Flash update

Winter outlook: £36 million in backup power contracts required to meet system standard

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The loss of load expectation (LOLE) in the coming winter would have been 8.9 hours/year – a margin of 1.2% – if National Grid had not procured backup supplies at a cost of £36 million.

The company said procuring Strategic Balancing Reserve (SBR) and Demand Side Balancing Reserve (DSBR) for 2015/16 has brought LOLE below the government-set level of 3 hours in most scenarios, and down to 1.1 hours in the base case, giving a margin at peak hours of 5.1%.

The figures came as  the system operator (SO) launched its consultation for the 2015/16 Winter Outlook. This winter the SO expects the electricity supply system to be at its tightest since 2005/6, as 2GW of generation has been shut down during the year.

Margin could be still tighter in the two following winters. Cordi O’Hara, head of operations at National Grid, said of the likely margins that the Grid “haven’t got a full sense of that yet” and would be doing more analysis.   The option of procuring SBR and DSBR is not currently open to the SO in winter 2016/17 or 2017/18. National Grid said it would consult in July on whether and in what form the measures should be extended.

In winter 2014/15 the system operator (SO) did not call on SBR or DSBR plant because the weather was warm and plant availability was higher than expected. In addition, the wind farm load factor (averaged at daily demand peaks) was 48% – higher than previous years.

National Grid said it said it expected gas supplies would be “sufficient” but it needs more information on three issues in the gas market. The first was the gas Significant Code Review, due to be implemented on 1 October, which will allow prices to spike higher as margins fall. That measure is intended to give the market more incentive to respond to tight gas supplies. The SO also wanted more information about technical issues at Centrica’s Rough offshore storage site, whose current capacity has been cut by 30%, and the knock-on effects of a gas production cap at the Dutch Groningen field.

The winter outlook consultation closes on 14 August.