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Operating Margins

Lorraine Weir, Project Manager, Strategy and Support, Gas Operations, National GridDarren Lond, Senior Commercial Analyst, Transmission Network Service, National Grid

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Operating Margins

Is required to fulfil the requirements of the Primary Gas

Transporter’s Safety Case and is facilitated by Section K of the

Uniform Network Code

It is gas which can be supplied to the system, or demand which

can be reduced, in times of distress

It will primarily be used in the immediate period following

operational stresses before other balancing measures become

effective.

Currently booked annually

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Operating Margins

What is it for?

Emergency prevention.

Unforeseen events cause NTS to be out of balance

Market Balancing Actions insufficient (eg not timely)

Short term response

Emergency management.

During emergency, to safely manage the run-down of the

NTS.

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Operating Margins

What are the categories of OM (as defined in the Safety

Case?

Group 1: Supply failure or forecast demand change

Calculated from failure of infrastructure at terminals (could

be whole terminal or largest sub-terminal)

Network analysis used to determine the OM required to

maintain system integrity for up to 24 hours

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Operating Margins

Group 2: Pipe or compressor failures

Network analysis used to determine the OM required to

maintain system integrity for 24 hours

This can be a local requirement (locational) or general (non-

locational)

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Operating Margins

Group 3: Orderly Rundown – isolation of consumers

due to reduction of supply over forecast demand

To manage the unpredictability of curtailing demand

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Operating Margins – Providers

Who provides OM?OM Providers

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Year

GW

h

Storage LNG Demand Turn-Down Total Booking

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Future of OM

What is the future for OM?

Still required

Volumes may increase due to demand volatility (rapid

changes over a short time period when the market may

not react) due to;

Wind intermittency

CCGT ramping

Reduction in Distribution Network storage leading to diurnal

swing being transferred onto the NTS

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Future for OM

Need to review contract types:

Longer term for locational?

Shorter term for supply shock?

Other types?

Interaction between Mod 435 and OM?

Dependant on:

response timescales

period covered for

anything else?

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OM Deliverability Contracts

Option Price for OM deliverability contract

Annual Service Fee

Exercise price for utilising the contract

Current calculation principles are shown in the 2012/13 OM Statement http://www.gasgovernance.co.uk/sites/default/files/Operating%20Margins%20Statement%202012-13.pdf

New calculation principles can be developed in advance of OM tender periods

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Example OM Deliverability Contract 2012-1

The exercise price in respect of Deliverability Contract 2012-1 is as follows (in p/kWh):

Exercise Price = SMPB * 1.40

Where

SMPB represents the System Marginal Buy Price (in p/kWh) for gas for the Gas Day in which the service has been delivered

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Example OM Deliverability Contract 2012-2

The exercise price in respect of Deliverability Contract 2012-2 is as follows (in p/kWh):

Exercise Price = Max (SMPB + 0.1706, 2.559)

Where:

SMPB represents the System Marginal Buy Price (in p/kWh) for gas for the Gas Day in which the service has been delivered