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National Grid - Key Challenges Beijing 24 October 2005

National Grid - Key Challenges Beijing 24 October 2005. Alan Smart Optimisation & Risk Manager UK Transmission. National Grid - recent developments. UK electricity & gas transmission. US electricity & gas. Other activities. UK gas distribution. National Grid Transmission organisation.

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National Grid - Key Challenges Beijing 24 October 2005

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  1. National Grid - Key Challenges Beijing 24 October 2005 Alan Smart Optimisation & Risk Manager UK Transmission

  2. National Grid - recent developments UK electricity & gas transmission US electricity & gas Other activities UK gas distribution

  3. National Grid Transmission organisation US Northeast Transmission UK Transmission Thin asset manager model Integrated gas and electricity Transmission business Functional organisation Functional organisation Shared functions Shared functions Field Force & Delivery Field Force & Delivery Operations Operations (SO) Asset Manager Asset Manager Transmission

  4. UK Generation Mix Coal CCGT Nuclear Oil Pumped Storage Interconnector Hydro Wind Gas Other Other

  5. Changing Sources of Supply • Support mechanisms for renewable generation • non fossil fuel obligation and Renewables Obligation Certificates (ROCs) • climate change levy exemption certificates (LECs) • capital grants • Market corrections (reflecting environmental costs into the wholesale market) • EU Emissions Trading Scheme – EU ETS • large combustion plant directive – LPCD • impact on fossil fuel plant and potential for nuclear generation

  6. UK Renewable Obligation Renewable Obligation National Grid Forecast Actual

  7. Changing supply patterns in electricity Ofgem final proposals recognise need to invest in networks to accommodate renewables £560m of GB "baseline" projects baseline projects now include upgrade of Anglo-Scottish interconnection Network Investment - Changes to supply Future windfarms

  8. Network Investment - Changes to supply Generation plant closures – nuclear, coal & oil Nuclear closure: -2.5GW of Magnox -3.5GW of AGRs Margin in 2013/14: 8% Coal & oil closure: 14.5GW of plant opted out of LCPD Assuming 30% of opt-out capacity closes,margin in 2013/14: 2%

  9. Network Investment - Changes to supply Generation capacity additions 30% New CCGT & Wind: 9.5GW contracted CCGT 7.7GW of Wind at full capacity 3.3GW of Wind at DNC margin in 2013/14: CCGT only 11% CCGT & DNC Wind 16% CCGT & TEC Wind 23% 25% 20% CCGT & Full Wind CCGT & Wind at DNC Plant Margin 15% CCGT - No Wind Coal, Oil, Nuclear & existing CCGT 10% 5% 0% 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

  10. Network Investment - Asset Replacement Age of NGC’s assets • Bulk of electricity existing system was installed from early 1960’s • Main plant asset lives are typically 45 - 50 years • Increasing investment demands: • network renewal (given asset life cycle)

  11. Network Reliability - General obligations • General obligations - ‘develop and maintain an efficient, co-ordinated and economical system of electricity transmission’ • But - • need to ensure you have defined what is in the public interest • need to ensure obligations on the business enable it to effectively meet the public interest • general obligations are open to interpretation, only form of control if they can be considered to have not been met is Licence Breach • Move towards specific well defined service standards aligned with public interest • align service standards with appropriate incentive schemes e.g. network reliability incentive

  12. Network Reliability- Incentives • Scheme went live on 1 January • sliding scale incentive, • potential to earn additional revenue for performance below the target level, small deadband, and a capped loss for performance above the target • for each incentive year, the revenue impact takes place in the following year. • the parameters of the scheme are as follows:

  13. Skills pool • Increase needed over the next 5 years in Project Engineers & Site Engineers in order to meet investment programme • Retirement of professional engineers over the next 5 years needs to be offset by planned recruitment and succession management • Low output of appropriate skilled people from UK education systems • perception of engineering and power industry • Need to diversify staff base • increase the representation of women and other minority groups in management teams/field force recruitment • Shrinking supplier base

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