Chief executive’s view: preparing for winter

National Grid has the right tools in place to keep the lights on, whatever the weather throws at us.

Understanding what winter holds for the energy sector can be difficult. On top of the notoriously unpredictable British weather, geopolitical factors such as the ongoing instability in Ukraine can have an impact.

National Grid’s 2014/15 winter outlook, which summarises the supply and demand situation we’re likely to face this winter, helps industry plan for the winter. It tells us in a nutshell how well we’re prepared to meet demand for electricity and gas during a cold winter.

We live in a changing world, so we’ll be keeping a careful watch on the situation through to next spring.

As system operator, National Grid’s role is clear: we need to work with a whole range of stakeholders, including power generators, energy suppliers, government and others to make sure that the lights stay on and the gas keeps flowing.

Our analysis and stakeholder consultation has shown that gas demand for winter 2014/15 is expected to be similar to last year’s. Average cold day demand is forecast at 400 million cubic metres per day (mcm/d), peaking at 499 mcm/d for exceptionally cold weather. However, the maximum supply potential is more than 600 mcm/d.

There are uncertainties, including the enduring tensions between Russia and Ukraine. But only in the most extreme circumstance, where all supplies from Russia are disrupted and it is exceptionally cold, would we need to take additional actions.

For electricity, margins are tighter this year than in previous years – down from 5 per cent last year to 4.1 per cent this winter. This is for a variety of reasons – including planned maintenance on generators and breakdowns. However, the margins are well within the reliability standard set by government, and we’ve managed tougher margins before.

We’re part of an industry that thrives on finding solutions. So, faced with the winter peaks and troughs of demand, we introduced two new balancing tools earlier this year: Demand Side Balancing Reserve (DSBR) and Supplemental Balancing Reserve (SBR). Taken together these add 1.1GW to overall capacity on the system and push the margin during an average cold spell up to 6.1 per cent.

Through DSBR, large energy users sign up voluntarily to reduce their demand at peak times during winter. They receive payments to take part. DSBR allows us to keep energy system costs down for consumers.

SBR aims to make use of previously uneconomic generating plant that would otherwise be closed or mothballed. A DSBR tender launched in June resulted in contracts being awarded to a number of providers and this week we announced that we’re contracting three power stations to provide SBR.

With these new services in place, I’m confident that we’ve got the right tools in place to deal with the toughest winter conditions.#