SR Introduction to the Electricity Market

SR Introduction to the Electricity Market

6 July 2016In association with

Welcome & Chair

Michael RieleyScottish Renewables

The Electricity Market and Renewables

Helen SnodinCAG Consultants

5

Introduction to the electricity market

Scottish Renewables

Technology and Innovation Centre, University of Strathclyde

6 July 2016

What will we cover?

An introduction to….

• Renewable support mechanisms• The GB market• The Capacity Market

6

RENEWABLE SUPPORT MECHANISMS

7

8

Growth in generation (GWh)

NFFO 1990

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

onshore offshore

Renewables Obligation 2001 EMR 2015

• NFFO

• RO

• EMR

• CfDs, allocated competitively on price to paper renewable projects, regionally allocated, frequency, size and duration controlled by government. No trading. Non-competitive allocation to nuclear power.

• Tradeable certificate system, allocated by eligibility (only renewables) but value created by selling (competitively) to suppliers. Value maintained by including headroom in calculation of Obligation size.

• CfDs, allocated competitively on price to ready-to-build renewable projects, nationally allocated, frequency, size and duration controlled by government. No trading. Non-competitive allocation to nuclear power.

9

• NFFO

• RO

• EMR

• Prices driven down, at expense of volume i.e. some projects were not economic and did not go forward.

• Very successful on volume, built up the industry, some local manufacturing. Initially designed as price competitive across all technologies, but subsequently banded.

• CfDs have revealed cost reductions in RO-conceived projects, passed on in price. Hostage to political changes, government exercising its control.

10

11From: UK offshore wind, opportunities for trade and investment

Contracts for Difference and the market

• Strike Price – paid a cleared price by technology and delivery year.

• Reference price – for renewables based on traded day-ahead prices– Interactions with the capacity market and wind generation

• Difference between strike price and reference price = levy controlled budget– Lower market prices, higher subsidies – Difference between Lib / Con co-alition and Conservative government as to

how budget controlled

• CfDs awarded amount to £1.9-2 Bn per year. RO generation costs around £4Bn. Levy Control Framework has cap of £7.9 Bn by 2020. (Hinkley around £2.7 Bn in 2012 prices)

https://www.theccc.org.uk/publication/technical-note-budget-management-and-funding-for-low-carbon-electricity-generation 12

GB ELECTRICITY MARKET

13

14

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

scotland england wales northern ireland

Onshore + offshore (GWh)

GB-wide market 2015

BETTA – GB-wide market

• Separate System Operator, National Grid– System balancing– System services– Transmission connection and transmission charging

• Extension of transmission charging (TNUoS) to Scotland– Replaced a deeper charging methodology in Scotland– Common distribution charging followed

• The Scotland – England ”interconnector” disappeared overnight– Much more connected and “managed” before upgrades

• Settlement of market positions on GB basis, by Elexon– Imbalances settled every half hour

• Long term mandatory purchase agreements for conventional generation fell away15

Jobs, turnover, & acquisitions, onshore wind, 2014

16From: Office for National Statistics: Low Carbon and Renewable Energy Economy Survey

THE CAPACITY MARKET

17

The Capacity Market

• Introduced alongside CfDs as part of EMR• Buying a promise (4 and 1 years ahead) from generation and

demand side to be generating or reduce load, when a stress event warning (4 hrs notice). Like reserve, but not like reserve.

• Of approx 85 GW on system, 50GW have contracts for 2018 delivery. Costing about a £Billion per year based on initial auction results.

• Likely to impact wholesale prices, directly by lowering energy-related revenues requirements, and indirectly by seeing off system stress (accompanied by price spikes)

18

Fiona ShepherdScottishPower Renewables

www.scottishpowerrenewables.com 20Template for corporate and business use/ July 2015 /

Introduction to Electricity Markets6 July 2016

Impact of Renewables on Electricity Prices

Fiona ShepherdEnergy Policy Manager


Electricity Price Drivers

45/MWh

Long-term Short-term

Average Power Price

Underlying commodity prices

Short-term dispatch decisions


Historic UK Generation Mix

Coal generation dominates during the 80’s and early 90’s

Dash for gas during the 90’s

Cost of dominant generation technologies drive the power price

Increasing renewable generation since early 00’s


Factors Affecting Underlying Commodities – Fuel Costs vs Power Price


Merit Order Effect

Changing energy mix leads to a shift in the merit order

Renewable generation with lower marginal cost displace more expensive forms of generation

Renewable

Nuclear

Coal

Gas

Oil

Nuclear

Coal

Gas

Oil

Merit Order and Supply vs demand determines the market price in the short term


Future Long Term Prices

Demand Drivers

Energy efficiency

Electrification of heat and transport

Commodity Drivers

Coal – closure of existing coal fleet

Gas – new build CCGT

Carbon Price Consumer buying power

National Grid FES 2015 – Slow Progression

StorageRenewables-capacity/generation profile

Q & A

Trading Power

Iain RobertsonSmartestEnergy

28

Trading PowerIntroduction to the Electricity Market

Iain Robertson, Generation Sales Manager

Agenda

SmartestEnergy

What is a PPA?

Traded markets

The role of Elexon

SmartestEnergyThe UK’s leading purchaser of power from independent renewable generators and supplier of renewable electricity to large commercial and industrial organisationsEstablished as generation aggregator since 2001Diverse portfolio

3GW contracted installed capacity600 sites (>13% of GB independent embedded renewables)Includes all commercial-scale renewable technologies

Strong balance sheet, backed by an international corporationAnnual turnover £1.2bn and profit after tax £13mWholly-owned subsidiary of Marubeni Corporation

170+ employees across offices in London, Ipswich & Glasgow

What is a PPA?

What is a Power Purchase Agreement?

Route to market contract between:Generator (the seller) and Purchaser of electricity (the buyer)

Defines the commercial terms, including: Pricing structuresKey dates and schedule for deliveryObligations and penaltiesPayment termsRisk and termination provisions

The principal agreement that defines the revenue and credit quality of a generating project and is a key element of project finance

Construction Risk ROC PPAsFor Project Finance, up to 15 years

FiT PPAFor Feed-in Tariff generators

CfD PPATo dovetail with CfD contract

Short-term PPAMerchant, typically up to 3 years

FlexiPPATypically for portfoliosFrameworks up to 7 years

“Linked Supply” Direct PPAs with end-users

PPAs for renewable generators

Project revenue made up of 4 componentsWholesale Power Price

Fixed or flexible market priceEmbedded Benefits

Payments for distribution-connected generators

Renewable Subsidye.g. ROC, FiT, CfD top-up

New BenefitsREGO value emergingCapacity Market Avoidance Benefit

New Benefits

Subsidy

Embedded Benefits

Power

Fundamentals: short-termSupply & demand

Recession led to 6-8% demand reduction Outages

Supply of primary energy Price largely linked to gas priceCoal, oil

System capacity marginsGas storage

European marketsWeather

UK Electricity Wholesale Market drivers

Sentiment: longer-term viewEconomic climate(Geo)political effectsRegulatory changes

Emissions legislationNew technologies, sources and uses

Power Price optionsMay be fixed for a forward period based on liquid wholesale market at the time

typical forward liquidity 3-4 years

Prices can be fixed beyond the liquid curve if a suitable hedge can be found in the market

Price may float by linking to a market index or via agreed price setting mechanism

Floor price may be required for project finance

Forward annual price

N2EX day-ahead price

PPA - Imbalance

Purchaser takes Volume Risk on the forecast versus delivered generation outputAn imbalance charge is made, based on:

Nature of the supplyHistoric data (if any)Prevailing level of wholesale prices Prevailing wholesale price volatility Time between contract agreement and deliveryPurchaser’s experience of similar generationPurchaser’s portfolioExpected nature of prices in the imbalance mechanism

What are Embedded Benefits?Costs to end users accrue as benefits to embedded generation as it is treated as ‘negative demand’ in settlements

Vary according to location and connection voltageDistribution and Transmission lossesGeneration Distribution Use of System (GDUoS)Balancing Services Use of System (BSUoS) chargesResidual Cashflow Reallocation Charge (RCRC)

Capacity Market Avoidance BenefitTransmission Network Use of System Charges (TNUoS)

Transmission Network Use of System (TNUoS) – Triad benefit

2015/16 Final(£/kW)

2016/17 Final(£/kW)

2017/18 Current Forecast(£/kW)

1 Northern Scotland 23.47 40.97 29.732 Southern Scotland 26.79 40.24 30.453 Northern 32.62 42.93 38.164 North West 35.68 42.83 43.595 Yorkshire 36.29 42.49 44.136 N Wales & Mersey 35.62 42.68 44.507 East Midlands 39.07 44.72 47.018 Midlands 39.63 45.74 48.269 Eastern 41.18 46.54 49.0210 South Wales 37.61 42.31 45.4411 South East 43.74 49.20 51.8312 London 46.24 51.87 54.3713 Southern 44.79 50.08 52.8314 South Western 43.98 48.58 51.43Range 22.77 11.63 24.64

Transmission Network Use of System Charges (TNUoS)

Embedded Benefits Review1. Growing gap between the Use of System charges faced

by transmission connected and embedded generation

2. Regulatory developments:

a) Ofgem reviewing charging arrangements for distribution-connected generators

b) CMA proposals also effectively remove the transmission losses embedded benefit

3. NG widening review of “Commercial Charging Arrangements”

ROC PPAPower + ROCs + REGOs + Embedded Benefits

Monthly cashflow

Short-term market remains competitive

Long-term market typically 10-15 year dealsFewer PPA providers

Power and ROC price volatility

ROC ValuesROC history Buy-Out Recycle

NominalValue

CP1 2002-03 £30.00 £16.52 £46.52

CP2 2003-04 £30.51 £22.99 £53.50

CP3 2004-05 £31.39 £14.17 £45.56

CP4 2005-06 £32.33 £10.19 £42.52

CP5 2006-07 £33.24 £16.04 £49.28

CP6 2007-08 £34.30 £18.65 £52.95

CP7 2008-09 £35.76 £18.61 £54.37

CP8 2009-10 £37.19 £15.15 £52.34

CP9 2010-11 £36.99 £14.35 £51.34

CP10 2011-12 £38.69 £3.58 £42.27

CP11 2012-13 £40.71 £3.59 £44.30

CP12 2013-14 £42.02 £0.70 £42.72

CP13 2014-15 £43.30 £0.35 £43.65

CP14 2015-16 £44.33 ? ?

CP15 2016-17 £44.77 ? ?

Targets

Values

ROC to become fixed price in 2027

Nominal ROC value forecast

FiT PPAFiT includes published Generation Tariff plus Export Tariff

Paid quarterly in arrearsIndexed annually

PPA is a market alternative to Export TariffGenerators can opt-outExport Tariff provides effective floor price

PPA includes Power + REGOs + Embedded Benefits

Monthly cashflow

Small Scale FiT

How CfDs workLow Carbon Contracts Company (LCCC) operate schemeDifference payments from and to LCCCGenerators also need a PPA provider to sell their power (at the Market Reference with discount)Strike Price = Market Reference Price + Difference Payment

Key aspects of CfDPr

ice

Generator pays back

Strike price

Generator receives Difference Payment

Market reference price- day-ahead for intermittent- season ahead for baseload

PPA standard model is a discount to MRP

CfD v RO

ROC CfD

Support financing low-carbon generationDrive down costsLong-term price certainty

PPAs in a post-subsidy world

Market stabilisation CfDDirect end-user PPAs

Generator agrees (long-term) price with ConsumerConsumer must also be creditworthy

Supplier provides PPA to GeneratorIncluding Embedded Benefits

Power is sleeved through to Consumer’s supply contract at agreed price

PPA provider may or may not also be Consumer’s SupplierCertainty for both partiesGreat opportunity to bring together willing partiesCSR and PR opportunities

Trading Power

Wholesale electricity is traded mostly OTC via brokers

Voice and screenTraders prefer interfaceMore flexibleProvides market intelligenceEncourages tighter pricesHighlights opportunities

Trades are anonymous, until after the tradeOther trading done via exchanges, on indicesUK trades up to 6 times consumptionSome other European markets more liquid

Wholesale market

Trading Parties

GeneratorsSuppliersBanks/ hedge fundsCommodity traders/ speculatorsConsumersEuropean utilities

Approximately 60 companies trading UK power

c.100 trading gas

Traded PeriodsForward Market

Months, Quarters, Seasons, Annuals

Prompt MarketDay-ahead, week-ahead

Spot MarketWithin-dayUp to gate closure

Can trade baseload or “shape” e.g. peak/ off-peak

Forward annual price

Forward winter price

Forward summer price

Impact of Solar PV generation on intraday wholesale price

The Role of Elexon

What does Elexon do?

Elexon monitor and validate payments made between generators and suppliers (BSC Parties)Compare how much electricity generators and suppliers were contracted to produce or consume with actual volumesCalculate a price for the difference and transfer funds accordingly

Elexon deliver the Balancing and Settlement Code

National GridBalance physical generation and

demand

ElexonSettlement imbalance

for generators and suppliers

BSC PartiesProduce or use

energy

System Sell Price - Single Cash Out

Trading arrangements

Transmission Network(Operated by National Grid)Generation Large

Consumption

Central volume allocationSupplier volume allocation

Grid Supply Point

Distribution Network

GSP GroupSupply Embedded Generation

How does Imbalance occur

Generators Suppliers Non-physical traders

May produce more or less energy than they have sold contractually

May consume (through customer demand) more or less energy than they have purchased contractually

No generation to sell, or demand to satisfy – buys from generators and trades to suppliers for profit

Elexon Settle ImbalanceELEXON’s systems capture the contracted volumes from generators/ suppliers to record what they said they would produce/consume

ELEXON’s systems and processes analyse the actual data to see who generated/consumed what

National Grid (Transmission operator) provides pricing data on actions taken to balance the system

Prices are calculated by Elexon as per National Grid data and applied to difference between contracted volumes & actual data = Imbalance.

Payment is made to and from their customers – the BSC parties

Thank you for watching….

Follow us on Twitter @SmartestEnergy for upcoming events and our latest

blogs

> Follow us here

Follow our company LinkedIn page for updates and connect with our team

> Connect with us

Sign up for our weekly newsletter The Informer to keep up to date with latest

developments

Sign up here

Energy Entrepreneurs Report 2016

Download our free report

Go to our blog to hear the latest from all our experts

Visit the info hub on our website

www.smartestenergy.com

Q & A

Networking Break

Making the Network Work

Audrey RamsayNational Grid

Managing Supply and Demand

Scottish Renewables: Introduction to Electricity MarketAudrey Ramsay, Commercial Strategy ManagerNational Grid

Agenda

Introduction and overview of National Grid

Balancing the system

Challenges

Publications

Introduction and overview of National Grid

National Grid

Commercial and Domestic Customers

National GridGas Distribution UK

Other GasDistribution Networks

National GridTransmission UK (Electricity & Gas)

Electricity Generators Gas Producers and Importers

SystemOperator

ElectricityDistribution Networks

TO

TO

TO

SO

Owns, builds and maintains assets

Operates the system

Provides customer interface

SO

Balances the GB System

Configures the GB Transmission System

Operational planning

Connection and Use of System Agreements with Generators, Suppliers and Distribution companies

GB charging and billing

Electricity Operations - who is responsible for what?

Transmission Owner

System Operation

OFFTO’s

Transmission provides the backbone of GB electricity reliability

Generation

SupplyDistribution 132kV

& Lower

National GridTransmission

99.999%

Low Loss Transmission 275kV & 400kV

Responsibilities

Supply electricity

Own electricity transmission networks in Scotland

Discriminate between customers or technologiesWe Don’t

We Do

Economically balance supply and demand, second by second for GB to keep frequency within statutory limits.

Facilitate the energy market by maintaining adequate transmission capability to within agreed security standards.

Facilitate competition via connection of new generation

Balancing the System

Through forward markets suppliers contract with generators to produce the right amount of energy

On the day generators decide which of their generating units run to meet their contractual obligations

Forwards and futures markets >24h ahead

Power exchanges <24h fine tune positions

National Grid administer Balancing Mechanism <1.5hr ahead

Supply companies forecast their electricity requirements per half hour.

Arrange contracts with generators per half‐hour

The electricity market

Generation Markets Suppliers

Target speed 50 miles/hour (+/- 0.5mph)

Accelerator = GenerationGradient = Demand

Statutory duty (License – balancing)

To maintain secure operation of the system

To maintain quality of supply

To operate economically

50.0

49.5

50.5Generation Demand

Real time balancing: keeping the frequency at 50Hz

Energy Balancing in real time

35500

36000

36500

37000

37500

38000

38500

39000

39500

40000

19:30

19:35

19:40

19:45

19:50

19:55

20:00

20:05

20:10

20:15

20:20

20:25

20:30

20:35

20:40

20:45

20:50

20:55

21:00

21:05

21:10

21:15

21:20

21:25

21:30

Time

MW

Demand

Market expectation

Need to reduceGeneration (or increase demand)

Need to increaseGeneration (or reduce demand)

The importance of a balanced generation portfolio

5gCO2eq/kWh

6000

0

Nuclear

48 hours

Coal Fired

12 hours 6 hours

Gas Turbines

2 minutes

CCGT

10 seconds

Hydro Wind

N/A

1000gCO2eq/kWh 450gCO2eq/kWh 800gCO2eq/kWh 10gCO2eq/kWh

Environmental data source:Parliamentary Office of Science & Technology

Solar

N/A

Start‐up times

85

Power Exchanges

Imbalance Settlement

Balancing MechanismForward Markets

National Grid’s Role in GB Market

Rolling half hour trades

(fine tuning) ~5%

T - Year Ahead(or earlier)

T – 1hr T+ 14 months

Suppliers contract directly with

generators to source the electricity they

need~ 90+%

T- 24 hrs

Generation & demand

balanced by National Grid

as SO ~ 3%

Post eventsettlement (Elexon)

ReserveTrades

Response

£30bn £1bn

Challenges to Balancing the System

Distributed Generation

Active Demand

Industrial Domestic

Passive Demand

DomesticIndustrial

Balancing an evolving grid

Conventional Generation

Inflexible generation

Intermittent Generation

0

200

400

600

800

1,000

1,200

1,400

1,600

0

200

400

600

800

1,000

1,200

1,400

1,600

01-J

an

05-J

an

10-J

an

15-J

an

20-J

an

25-J

an

30-J

an

01-J

an

05-J

an

10-J

an

15-J

an

20-J

an

25-J

an

30-J

an

MW

Interconnection

Interconnection

Challenges for National Grid

More than 700,000 individual PV sites across GB connected at

distribution levelGeneration dependent on weather

conditions

Power flows increasingly variable

Suppresses transmission demand

Increasing complexity in balancing

Impact of Distributed Generation

Total electricity use in GB

Electricity supplied via National Grid system

Available tools to manage difficult conditions

Low Demand/High Generation

System reconfiguration

Forward Trades/Contracts

Bid-Offer Acceptances (BOA)

SO-SO Trades

Negative Reserve Active Plant Margin (NRAPM)

High Demand/Low Generation

System reconfiguration

Forward trades/Contracts

Bid-Offer Acceptances (BOA)

SO-SO Trades

Notification of Inadequate System Margin (NISM)

Publications

We want to help you keep up to date

Any questions or feedback? Please contact [email protected]

Winter Consultation (July)Share your views on winter 2016/17Future Energy Scenarios (5 July)Credible pathways for energy out to 2050Winter Outlook Report (October)Our analysis for winter 2016/17

Andrew UrquhartSSEPD

CommercialMajor Connections Contracts

Andrew UrquhartActive Solutions ManagerSSEPD

The Future Network

Scottish and Southern Energy Power Distribution owns:• One electricity transmission

network• Two electricity distribution

networks• 106,000 substations • 130,000 km of overhead lines and

underground cables• 100+ submarine cable linksThe company serves 3.5 million customers across one third of the UK’s landmass

About SSEPD

• New market/network actors• New network configurations• New challenges• DSO, a natural evolution?• DNO current approach

Overview

policyexchange.org.uk

New Players - Interconnectors

New Players - Storage Operators• Grid scale

– Service providers at Distribution grid scale– EFR requires Fast import/export service– Technologies tendered

Batteries InterconnectorsDSR Diesel/backup

– 200MW tender resulting in circa 4GW of SEPD applications

• Smaller scale storage– EVs Increasing in volume– New actors including car manufacturers– Home storage

New Players - Community Energy

LegendOil heating

Wood heat’g

Electric heating

Other heating

Generator 400kWLoch Donhead s/s

New Network Configurations• Flexible connections

– ANM (single, multiple & 3rd party)– Export limiting– Timed connections

New Challenges

• Capacity conflict– G59 vs G83– Storage charging

• Service conflict– ANM vs Transmission services– Distribution vs Transmission services

• Storage applications• Modelling of new technologies/configuration

DSO, a natural evolution?

DNO

DSO

TSO

Service ProvidersTNO

Ofgem/DECC

Network connectees

DNOs Current Approach• Business as Usual projects

– ANM (UKPN, SSEPD, UKPN, SPEN & NPG)– CMZ Network service provision (SSEPD)

• R&D projects– NINES demand/generation control and stability control (SSEPD)– Mull Access Project (SSEPD)– CLNR demand/generation control (ENW)– C2C paid curtailment (ENW)– OpenLV better network capacity understanding (WPD) – ReZone islanded network management post fault (SSEPD)– Transmission & Distribution Interface 2.0 service request and

provision from D actors (NG)

Conclusion

Future networks involve new actors and network configurations

DSO seems natural evolution to solve new challenges

Work to do but already started

www.ssepd.co.uk/innovationEmail: [email protected]: @SSEPD_FN

Thank you

Q & A

Scotland in Context

Dr. Simon GillUniversity of Strathclyde

The Scottish Situation

Scottish Renewables CPD event

Dr. Simon Gill6th July 2016

[email protected]

1. What does Scottish electricity system looks like today?

2. How will it develop in the next few years? How much transmission network should get built and why?

3. Wind generation and the balancing mechanism

4. Paying for the network: Transmission Use of System Charges

5,500MW

9,500MW

5,200 MW

4,300MW

740MW1,100MW

2,300MW

2,650 MW / 3,500MW

Scottish Peak Demand

Generation with TEC

Pumped storageHydro

Wind with TEC

Wind > 100kW

Longannet – just closedImport / export capability of the ScottishBoarder

The Scottish Electricity system in numbers (from the Electricity Ten Year Statement)

Gas

Coal

NuclearMajor hydroPumped StoreLarge wind

Major Scottish Generation

Interconnection

Nuclear

‐ 2 stations‐ Torness and Hunterson‐ 4 units‐ Approx 2.2 GW‐ Hunterston currently

licenced until 2023‐ Torness currently licenced

until 2030

https://it.wikipedia.org/wiki/Centrale_nucleare_di_Tornesshttps://en.wikipedia.org/wiki/Hunterston_B_nuclear_power_station

Gas

‐ 1 station‐ Peterhead‐ 400 MW ‘in the market’‐ 390 MW in Supplementary

Balancing Reserve‐ Total capacity ~ 1200MW

http://www.geograph.org.uk/photo/1695720

Hydro

‐ 32 stations with TEC‐ 1,100MW capacity ‐ Several groups managed as

‘Cascade Hydro’ scheme where stations within the same water catchment

‐ Mainly in SHT region‐ Galloway hydro in SW

Scotland‐ Does not include smaller

‘distributed’ hydro


Pumped Store

‐ 2 station‐ Foyers, Cruachan‐ 6 units‐ Total capacity 740MW‐ Possibility of new station at

Corrie Gals

https://commons.wikimedia.org/wiki/File:Dam_at_Cruachan_reservoir.jpg

Wind

‐ 4,500MW wind with TEC‐ 5,200MW wind > 100kW‐ 4,200MW wind monitored

by NG‐ 39 ‘units’ submitting bids /

offers to the Balancing Mechanism (shown)


Interconnection‐ Moyle interconnector‐ HVDC link to Northern

Ireland‐ 2 independent monopole

links‐ Designed to be ‘highly

reliable’‐ 500MW cable capacity‐ Operation can be limited by

system / network limits at either end.

‐ Historically has predominately exported from Scotland

https://en.wikipedia.org/wiki/Mull_of_Kintyre

5500 MVADouble Circuit(400kV)

4220 MVADouble Circuit(400kV)

Images and

data from

ETYS, 2014 http://w

ww2.natio

nalgrid

.com

/UK/Indu

stry‐in

form

ation/Future‐of‐

Energy/Electricity

‐Ten

‐Year‐Statem

ent/

2 x 120 MVASingle circuits(132kV)

Transmission

Transmission

Current export capability ofAbout 3600 MW

The SQSS standard requires:About 1800 MW

Secure Transfer Capacity import

About 10 GW thermal line capacityAcross 4 main transmission circuitsCurrent Secure transfer capacity of

2650MW

Looking at the Future:Generation

‐ Wind Capacity: significant increases (17,000MW + in ETYS by 2025)‐ PV ? : significant continued increase in GB, maybe some in Scotland.

‐ Hydro capacity: no further major stations proposed at present

‐ Pumped Store: possibility of new station at Corrie Glas, SSE.

‐ Nuclear: both stations due to close within 15 years‐ Remember further 3 stations due in N. England due to close within 15 years

‐ Gas: Peterhead capacity ..??

Transmission‐ Beauly‐Denny, Kintyre‐Hunterston :

Complete

‐ Scottish Boarder, Series compensation, Scottish Export: due 2016

‐ Shunt compensation, Scottish voltage support: due next few years

‐ Western Link (HVDC): Due 2017

‐ Caithness‐Moray link (HVDC): Due 2018 Diagram adapted from NG, ETYS 2015


Complete





Transmission

PeterheadKintore

‐ Beauly‐Denny, Kintyre‐Hunterston : Complete





‐ Beauly‐Denny, Kintyre‐Hunterston : Complete




‐ Caithness‐Moray link (HVDC): Due 2018

Looking at the Future:Transmission

Diagram adapted from NG, ETYS 2015


Complete





Generation adequacy…..How is it regulated?

DECC sets the generation

security standard

National Grid calculate weather the market is

likely to meet the standard

If not….Pay for

supplementary services

How much generation

capacity should we build?

DECC Says….

The reliability standard for the GB electricity market is a LOLE of 3 hours/year. This translates as a system security

level of 99.97%.

RoI: 8 hours per year NI: 4.9 hours per yearFrance: 3 hoursNetherlands: 4 hours

VoLL dived CoNE gives max LoLE

Generation Adequacy

How much generation capacity should

we build?

…..obviously!(?)!

Value of Lost Load (VoLL)

The value we place on having an

uninterrupted supply£17,000/MWh

Generation Adequacy

The Cost of New Entry

The annuitized cost of building a new peaking plant £47,000/MW

Generation Adequacy

Loss of Load Expectation (LoLE)

The number of hours per year, on average, that generation availability is less than demand

Generation Adequacy

How much does it cost to build new peaking generation capacity?

Cost of New Entry

How much do we value an uninterrupted supply?

Value of Lost Load

£47,000 / MW £17,000 / MWh

What duration of not serving load would lead to the best trade off between building generation capacity, and the risk of not serving demand?

3 Hours “Loss of Load Expectation”

By Antho

ny Hartm

an from

Meizhou

, China

‐Flickr, CC BY

2.0, https://com

mon

s.wikim

edia.org/w

/inde

x.ph

p?curid

=380

087

By Alan Zomerfeld ‐Own work, CC BY

‐SA 2.5, https://com

mon

s.wikim

edia.org/w

/inde

x.ph

p?curid

=866

641

Generation Adequacy

How secure is our electricity supplyin GB?

Without additional balancing services “Loss of Load Expectation for the base case would have been 8.9 hours/year equivalent to a de‐rated margin of 1.2%

July 2015: Winter Outlook consultation

October 2015: Winter Outlook Report

With the additional balancing services “Loss of Load expectation of 1.1 hours/year equivalent to a capacity margin of 5.1%

How secure is our electricity supplyin GB?

What is “loss of load”?

Asking generators to use a short term ‘Max Gen’ output

Emergency instructions for interconnectors

Reducing the voltage slightly so energy arrives slightly slower in our homes / businesses

Un‐planned disconnection of load

Generation Adequacy

What is “loss of load”?

Asking generators to use a short term ‘Max Gen’ output

Emergency instructions for interconnectors

Reducing the voltage slightly so energy arrives slightly slower in our homes / businesses

Un‐planned disconnection of load

Only this is really “loss of load”

Generation Adequacy

Transmission ‘adequacy’

Security and Quality of Supply

Standarda requirements of

TO licence

National Grid, SP Energy

Networks and SHE Transmission plan and build the

network

National Grid operate the transmission

system

How much transmission capacity should

we build?

Greater power to Nation Grid, System Operator in last

year (ITPR, NOA)

Impo

rtant C

hapters

2. Design of generation connections

3. Design of demand connections

4. Design of the main interconnected

transmission system (MITS)

5. Operation of the system

6. Voltage limits for onshore

7. Generation connection offshore

8. Demand connection offshore

9. Operation of offshore networks

10.Voltage limits for offshore

The NETS SQSS – Quick Intro


Defines Minimum Transmission CapacityUnder 2 backgrounds

Security Background

Peak Demand: ACS Peak Demand

Economic Background



Security Background


Economic Background


Makes sure there is enough transmission capacity to:

give a very high chance that demand can be served in a region

Makes sure there is enough transmission capacity to:

Facilitate the market efficiently.

(If there is not enough transmission, demand will be met but it will be

more expensive to do so.)

E.g. Scottish wind curtailed; English CCGT used instead



Security Background


Economic Background


Wind, Wave and Tidal 0

‘Importing’ Interconnectors 0

Peaking Plant Scaled

Pumped Storage Scaled

Nuclear Scaled

Coal/Gas CCS Scaled

Other Plant Scaled

Wind, Wave and Tidal 70%

‘Importing’ Interconnectors 100%

Peaking Plant 0

Pumped Storage 50%

Nuclear 85%

Coal/Gas CCS 85%

Other Plant Scaled



And in each case adds a bit more to represent variations around the medium

Security Background Economic Background

Planned Transfer Capacity

Inter‐connection Allowance

Secure transfer capability, N‐1*

Planned Transfer Capacity

Boundary Allowance


*Loosely defined



Transmission

Current export capability ofAbout 3600 MW

The SQSS standard requires:About 1800 MW

Secure Transfer Capacity import

About 10 GW thermal line capacityAcross 4 main transmission circuitsCurrent Secure transfer capacity of

2650MW

Can Scotland meet its peak demand?Last

Winter

2015 – 16

Transmission

Can Scotland meet its peak demand?NextW

inter

Probability of Scotland needing to import at peak: ~55% To be 99% sure of

meeting Scottish Peak: 1.9 GW

To be 99.9% sure of meeting Scottish Peak: 2.5 GW

2016 – 17

Transmission

Can Scotland meet its peak demand?

Transmission

Can Scotland get its electricity out?

‐ Calculation based on data from the Balancing Mechanism Reporting Archive (www.elexonportal.co.uk )

Can Scotland get its electricity out?

October 2014 December 2015


2011‐12 2012‐13 2013‐14 2014‐15

Energy available, FPN (GWh)

3776 4571 7563 7396

Energy curtailed,BOAV (GWh)

69 36 538 776

Percentage curtailed(%)

1.8 0.8 7.1 10.5

Balancing mechanismwind


Local Tariff Wider tariff

Old TNUoS charging structure for generation

Residual, non locational element

Locational ‘zonal’ cost reflective charge

Locational cost

reflective local circuit charge

Local substation charge –type cost reflective

Generator TNUoS tariffs

Paying for the network –TNUoS


Local Tariff Wider tariff


Peak Security Tariff(Not paid by intermittent

generation)

Year Round Tariff

Non‐shared Component

Shared Component(Scaled by Annual Load

factor)

New TNUoS charging – Adjusts

the existing Locational Element

Residual carries out full D, G splitting as well as aligning revenue with price‐control allowances

Local Tariff Wider tariff Old TNUoS charging

structure for generation

Locational cost

reflective local circuit charge

Local substation charge –type cost reflective


‐10‐505101520253035

1 6 11 16 21 26

£/kW

Zone (1 = N. Scotland, 27= W. Devon and cornwall)

Components of the Generation Wider Tariff (old methodology)

Residual

Final


‐30.00

‐20.00

‐10.00

0.00

10.00

20.00

30.00

40.00

1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627

£/kW

Generation Zone

Wider Tariffs for a Conventional 80% Generator

2016/17 2017/18 2018/19 2019/20 2020/21

‐20.00

‐10.00

0.00

10.00

20.00

30.00

40.00

1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627

£/kW

Generation Zone

Wider Tariffs for an Intermittent 40% Generator

2016/17 2017/18 2018/19 2019/20 2020/21From NG TNUoS forecasts for 2017‐18 – 20/21 Forecastshttp://www2.nationalgrid.com/WorkArea/DownloadAsset.aspx?id=45336

‐ Electricity Ten Year Statement: http://www2.nationalgrid.com/UK/Industry‐information/Future‐of‐Energy/Electricity‐Ten‐Year‐Statement/

‐ Network Options Assessment: http://www2.nationalgrid.com/UK/Industry‐information/Future‐of‐Energy/Network‐Options‐Assessment/

‐ Winter Outlook Report: http://www2.nationalgrid.com/UK/Industry‐information/Future‐of‐Energy/FES/Winter‐Outlook/

‐ Security and Quality of Supply Standard: http://www2.nationalgrid.com/uk/industry‐information/electricity‐codes/sqss/the‐sqss/

‐ DECC Enduring Reliability Standard: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/223653/emr_consultation_annex_c.pdf

‐ TNUoS tariff forecasts: http://www2.nationalgrid.com/UK/Industry‐information/System‐charges/Electricity‐transmission/Approval‐conditions/Condition‐5/

‐ Scottish Security of Supply Study: www2.nationalgrid.com/WorkArea/DownloadAsset.aspx?id=40185

Useful links

Thanks

Contact Details

Dr. Simon [email protected]

0141 444 7231

Q & A

Networking Lunch

SR Introduction to the Electricity Market

6 July 2016In association with

Documents

SR Introduction to the Electricity Market