South West? Other stress tests as required

Off peak analysis required to refine investment options and predict plant usage

Flex Capacity Uncertainties

Modelled Transiently (hour by hour)

Sensitivities Similar supply uncertainties to flat Include wider supply variations Supply profiling considered

Allocation within existing and planned capability No specific investment

Pressure

Pressure capability is output of flat and flex capacity analysis.

Sensitivities Need to consider long run requirements for flat and flex Seasonal variations Operational configurations

Comparison between Entry and Exit analysis

Entry Capacity Exit (Flat) Capacity

Supply scenarios

TBE Base Case and

supply sensitivities

TBE Base Case and

localised supply sensitivities

Demand scenarios

TBE Base Case

TBE Base Case and OCS Demands and

sensitivities for new loads

Load Conditions

1 in 20 peak day and off-peak (selected days on average load duration curve)

Development of optimal investment plan

Optimal investment plan considers range of supply and demand cases and other available options e.g. constrained LNG, buyback

Existing investment projects are kept under review Sanctioning of new entry investment projects

undertaken on strength of long-term auction signals Sanctioning of new exit investment projects undertaken

after user commitment received (currently through ARCAs)

S6

S5

S7

S4

S3

S1S2

Identification of Scenarios

S6

S5

S7

S4

S3

S1S2

Capability Analysis

Optimal Investment Plan

S6

S5

S7

S4

S3

S1S2

Investment Planning Analysis

Summary

Base Case view of supply and demand outlook for the planning horizon developed after industry consultation through the TBE process

Further supply cases are required for planning due to the diversity and uncertainty surrounding future supplies to the UK and to test localised adverse supply patterns for exit

Further demand cases are required to ensure NTS meets 1 in 20 peak day requirement

TBE and OCS Demand data is analysed Analysis conducted for peak and off-peak conditions

Investment projects are determined by considering Reinforcement across supply scenarios for different demand conditions Other options not requiring capital investment Long-term signals from users