electricity system operator incentives bsuos seminar · 350 400 450 500 550 600 650 700 750...

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Electricity System Operator Incentives BSUoS Seminar

Tuesday 15th February 2011

Welcome and Introduction

Alan Smart, Energy Operations Manager

3

Agenda

� Welcome and Introduction

� Overview of SO Incentives Review – David Smith

� BSUoS methodology – Colin Williams

� BSUoS Forecasts and input assumptions:

�Energy – Katharine Clench

�Constraints – Guilherme Susteras

� BSUoS Reporting – Jo Faulkner

� Closing remarks and next steps – Alan Smart

4

Things to note

� Health and Safety

� Feedback forms

Overview of the Electricity SO Incentives Review

Place your chosen

image here. Turn on

the Grid and Guides

option under View and

check the ‘display

drawing guides on

screen’ box for

position.

David Smith, Electricity Codes Manager

6

Where are we in theSO Incentives Review process?

Phase 1 (6 weeks) Phase 2 (15 weeks)

Review of current

modelling approach

(Ofgem-led with

consultancy

support)

Development by

NGET of revised

forecasting

methodology based

on recommendations

from Phase 1

Phase 3 (8 weeks)

Examination of

NGET’s proposed

methodology,

including models and

modelling approach

7

Summary of Phase 1 key findings

Ofgem and Frontier suggested clear way forward:

Aim: Multi-year scheme:

• Promote system operation efficiency

• Reduce regulatory and industry burden

New constraint model

and revised energy

models to provide reliable analysis to

support setting

scheme parameters

Ex-post treatment of

unpredictable external

factors beyond NGET’s control to remove windfall potential

8

Evolution of the proposed incentivisation approach

Current Proposed

Target IBC Ex-anteEx-ante forecast updated ex-post

Adjustments to Target IBC

Two ex-post adjusters

Multiple ex-post adjustments

Adjustments to out-turn costs

Ex-post NIA None

BSUoS Charges Ex-ante forecast Ex-ante forecast

9

Existing scheme

Profit

0

Loss

IBC

No (or limited) dead-band (e.g. to cover modelling errors)

Higher profit cap

Lower loss floor

Steeper sharing factors

New scheme structure

We believe the proposed approach will remove volatility and allow for sharper scheme parameters:

BSUoS Charging Methodology – Impact of BSIS Initial Proposals

Colin Williams - Charging and Revenue

11

Agenda

� Calculation of BSUoS Charges

� Impact as a result of BSIS 2011/13

� Internal Incentive

� External Incentive

12

BSUoS – Calculation and Billing

� Charges apportioned on a £/MWh proportionality basis

� £/MWh - one price per HH period, paid by all

� Calculated half-hourly

� Billed Daily

� Two stage Financial Settlement

Daily, Settlement Day + 14 months

Reconciliation Final

RF

Daily, Settlement Day + 16 working days

Settlement FinalSF

Settlement Day + 5 working days

*No invoice sentInterim InitialII*

Processing /

Billing Timescales

DefinitionRun

Type

This will remain unchanged

13

BSUoS Charges - Calculation

� Two main components of BSUoS

� Internal - internal SO costs e.g. staff, buildings, IS

� External - costs of the services used to balance the

system

�Electricity related products

� Balancing Services Contract Costs

� Balancing Mechanism Bids and Offers

� Both Internal and External Costs have an Incentive

Scheme Adjustment

14

BSUoS Calculation – Simplified

BM Unit Metered VolumesContract

Costs / Other Costs

External BSUoS Charge

Customer BSUoS Charges

HH BMUVolume

£/MWhx HH BSUoSCharge

=

HH BSUoS (£)HH Volume (MWh)

= £/MWh

Total BSUoS

For all HH periods of a

Settlement Day

Internal BSUoSCosts

BSIS

BM Costs

Internal Incentive

Internal BSUoSCharge

Total BSUoSCharge

15

BSUoS Calculation – Simplified

BSIS Incentive

Internal Incentive

BM Unit Metered VolumesContract

Costs / Other Costs

External BSUoS Charge

Customer BSUoS Charges†

HH BMUVolume

£/MWhx HH BSUoSCharge

=

HH BSUoS (£)HH Volume (MWh)

= £/MWh

Total BSUoS

For all HH periods of a

Settlement Day

Internal BSUoSCosts

BM Costs

Internal BSUoSCharge

Total BSUoSCharge

16

Incentivised Balancing Costs –Current Methodology

� 2010/11 IBC Calculation

� To determine the value of the incentive adjustment to

BSUoS Charges the average IBC is calculated. Against this number the incentive adjustment is calculated by

comparing against the Incentivised Target

IBCd = Σj

(CSOBMj + BSCCVj + NIAj + TLICj ) + BSCCAd – OMd – RTd

Balancing Services

Contract Costs

Costs to SO of

Balancing Mechanism (Bids / Offers)

Net

Imbalance Adjustment

Transmission

Loss Adjustment

Reconciliation &

adjustment Terms

17

BSIS – 2010/11 - Summary

-20

-15

-10

-5

0

5

10

15

20

350 400 450 500 550 600 650 700 750

Incentivised Balancing Costs (£m)

Pro

fit

/ L

os

s (

£m

)

Scottish Generation and IFA Adjusted Scheme

15% Upside Sharing Factor

15% Downside Sharing Factor

Max £15m Profit

Min £-15m loss

Deadband(£0 profit or loss)

Summary of Current Scheme

�One Year Scheme

�Fixed Incentivised Cost Target

�Cap and Collar

�Sharing Factors

18

Impact on Incentivised Balancing Costs from Initial Proposals

� 2011/13 IBC Calculation

� Proposed changes to calculation of IBC

� Remove NIA and potential removal of RT

IBCd = (CSOBMj + BSCCVj + NIAj + TLICj ) + BSCCAd – OMd – RTd

Balancing Services

Contract Costs

Costs to SO of

Balancing Mechanism (Bids / Offers)

Transmission

Loss Adjustment

Reconciliation &

adjustment Terms

Net

Imbalance Adjustment

NIAjΣj

19

BSIS – 2011/13 – Initial Proposals

Incentivised Balancing Costs (£m)

RevisedTarget

Summary of Initial Proposals�Two Year Scheme

�Ex-Post Updated Target

�Fixed variances from Target

�Cap and Collar

�Sharing FactorsUpside Sharing Factor

Downside Sharing Factor

Target - y

Target + y

Limited or no Deadband

(£0 profit or loss)

Sch

em

e P

rofit

of

Lo

ss (

£m

)

20

BSUoS – Internal Incentive 2010/11

FSOINt (£)0

Fixed Target

£55,262,715

Summary of Current Scheme�Five year scheme

�Annual adoption of BSIS sharing

factors

�Fixed Target

�No Cap or Collar

�Sharing Factors15% Upside Sharing Factor

15% Downside Sharing Factor

21

BSUoS – Internal Incentive 2011/12 & 2012/13

FSOINt (£)0

Fixed Target

Summary of Scheme�Remain as five year scheme

�Annual adoption of BSIS sharing

factors

�Fixed Target per year

�No Cap or Collar

�Sharing Factors

Upside Sharing Factor

Downside Sharing Factor

22

BSUoS Charges – BSIS 2011/13 Impact Summary

� Sharing Factor

� Remains to be considered on an annual basis

X

Calculation of

Internal Incentive

� No Change to method

� No Change to method

� Two Year External Scheme

� Variable Target with cap, collar and sharing factors

� Removal of NIA

Change

Detail

XX�Any

Change?

Billing BSUoSMethodology of

Charging and Apportioning

Calculation of

External Incentive

23

BSUoS Charging – Contact

� Any BSUoS Charging Questions please contact:

Colin Williams

Colin.Williams@uk.ngrid.com

Tel: 01926 65 5916

BSUoS Forecast - Energy Components

Katharine Clench, BSIS Commercial Analyst

25

Content

� Headline Energy forecast

� Ex ante/ ex post inputs and assumptions

� Model sensitivity

� Black Start and Transmission Losses

� Waterfall diagrams

26

All Categories £m

2005/6

Year

End

2006/7

Year

End

2007/8

Year

End

2008/9

Year

End

2009/10

Year

End

2010/11

Latest

View

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance 6.1 -27.6 19.9 -71.5 11.6 -37.9 -28.0 -27.9

Margin 194.9 159.1 183.1 358.4 186.6 155.9 159.2 174.8Op. Reserve 126.3 59.9 100.3 205.9 78.6 46.7 42.4 45.0

STOR 47.4 69.4 57.6 75.1 85.4 87.1 88.5 99.7

BM Start Up 7.4 11.9 14.8 28.9 10.8 8.1 9.7 10.1

CMM 13.8 17.9 10.4 48.5 11.8 14.1 18.6 19.9

Energy + Margin 201.1 131.6 203.0 287.0 198.3 118.0 131.2 146.8

Footroom -5.5 9.2 5.2 5.7 30.2 13.9 28.3 31.0

Fast Reserve 51.0 58.4 58.3 60.8 63.3 69.4 75.3 77.8AS Response 65.5 124.3 126.0 129.5 111.5 139.1 126.3 126.5

BM Response 71.2 36.3 31.8 71.3 50.4 27.9 54.1 48.3

Reactive 54.5 53.1 47.0 61.9 42.8 48.1 59.3 60.5Blackstart 14.5 15.5 13.6 16.9 14.5 16.8 28.4 29.0

Total (less Constraints and TLA) 471.0 442.9 497.3 655.4 532.0 448.6 521.2 539.1

Headline Energy Forecast

27

All Categories £m

2005/6

Year

End

2006/7

Year

End

2007/8

Year

End

2008/9

Year

End

2009/10

Year

End

2010/11

Latest

View

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance 6.1 -27.6 19.9 -71.5 11.6 -37.9 -28.0 -27.9

Margin 194.9 159.1 183.1 358.4 186.6 155.9 159.2 174.8Op. Reserve 126.3 59.9 100.3 205.9 78.6 46.7 42.4 45.0

STOR 47.4 69.4 57.6 75.1 85.4 87.1 88.5 99.7

BM Start Up 7.4 11.9 14.8 28.9 10.8 8.1 9.7 10.1

CMM 13.8 17.9 10.4 48.5 11.8 14.1 18.6 19.9

Energy + Margin 201.1 131.6 203.0 287.0 198.3 118.0 131.2 146.8

Footroom -5.5 9.2 5.2 5.7 30.2 13.9 28.3 31.0

Fast Reserve 51.0 58.4 58.3 60.8 63.3 69.4 75.3 77.8AS Response 65.5 124.3 126.0 129.5 111.5 139.1 126.3 126.5

BM Response 71.2 36.3 31.8 71.3 50.4 27.9 54.1 48.3

Reactive 54.5 53.1 47.0 61.9 42.8 48.1 59.3 60.5Blackstart 14.5 15.5 13.6 16.9 14.5 16.8 28.4 29.0

Total (less Constraints and TLA) 471.0 442.9 497.3 655.4 532.0 448.6 521.2 539.1

Headline Energy Forecast

£521.2m £539.1m

2011/12 2012/13

28

New Modelling Approach

Scheme Target (bundled)

Forecast Inputs

Modelled Relationships

Ex-Ante

Actual Data

Inputs

Ex-Post

Ex-Ante/Ex-Post Approach

29

Ex ante Inputs

Modelled relationship

STOR volume and price

Trend

2009/10 Volume Weighted Price

Reserve for wind %

Demand

Energy Imbalance

Static Response/ FFR

Constraints - CMM

Reactive Power

Margin

Fast Reserve

Footroom

Frequency Response

30

Ex post Inputs

Power Price

NIV

Headroom

Wind generation

Nuclear generation

RPI

Energy Imbalance

Frequency Response

Fast Reserve

Footroom

Margin

Reactive Power

Ex a

nte

in

pu

ts

Assumptions and Sensitivities

32

Ex

Po

st In

pu

t As

su

mp

tion

sP

ow

er P

rice

0

20

40

60

80

10

0

12

0

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

£/MWh

SP

NIR

P (A

vg)

BM

Pric

e (A

vg

)

FO

RE

CA

ST

AC

TU

AL

33

Ex Post Input AssumptionsPower Price Scenarios

Power price by: 50%

~£79m increase to each

year

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

+36%

+25%

+~16%

34

Ex Post Input AssumptionsPower Price Scenarios

Power price by: 50%

~£60m decrease to each

year

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

-36%

-15%

-27%

-21%

35

Ex

Po

st In

pu

t As

su

mp

tion

sH

ea

dro

om

0

50

0

100

0

150

0

200

0

250

0

300

0

350

0

400

0

450

0

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

MW

He

adro

om

(Avg)

FO

RE

CA

ST

AC

TU

AL

36

Ex Post Input AssumptionsHeadroom Scenarios

Headroom and by: 40%

±±±± ~£26m to each year

±±±± 6%±±±± 17%

±±±± 24%

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

37

Ex Post Input AssumptionsWind Generation

0

1000

2000

3000

4000

5000

6000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Win

d m

ean

ge

nera

tio

n (

MW

)

2012/13

2011/12

2009/10

38

Ex Post Input AssumptionsWind Scenarios

Wind output and by: 15%

±±±± ~£10m to each year

±±±± ~6%

±±±± 8%

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

39

Ex

Po

st In

pu

t As

su

mp

tion

sN

et Im

ba

lan

ce

Vo

lum

e (N

IV)

-12

00

-10

00

-800

-600

-400

-200 0

200

400

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

MW

FO

RE

CA

ST

AC

TU

AL

40

Ex Post Input AssumptionsNIV Scenarios

NIV and by: 100MW

±±±± ~£90m to each year

±±±± ~300%

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

±±±± 4 %

41

Ex

Po

st In

pu

t As

su

mp

tion

sN

uc

lea

r Ge

ne

ratio

n

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

MW

Nucle

ar (A

vg)

FO

RE

CA

ST

AC

TU

AL

42

Ex Post Input AssumptionsNuclear Scenarios

Nuclear output to and to 8800MW

-£33m and+£10m to each

year

- 43% and +14%

- 47% and +13%

All Categories £m

THIS

MODEL

(Apr/11 to

Mar/12)

THIS

MODEL

(Apr/12 to

Mar/13)

Energy Imbalance -28.0 -27.9

Margin 159.2 174.8Operating Reserve 42.4 45.0

STOR 88.5 99.7

BM Start Up 9.7 10.1

CMM 18.6 19.9

Energy Imbalance + Margin 131.2 146.8

Footroom 28.3 31.0

Fast Reserve 75.3 77.8AS Response 126.3 126.5

BM Response 54.1 48.3Reactive 59.3 60.5Blackstart 28.4 29.0Total (less Constraints and TLA) 521.2 539.1

4500MW

43

Ex

Po

st In

pu

t As

su

mp

tion

sR

PI

-2.0

0%

-1.0

0%

0.0

0%

1.0

0%

2.0

0%

3.0

0%

4.0

0%

5.0

0%

6.0

0%

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

FO

RE

CA

ST

AC

TU

AL

44

Black Start and Transmission Losses

Transmission Losses

£29m

2012/13

£28.4m

2011/12

Black Start

£57.4m

Total

� Availability fees

� Capital

� Testing

5.5TWh ± 0.5TWh

45

Energy Forecast - Range

£448.6m

(latest view)2010/11

£539.1m

£521.2m

Mid

£785m£377m2012/13

£767m£361m2011/12

HighLow

� Low = combined output of lower case scenarios

� High = combined output of upper case scenarios

46

Waterfall 2010/11 to 2011/12

£9.9£3.3

£14.4

£5.8£26.1

£11.2

£11.6£2.9

£521.2

£448.6

£12.7

£400

£420

£440

£460

£480

£500

£520

£5402

01

0/1

1

En

erg

y

Imb

ala

nce

Ma

rgin

Fo

otr

oo

m

Fa

st

Re

se

rve

AS

Re

sp

on

se

BM

Re

sp

on

se

Re

active

Bla

cksta

rt

Oth

er

20

11

/12

£m

47

Waterfall 2011/12 to 2012/13

£0.1

£15.6

£2.7

£2.5

£1.2£0.6 £1.0

£539.1

£521.2

£0.1

£5.8

£510

£515

£520

£525

£530

£535

£540

£5452

01

1/1

2

En

erg

y

Imb

ala

nce

Ma

rgin

Fo

otr

oo

m

Fa

st

Re

se

rve

AS

Re

sp

on

se

BM

Re

sp

on

se

Re

active

Bla

cksta

rt

Oth

er

20

12

/13

£m

48

Energy Summary

� Energy forecast for 2011/12 and 2012/13

� Ex ante and ex post inputs

� Ex post assumptions

� Model sensitivities

� Waterfall diagrams

£539.1m

£521.2m

Mid

£785m£377m2012/13

£767m£361m2011/12

HighLow

Constraints Forecast

Gil Susteras, Future Requirements Manager

50

Agenda

� Model overview

� Unconstrained calibration

� Ex-ante assumptions

� Ex-post assumptions

� Forecast

� Scenarios and waterfalls

51

1. Unconstrained Run (simplified)

Ex-ante

Ex-post

Model output

Generator FPNs and Interconnector flows to meet forecast demand (assuming infinite Transmission System

capability)

Simulation of

interconnected (non-GB) markets

Generator Availability

Generator Dynamic

Parameters,

efficiencies etc

Fuel/ Carbon

Prices

Wind

Output

Demand Forecast

52

2. Constrained Run (simplified)

Generator FPNs and Interconnector flows to meet forecast demand (assuming infinite Transmission System

capability)

Transmission System modelled by a number of zones

divided by

boundaries

Each

boundary has a limit

Forecast generation and demand levels

assigned to

each zone

IF: zone generation – zone demand >

zone boundary capability

The model re-despatches generation in order to satisfy

each boundary limit (or constraint) based on BM Prices

Unconstrained calibration results

Sample results for key boundaries

54

Scotland

20 30 40 50 60

20

00

30

00

40

00

50

00

60

00

70

00

Scotland Peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

20 30 40 50 60

20

00

30

00

40

00

50

00

60

00

70

00

Scotland Off-peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

55

Thames Estuary

20 30 40 50 60

10

00

20

00

30

00

40

00

Thames Estuary Peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

20 30 40 50 60

10

00

20

00

30

00

40

00

Thames Estuary Off-peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

56

South Wales

20 30 40 50 60

10

00

15

00

20

00

25

00

30

00

35

00

South Wales Peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

20 30 40 50 60

10

00

15

00

20

00

25

00

30

00

35

00

South Wales Off-peaks

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

57

French Interconnector

20 30 40 50 60

-20

00

-10

00

01

00

02

00

0

France (IFA) off-peak [Positive=flow into GB]

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

20 30 40 50 60

-20

00

-10

00

01

00

02

00

0

France (IFA) peak [Positive=flow into GB]

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

58

Moyle Interconnector

20 30 40 50 60

-40

0-2

00

02

00

40

0

Ireland (Moyle) peak [Positive=flow into GB]

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

20 30 40 50 60

-40

0-2

00

02

00

40

0

Ireland (Moyle) off-peak [Positive=flow into GB]

solid=FPN 2009/10; dashed=Plexos 2009/10

Week

MW

Assumptions

60

Ex-ante assumptions

Generator Availability: OC2 + stochastic failure rate

Generator Dynamic Parameters, efficiencies etc: BM submissions + publicly available information

Simulation of interconnected (non-GB) markets: simplified stack (Redpoint’s experience)

Demand Forecast: National Grid well established process

Transmission zones and boundaries: National Grid experience and expected outage plan

Generation/demand per zone: Diagrams + GSP historic levels

Boundary limits: Power System Studies and operational experience

61

Ex-post assumptions

Fuel/ Carbon Prices: Argus forward curve and Bloomberg

Wind Output: 2009/10 metered output scaled for expected installed capacity (Gone Green scenario)

BM Prices: scaled from SRMC

Forecast

63

Like-for-like run (SRMC based)

2009/10 = 120

2011/12 = 268

2012/13 = 229

64

Pro-rata of values

2009/10 = 120 = £140m

2011/12 = 268 = £313m

2012/13 = 229 = £267m

65

Simplified waterfall (1)

140

313

154

19

-

50

100

150

200

250

300

350

2009/10 Fuel Prices &

Generation changes

Boundary limits 2011/12

To

tal

Co

ns

tra

int

Co

sts

(£

m)

66

Simplified waterfall (2)

140

267

104

23

-

50

100

150

200

250

300

2009/10 Fuel Prices &

Generation changes

Boundary limits 2012/13

To

tal

Co

ns

tra

int

Co

sts

(£

m)

67

Drivers for variations

� System boundaries

� Evolving transmission system

� Fuel Prices

� Snapshot based on forward curve; in reality, ex-post input

� Wind generation

� Snapshot based on best view of connections; in reality, ex-post input

68

Commodity prices effect

0

10

20

30

40

50

60

70

804 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3

2009 2010 2011 2012 2013

SR

MC

(£

/MW

h)

Old CCGT Typical coal unit Coal unit (LCPD opted out) New CCGT

69

Wind generation

0

1000

2000

3000

4000

5000

6000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Win

d m

ea

n g

en

era

tio

n (

MW

)

2012/13

2011/12

2009/10

70

Sensitivity analysis

� Commodity prices

� Wind

71

Effect of Movements in Gas Prices (up by 15% in summer)

0

10

20

30

40

50

60

70

804 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3

2009 2010 2011 2012 2013

SR

MC

(£/M

Wh

)

Old CCGT Typical coal unit Coal unit (LCPD opted out) New CCGT

2011/12 forecast up by 60%

2012/13 forecast up by 50%

72

Effect of Movements in Gas Prices (down by 15% in winter)

0

10

20

30

40

50

60

70

804 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3

2009 2010 2011 2012 2013

SR

MC

(£

/MW

h)

Old CCGT Typical coal unit Coal unit (LCPD opted out) New CCGT

2011/12 forecast down by 9%

2012/13 forecast down by 3%

73

Wind sensitivity 2011/12 (±±±±15%)

0

500

1000

1500

2000

2500

3000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Win

d m

ea

n g

en

era

tio

n (

MW

)

2011/12

2009/10

2011/12 forecast up/down by ± 8%

74

Wind sensitivity 2012/13 (±±±±15%)

0

500

1000

1500

2000

2500

3000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Win

d m

ea

n g

en

era

tio

n (

MW

)

2012/13

2009/10

2012/13 forecast up/down by ± 8%

75

Constraints Forecast - Range

£161m

(latest view)2010/11

£267m

£313m

Mid

£422m£238m2012/13

£526m£260m2011/12

HighLow

� Low = combination of all low scenarios

� High = combination of all high scenarios

76

Summary

� Transmission system evolving in response to new connections

� Constraint management is a key aspect of the value added by National Grid as System Operator

� Sharper incentives + Higher requirements = potential increase in CMS contracts

� Forecast presented is a snapshot based on current best view of controllable and un-controllable drivers

BSUoS Reporting

Jo Faulkner, Balancing Services Manager

78

Wa

terfa

ll Ex

am

ple

Intitial

Scheme

Target

Market

Length

Wholesale

Power Price

Other Ex-

Post

Adjustment

Agreed

Scheme

Target

SC+CH

Constraints

EW -

Constraints

Response

Outturn

6

-3.5

+2

+2

6.5

+1

-2

-0.5

5

79

Monthly Forecast & Outturn Example

0

20

40

60

80

100

120

140

Apr-

11

May-1

1

Jun-1

1

Jul-11

Aug-1

1

Sep-1

1

Oct-

11

Nov-1

1

Dec-1

1

Jan-1

2

Feb-1

2

Mar-

12

Apr-

12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-

12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

Mar-

13

Month

Mo

nth

ly IB

C (

£m

)

0

200

400

600

800

1000

1200

Cu

mu

lati

ve I

BC

(£

m)

Intital Scheme Forecast Agreed Scheme Forecast Latest Forecast Outturn

Cumu. Initial Cumu. Revised Cumu. Outturn+Forecast

80

Sc

he

me

Ch

art E

xa

mp

le

Scheme Profit or Loss (£m)

81

Mo

nth

ly B

SU

oS

Ex

am

ple

20

11

/12

: £0

.95

/MW

h

20

12

/13

: £1

.02

/MW

h

-

0.2

0

0.4

0

0.6

0

0.8

0

1.0

0

1.2

0

1.4

0

1.6

0

1.8

0

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Mo

nth

BSUoS charge £/MWh

La

st Y

ea

r Va

lue

Pro

vis

ion

al O

uttu

rn

La

test F

ore

ca

st

Closing remarks

Alan Smart, Energy Operations Manager

83

Next Steps

� Models to be ‘refreshed’ with most recent data prior to scheme start

� CUSC Modification to update Charging Methodology by removing the NIA concept from the BSUoS calculation

� Licence methodology statements to be developed

� Ofgem to publish Final Proposals in March 2011

84

Contact us

On the web:

Our dedicated web pages for electricity SO incentives are available at

the following addresses:

http://www.nationalgrid.com/uk/Electricity/soincentives/

Talk to us:

Ian Pashley: Tel: 01926 653446 ian.pashley@uk.ngrid.com

General enquiries: SOincentives@uk.ngrid.com