UK Future Energy Scenarios. Richard Smith Future Transmission Networks Manager

Transcription

1 UK Future Energy Scenarios Richard Smith Future Transmission Networks Manager January 2012

2 Cautionary Statement This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid s financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as anticipates, expects, intends, plans, believes, seeks, estimates, targets, may, will, continue, project and similar expressions, as well as statements in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of National Grid s future performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ materially from those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and uncertainties relate to factors that are beyond National Grid s ability to control or estimate precisely, such as changes in laws or regulations and decisions by governmental bodies or regulators; breaches of, or changes in, environmental, climate change and health and safety laws or regulations, including breaches arising from the potentially harmful nature of its activities; network failure or interruption, the inability to carry out critical non network operations and damage to infrastructure, due to adverse weather conditions, including the impact of Hurricane Irene and other storms; performance against regulatory targets and standards and against National Grid s peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings, including those related to investment programmes, restructuring and internal transformation projects; and customers and counterparties failing to perform their obligations to the Company. Other factors that could cause actual results to differ materially from those described in this presentation include fluctuations in exchange rates, interest rates and commodity price indices; restrictions in National Grid s borrowing and debt arrangements, funding costs and access to financing; National Grid s status as a holding company with no revenue generating operations of its own; inflation; seasonal fluctuations; the funding requirements of its pension schemes and other post-retirement benefit schemes; the loss of key personnel or the ability to attract, train or retain qualified personnel and any disputes arising with its employees or the breach of laws or regulations by its employees; accounting standards, rules and interpretations, including changes of law and accounting standards and other factors that may affect National Grid s effective rate of tax; and incorrect or unforeseen assumptions or conclusions relating to business development activity. For a more detailed description of some of these assumptions, risks and uncertainties, together with any other risk factors, please see National Grid s filings with and submissions to the US Securities and Exchange Commission (the SEC ) (and in particular the Risk factors and Operating and Financial Review sections in our most recent Annual Report on Form 20- F). The effects of these factors are difficult to predict. New factors emerge from time to time and National Grid cannot assess the potential impact of any such factor on its activities or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this presentation. The content of any website references herein do not form part of this presentation. 2

3 The UK energy landscape is changing Sustainability Existing power station closures ~25% Affordability Security of supply of total capacity by 2020 Gas from UK sources ~25% of total supplies by

4 The future: efficiency, decarbonisation and electrification Electricity Heat Transport Smart Meters & Appliance efficiency Insulate and reduce Efficiency and innovation Heat pump Decarbonised electricity Gas backup & embedded generation new homes & retrofit Biomethane De-carbonise heat CNG and decarbonise transport 4

5 Our scenarios Our scenarios are designed to explore a range of possible outcomes Gone Green: Renewable and carbon targets are hit Slow Progression: 2020 targets are not hit until after 2025 Accelerated Growth*: Faster deployment of offshore wind than in Gone Green Electricity generation capacity (GW) Domestic heat pumps (m) Electric cars (m) Annual gas demand (TWh) 1,200 1, * Accelerated Growth only varies from Gone Green in the mix of power generation all other variables e.g. demand, EV s, heat pumps etc are the same as for Gone Green. 5

6 Gone Green: total UK energy requirements 2,500 2,000 1,500 1, Wind Renewable Nuclear Gas-CCS Gas Coal-CCS Coal Oil Energy requirement (TWh)

7 Gone Green: some key themes 2030 target 2020 targets 15% of energy from renewables 37% reduction in CO 2 60% reduction in CO target 80% reduction in CO Generation mix is radically overhauled Transmission is a key enabler connecting & balancing new, diverse sources of energy Electricity demand increases, driven by electric cars & heat pumps; gas demand declines Distribution network capacity significantly increases Carbon Capture & Storage is deployed at significant scale Significant technology uncertainty, disruptors may emerge 80% reduction in CO2 is achieved Consumer energy behaviour is unrecognisable from today 7

8 When do you switch to electric? Emissions intensity pre appliance (g/kwh) 1,000 Window for transport Window for heat Electricity (total grid) Marginal electricty for transport Marginal electricty for heat Natural Gas Gas-Biogas mix Oil Oil-Biofuel mix Appliance efficiency will also determine the optimum transition point and may extend the window 8

9 How much do you switch to electric? Electricity demand ~1,000 GWh / day (avg. November day) Gas demand ~4,000 GWh / day (avg. November day) GWh 4,000 3,000 2,000 Energy use is variable Full electrification of all heat: what you have to believe ~100 GW of heat electrified = Nuclear? Renewables? ~30 sites at 3.3GW / site ~20,000 wind turbines at 5MW / turbine 1,000 CCS? ~50 sites at 2GW / site Days Electricity demand Heat pump electric load Environmental heat Solar PV? ~27m homes at 17m 2 / home Inter-connectors? ~100 BritNed s at 1GW each even after significant energy efficiency 9

10 2020 to 2030: Distribution network capacity will need to increase Peak domestic electricity demand increases significantly ~2.5kW peak appliance demand for an average house Distribution networks will need to more than double their capacity ~3kW charge for an electric car + ~3.5kW demand for a heat pump = ~9kW potential total demand Household demand* Number of homes Embedded generation Network loading (kw/km) ~2.5kW ~4.7kW ~7kW 26m 31m 36m ~8GW ~15GW ~20GW ~75 ~170 ~300 Network scale X2.3 X4.0 * After diversity average peak demand Network scale vs 2010 levels 10

11 Now to 2020: EVs and heat pumps less significant than generation build Heat pumps ~1,200,000 in homes Properties insulated for efficiency Hot-spots of demand will emerge Evening peak impact mid-decade ~1 4GW peak demand Time of use tariffs & smart metering enable peak management by 2020 Change under Gone Green (GW) Electric vehicles ~1,700,000 on the road ~1 5GW peak demand (10) (20) 13A plug-in home charge dominant Hot-spots of demand will emerge Evening peak impact mid-decade Time of use tariffs & smart metering enable peak management by 2020 * Electric vehicle and heat pump at mid-range peak demand. (30) Generation Demand Gas Nuclear Coal Hydro Interconnector Wind Biomass Marine Gas Oil Electric cars* Heat pumps* 11

12 Are the 2020 targets achievable? 2020 Transmission connected renewable generation (GW) Gone Green target Currently connected Contracted projects at an average of 306MW each 78 average projects required (a 60% conversion rate) 2020 renewables target is challenging, but achievable Data source: National Grid TNQCU November 2011; National Grid 2011 SYS. Connected renewable generation excludes pumped storage. 12

13 A line of sight to achieving the 2020 renewables target 2020 Transmission connected renewable generation (GW) Gone Green target Currently connected Contracted Under construction Consents approved Awaiting consents Scoping 2020 renewables target is challenging, but achievable Data source: National Grid TNQCU November 2011; National Grid 2011 SYS. Connected renewable generation excludes pumped storage. 13

14 A line of sight to achieving the 2020 renewables target 2020 Transmission connected renewable generation (GW) Tidal Wave Gone Green target Currently connected Contracted Biomass Woodchip Onshore wind Offshore wind Securing offshore wind, particularly round 3, is critical Data source: National Grid TNQCU November 2011; National Grid 2011 SYS. Connected renewable generation excludes pumped storage. 14

15 Plus significant new non-renewable generation connections 2020 Transmission connected non-renewable generation (GW) CCGT Nuclear Contracted Other Interconnector Clean coal Data source: National Grid TNQCU November 2011; National Grid 2011 SYS. Connected renewable generation excludes pumped storage. 15

16 Cost implications Mean undiscounted real pounds per person per year 6,000 5,500 5,000 4,500 4,000 3,500 3,000 Markal High energy reduction / High renewables High nuclear / Less energy efficiency Higher CCS / more bioenergy National Grid (Gone Green) DECC do nothing scenario Friends of the Earth CPRE Mark Brinkley Atkins DECC scenarios Stakeholder scenarios DECC calculator suggests a number of low carbon scenarios are broadly comparable with a do nothing scenario for total energy costs Data source: DECC 2050 cost calculator: Markal is DECC s economic optimisation tool. 16

17 The transmission delivery challenge existing electricity network interconnectors potential wind farm sites potential nuclear sites Norway Ireland Netherlands Belgium France France 17

18 The UK energy landscape is changing New sources of energy; different peak and annual demand profiles; greater geographical spread of supply sources; greater supply and demand variability UK Future Energy Scenarios Energy focus 40 year outlook Scenario based Offshore Development Information Statement (ODIS) Electricity focus 20 year outlook Scenario based Ten Year Statement (TYS) Gas focus 10 year outlook Best view based Operating the Electricity Networks in 2020 (GO2020) Electricity focus 8 year outlook Scenario based Seven Year Statement (SYS) Electricity focus 7 year outlook Contracted background based Transmission Networks Quarterly Connections Update (TNQCU) Electricity focus Contracted background based 18

19 Appendix

20 Our scenarios: Gone Green Gone Green is constructed such that the renewable energy and carbon emissions targets are always achieved. A bottom-up approach is used starting with the finest level of detail practical. Generation capacity (Tx / Total)* 101GW / 115GW 128GW / 147GW Renewable generation capacity 36GW 64GW Low carbon generation capacity** 48GW 94GW Electric vehicles 1.8m (4TWh) 13.5m (40TWh) Heat pumps (domestic households) 1.2m (6TWh) 8m (60TWh) Transmission connected generation (GW) Nuclear Coal Gas Offshore Wind Onshore Wind Other Renew able Interconnector Other Summary: AGR nuclear plant receives 5yr life extensions beyond the closure dates in Slow Progression First new nuclear plant connects in 2019/20 The majority of existing coal plant closes by 2023 due to a combination of the IED and the age of the plant 4GW of coal with CCS connects post 2023 in addition to the Government funded pilot project Existing gas-fired plant is assumed to close at around 25 years of age A total of 13GW of new conventional CCGT plant connects over the period 7GW of new gas plant with CCS is included in the scenario from 2023 The build up of wind generation reaches 26GW of wind capacity in 2020 (17GW offshore) and 47GW in 2030 (37GW offshore) Marine generation develops more quickly than in the Slow Progression scenario reaching 4GW in 2030 * Total capacity includes transmission connected generation plus embedded generation ** Low carbon generation capacity includes renewable generation capacity plus nuclear and CCS 20

21 Our scenarios: Slow Progression Slow Progression is similar in concept to the forecasts of earlier years. Projections are prepared for electricity and gas demand on the transmission networks using econometric modelling at a sector level. Renewable energy and carbon emission targets are not met until after their deadlines Generation capacity (Tx / Total)* 96GW / 107GW 110GW / 123GW Renewable generation capacity 26GW 41GW Low carbon generation capacity** 38GW 59GW Electric vehicles 0.7m (0.9TWh) 4.5m (12TWh) Heat pumps (domestic households) 0.4m (0.8TWh) 0.4m (0.8TWh) Transmission connected generation (GW) * Total capacity includes transmission connected generation plus embedded generation ** Low carbon generation capacity includes renewable generation capacity plus nuclear and CCS Nuclear Coal Gas Offshore Wind Onshore Wind Other Renew able Interconnector Other Summary: AGR nuclear plant receives 5yr life extensions unless otherwise announced First new nuclear plant connects in 2021/22, with a slower build up of new nuclear capacity than in Gone Green or accelerated Growth The majority of existing coal plant closes by 2023 due to a combination of the IED and the age of the plant No new coal plant is built apart from the government funded pilot project with CCS coal plant assumed to prove uneconomic Existing gas-fired plant remains open for longer than in Gone Green A significant amount of new gas-fired generation is constructed between 2015 and 2023 in order to maintain the required levels of capacity. A total of 21GW of new conventional CCGT plant is included in the scenario by GW of new gas plant with CCS is included in the scenario from 2023 The build up of wind generation is lower in this scenario with 20GW of wind capacity in 2020 (11GW offshore) and 32GW in 2030 (23GW offshore) Marine generation is assumed to develop very slowly with larger scale generation not connecting until around

22 Our scenarios: Accelerated Growth Accelerated Growth uses the same demand projections as Gone Green but assumes that offshore generation builds up far more quickly. There is no requirement for extra life extension for nuclear AGR plant as in Gone Green. Renewable energy and carbon emission targets are met early Generation capacity (Tx / Total)* 117GW / 131GW 137GW / 156GW Renewable generation capacity 51GW 74GW Low carbon generation capacity** 58GW 100GW Electric vehicles 1.8m (4TWh) 13.5m (40TWh) Heat pumps (domestic households) 1.2m (6TWh) 8m (60TWh) Transmission connected generation (GW) Nuclear Coal Gas Offshore Wind Onshore Wind Other Renew able Interconnector Other Summary: AGR nuclear plant receives 5yr life extensions unless otherwise announced First new nuclear plant connects in 2019/2020 Significant amount of new coal plant closes due to a combination of the IED and the age of the plant 4GW of coal with CCS connects post 2023 in addition to the Government funded pilot project Existing gas-fired plant remains open longer as a back-up for the significant amount of wind capacity A total of 13GW of new conventional CCGT plant connects over the period 5GW of new gas plant with CCS is included in the scenario from 2023 The build up of wind generation reaches 42GW of wind capacity in 2020 (33GW offshore) and 59GW in 2030 (49GW offshore) Marine generation develops at a slightly quicker rate than in the Gone Green scenario albeit reaching around the same level in 2030 * Total capacity includes transmission connected generation plus embedded generation ** Low carbon generation capacity includes renewable generation capacity plus nuclear and CCS 22

23 Where will our gas come from? Sources of gas change significantly Day to day variability could increase 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 2010/ /21 0% Avg. Sep Avg. Dec UKCS Norway LNG Continent Unconventional UKCS Norway LNG Continent Unconventional Storage 23

24 The regional transmission challenge NORWAY DENMARK GERMANY THE NETHERLANDS, Nemo BELGIUM, FRANCE 24