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Background to National Grid’s Baseline analysis. 14 August 2007. Agenda. Baselines during TPCR 2002 - 2007 Consultation during the TPCR 2007 – 2012 Ofgem’s modelling requests National Grid’s Network Analysis Ofgem’s Updated and Final Proposals. Baselines during TPCR 2002 - 2007.

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agenda
Agenda
  • Baselines during TPCR 2002 - 2007
  • Consultation during the TPCR 2007 – 2012
  • Ofgem’s modelling requests
  • National Grid’s Network Analysis
  • Ofgem’s Updated and Final Proposals
baselines during tpcr 2002 2007
Baselines during TPCR 2002 - 2007
  • How were the baselines set?
  • Baselines set on ‘Maximum Physical Entry Capacity’ (MPEC) methodology
    • Theoretical maximum through each ASEP
    • Ignored interactions between ASEPs
  • Obligations (SO baselines) set at 90% of MPEC
  • Baselines in aggregate (9755 GWh/d) acknowledged to be in excess of Physical capability of the system
  • Essentially purely a nodal model (no substitution)
consultation during tpcr 2007 2012
Consultation during TPCR 2007 – 2012
  • Problems with current arrangements?
    • High baselines coupled with zero priced capacity on the day discouraged Long-Term Signals and encouraged Short-Term bookings
    • Problems for new entrants (ASEPs) – not able to secure capacity which was not yet booked at existing entry points
  • View that current arrangements were not flexible enough to deal with changing demands for capacity
  • Debate over retention of entry specific baselines or move to more aggregated level?
  • Should modelling be based on supply substitution or load absorption?
  • Discussion whether baselines should exceed physical capability of the system (at peak)
load absorption vs supply substitution
Load Absorption vs Supply Substitution
  • Purpose of the modelling was to determine the maximum supply capability at different points on the system
  • Starting point for any network analysis is that supply equals demand
  • How do you increase supply, yet keep supply and demand in balance?
  • Load Absorption:
    • As supplies are increased at entry points, demands are increased pro-rata to keep supply and demand in balance
  • Supply Substitution:
    • As supplies are increased at entry points a corresponding other supply point is reduced (demands kept fixed)
ofgem s initial modelling request
Ofgem’s initial modelling request
  • Network:
    • Initially for 2 years 2007/8 and 2008/9
  • Demand side: central case forecast 1 in 20.
  • Supply side:
    • Initially just TBE Auctions + scenario for 2007/08 for all entry points and for 2008/09 for MH and IoG Initially, employ both supply substitution and 50/50 supply substitution/load absorption
      • Using least favourable node as supply balance
  • Modelling work produced four sets of data on “baseflows” (which reflected the initial supply scenario)
  • Also produced “free increments” (reflecting network capability at individual nodes or zones)
  • Modelling involved around 4 x 26 sets of analysis (104 man days effort)
ofgem s further modelling request
Ofgem’s further modelling request
  • Network:
    • Settled on using only 2008/9
  • Demand side: central case forecast 1 in 20.
  • Supply side:
    • Settled on using three TBE scenarios (Auctions +, Transit UK and Global LNG) using supply substitution
      • Using least favourable node as supply balance
  • Modelling work produced three sets of data on “baseflows” (which reflected the initial supply scenario)
  • Also produced “free increments” (reflecting network capability at individual nodes or zones)
  • Modelling involved 3 x 21 sets of analysis (58 man days effort)
ofgem s initial proposals
Ofgem’s Initial Proposals
  • Ofgem’s Initial Proposals (June 2006):
    • Decided on entry point baselines
    • Baselines should be set consistent with physical capability of the network (to include planned investments)
    • NGG NTS to introduce methodology for substituting baselines (in response to auction signals)
    • Modelling work favoured supply substitution
    • Proposed baselines were set on average of 3 TBE scenarios of ‘baseflow’ + 90% of ‘free-increments’
  • NGG NTS re-iterated that baselines should not exceed physical capability of the system and in their view, Ofgem’s IPs did exactly that
    • Within response to IP document, NGG NTS outlined its views for modelling network capability and baselines
national grid s network analysis
National Grid’s Network Analysis
  • Based on
    • 2006 plan ( i.e. on 2005 TBE data)
      • Central Supply scenario
      • 2008 Network
      • Hence included planned investments such as those on East Coast, Trans-Pennine pipeline
    • Zonal analysis (High case/Low case capabilities)
    • Taking strong account of network interactions on the system; and
    • Capacity commitments already sold
principles of allocation
Principles of allocation
  • No reduction in existing entry capacity commitments allowed
    • Based on maximum daily quantity booked for winter of 2007; plus
    • Incremental capacity released at each entry point from 2007
  • Any remaining capacity allocated on pro rata basis in proportion to expected peak level of supply
  • Highlighted interactions between zonal capabilities
    • If optimise Northern Triangle first, this results in reducing East Coast and West Coast zones below capacity rights already sold
    • East Coast zone chosen as starting point, hence based on ‘high’ case capability of 4127 GWh/d
      • Combined with Milford Haven at obligated level (950 GWh/d)
      • Results in only 1895 GWh/d of capability in Northern Triangle
ofgem s updated proposals
Ofgem’s Updated Proposals
  • Ofgem’s Updated Proposals (September 2006):
    • Stated that “baselines should be set at levels consistent with the simultaneous physical accommodation of possible flows under a wide range (although not all possible) scenarios across entry points”
    • Clarified that baselines will be set such that no baseline is less than the amount of obligated capacity already sold
    • Proposed reduction of proportion held back for shorter-term auctions to 10%
  • NGG NTS outlined concerns that not yet seen baselines which meet Ofgem’s stated aims
ofgem s final proposals
Ofgem’s Final Proposals
  • Ofgem’s Final Proposals (December 2006):
    • Stated that believed baselines reflected physical capability of the network
    • Baselines were consistent with the allowances made for NGG NTS in respect of the costs of buying back capacity
  • National Grid believed FP baselines still carried risk as above its proposed baselines

Note that no zonal analysis performed for NW or SW zones