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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
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 [email protected]
General enquiries: [email protected]