Winter Outlook 29/1 8 th October 29 Peter Parsons
Agenda Winters 28/9 & 29/1 Gas Demand Gas Supply Electricity Demand Electricity Supply
28/9 Overview Winter 28/9 characterised by: Periods of cold weather, snow and ice for ~ 2 weeks. Overall winter was average January cold snap drove UK gas demand to near record levels not seen since 23 (446mcm) Widespread gas supply disruptions across Europe in January as a consequence of Russia/Ukraine dispute over gas prices and compressor fuel Unprecedented IUK winter export flows Higher demands met through significant flows from UK Storage facilities at an early stage of the winter period Concerns raised over the UK s resilience to a late winter supply shock or prolonged period of cold weather Lower demands due to economic recession
Average winter temps 1928/9 to 28/9 9 Oct to Mar average temps ( o C) 8 7 6 5 4 1928/1929 1932/1933 1936/1937 194/1941 1944/1945 1948/1949 1952/1953 1956/1957 196/1961 1964/1965 1968/1969 1972/1973 1976/1977 198/1981 1984/1985 1988/1989 1992/1993 1996/1997 2/21 24/25 28/29 212/213 216/217 Winter 1 year winter average 17-year SNT Forecast climate
National Composite Weather Variable (CWV) and 17 year Seasonal Normal CW (Oct 28 Mar 29) 14 12 1 degrees CWV 8 6 4 SNCW 2 1-Oct-8 1-Nov-8 1-Dec-8 1-Jan-9 1-Feb-9 1-Mar-9
Mean National CWV: October March 8 7 6 Degrees CWV 5 4 3 2 1 Year 28/9 Last 1 Other years
Russia Ukraine: Why is it important? Crisis/State of Emergency Demand Response Moderately effected No Effects Reported Ukraine 12 bcm Russian Gas transits through Ukraine, ~2% European supplies Jan 29 Payment dispute leads to 13 day cut off 8 countries severely effected (55 million people), many households without heating Western Europe less severely impacted but increased storage use & exports Ukraine has been heavily impacted by the global recession and credit crunch Continued fears over payments leading to future cut offs
NBP vs Continental Contract Price 9 8 7 Price (p/th) 6 5 4 3 2 1 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 NBP Contr Price
28/9 Supplies 55 No material increase in UK gas price despite a combination of high demands, 8 Russia / Ukraine and subsequent exports via IUK 7 45 6 mcm/d 35 5 4 3 p/therm 25 2 1 15 1/1/28 1/11/28 1/12/28 1/1/29 1/2/29 1/3/29 UKCS Norway BBL IUK LNG Storage NBP
Remaining Storage Delivery mcm/d 14 12 1 8 6 4 SRS MRS LRS 2 nd February 29 1 st October 28 2 1 11 21 31 41 51 61 71 81 Days Stock
IUK flows v differential between NBP & European contracted price 3 3 IUK imports 2 1 Dispute over, high UK demand, continental imports Big responses, little variation in price differentials 2 1 IUK exports mcm/d -1-2 -3-4 -5-6 Russia/Ukraine dispute with UK exports to continent Response to high UK price -1-2 -3-4 -5-6 p/therm NBP < European contracted price 1/1/28 1/11/28 1/12/28 1/1/29 1/2/29 IUK Imports IUK Exports Differential Note: European contracted price based on National Grid analysis
28/9 Demands (inc IUK) 5 45 DM (ex IUK) NDM IUK mcm 4 35 3 25 2 15 1 5 1-Oct 8-Oct 15-Oct 22-Oct 29-Oct 5-Nov 12-Nov 19-Nov 26-Nov 3-Dec 1-Dec 17-Dec 24-Dec 31-Dec 7-Jan 14-Jan 21-Jan 28-Jan 4-Feb 11-Feb 18-Feb 25-Feb 4-Mar 11-Mar 18-Mar 25-Mar 1-Apr 8-Apr 15-Apr 22-Apr 29-Apr
Winter 28/9 gas demand On a weather corrected basis all market sectors were lower than last year NDM actual demand was slightly higher than last year due to the colder weather, but lower when weather corrected NTS industrial demand reduction based on temporary reduction at 2 large sites, these have returned to operation recently Domestic NDM (includes domestic) DM excluding power NTS Industrials Ireland Power GB % of actual winter demand 46% 6% 9% 1% 6% 23% 1% Weather corrected change from 27/8-5.3% -5.8% -11.9% -34.7% -.5% -4.1% -6.%
28/9 Weather corrected weekly peak electricity demands 62 61 6 59 58 57 56 59.1 27/8 Weather Corrected Winter Peak 56.4 57.6 26/7 Weather Corrected Winter Peak Demand (GW) 55 54 53 52 51 5 49 48 47 28/9 Weather Corrected Winter Peak ~6% reduction 46 November December January February March 28/9_NORM 27/8_NORM 26/7_NORM
28/9 Generation Mix 14 12 1 GWh/d 8 6 4 2 Gas min 274 GWh/d (~5 mcm/d) max 451 (~83) avg 371 (~68) 1/1/28 1/11/28 1/12/28 1/1/29 1/2/29 1/3/29 NUCLEAR GAS RENEWABLES FRENCH I/C OCGT OIL COAL
29/1 Winter Outlook Mum. He showed all of these charts last year! I know dear, he needs some new material
Met Office Sept 9 Early indications for winter 29/1 Rainfall: Signals slightly favour near or above average rainfall over much of Northern Europe, including the UK Temperature: Preliminary indications of near or above average temperatures over much of Europe including the UK Winter 29/1 likely to be milder than last year for the UK, with a 1 in 7 chance of a cold winter Weather series: 1971-2 Main forecast for Winter 29/1 will be issued in November by Met office
Total UK Winter Demand 6 55 Average ~ 3mcm/d 5 bcm 45 4 57.3 56.8 55.5 Further 2.5% lower 54.1 35 3 Seasonal normal forecast 28/9 Actual 28/9 Weather corrected actual 28/9 Seasonal normal forecast 29/1
Marginal dark / spark spreads in winter 6 FUTURES 5 4 /MWh 3 2 1 Oct-8 Apr-9 Oct-9 Apr-1 Oct-1 Apr-11 Dark Spread Spark Spread
Coal / gas generation winter 29/1 Gas (p/th) 6 5 4 3 2 Prices as of 3/9/9 55% Coal Burn Dec Nov Oct Jan-Mar Coal / Gas Burn 1 4% CCGT Gas Burn 2 4 6 8 1 Coal ($/tonne) Gas Range 4% - 55% Gas Favoured Uncertain Coal Favoured
29/1 forecast power generation 18 16 14 15.5 73mcm/d 88 mcm/d 15.9 bcm 12 1 8 12.3 66 mcm/d 11.9 6 4 1.4 13.2 5 mcm/d 9.1 2 Forecast 28/9 Actual 28/9 Forecast 29/1 Actual Low Seasonal normal High
Possible variation in daily gas demand 12 4 8 mcm/d 4-4 98-59 + = + 24-2 = 82-37 -8-2 Weather Power Generation Net Cause of Demand Variation NDM cold DM cold NDM warm DM warm Gas marginal generation Gas baseload generation Net increase Net decrease
Winter 28/9 4 Flexible supplies notably storage & IUK 3 mcm/d 2 Non Storage Supplies (NSS) UKCS & other imports 1 1/1/28 1/11/28 1/12/28 1/1/29 1/2/29 1/3/29 UKCS Norway BBL IUK LNG Storage
Storage Comparable storage levels to last winter (4.6 bcm, 124 mcm/d) Aldbrough offsets loss of some LNG storage Lower demands may influence storage use as may forward prices Storage (mcm/d) 12 1 8 6 4 2 3.9 bcm 95 mcm/d 1/1/28 1/11/28 1/12/28 1/1/29 1/2/29 1/3/29 Storage Demand 46 44 42 4 38 36 34 Demand (mcm/d) 34 mcm/d is typical level of non storage supplies
Historic & forecast supplies (highest 2 demand days) (mcm/d) 25/6 26/7 27/8 28/9 29/1 UKCS 265 28 211 198 183 Norway 29 84 84 97 1 BBL 24 36 29 2 LNG 12 12 3 18 4 Total NSS [1] (ex IUK) 35 329 335 341 343 IUK 35 18 12 3-3 Total NSS 341 347 347 344 331-386 Storage 45 46 54 63 124 Supply = Demand 386 392 41 47 [1] NSS = Non Storage Supply
Supply make-up, top 2 days 5 4 mcm/d 3 2 1 5/6 6/7 7/8 8/9 9/1 Forecast IUK UKCS Norway BBL LNG Storage
LNG import flows 35 mcm/d (average over month) 3 25 2 15 1 5 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Grain South Hook Dragon
Drivers that may influence supply & demand in 29/1 Repeat of Russia / Ukraine or other Continental / global driver IUK exports?, lower Norway?, lower LNG Lower Continental and global demand increases UK supply Change in gas prices
Forward Prices (September) 8 6 p/th 4 2 Note alignment of all prices & no seasonality in winter prices Oct-9 Nov-9 Dec-9 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 HH Zee TTF NBP German - Contract
Drivers that may influence supply & demand in 29/1 Repeat of Russia / Ukraine or other Continental / global driver IUK exports?, lower Norway?, lower LNG Lower Continental and global demand increases UK supply Change in gas prices Current winter UK price is below Continental contract More Norwegian?, IUK exports? UK & US prices are closely aligned Limited incentives for LNG to cross Atlantic for trades Future UK summer prices = winter prices Less of an incentive to flow storage? Higher NSS? Higher demand due to lower wholesale prices, notably for power generation Weather & events!!
Information Provision http://www.nationalgrid.com/uk/gas/data/gba/
29/1 generation availability assumptions 9 8 7 6 26.3 Assumed availability 9% 23.6 5 GW 4 3 28.1 85% 2 23.9 1 1.4 Full Metered Capacity (GW) 8% 8.4 Assumed Availability (GW) Nuclear French Interconnector Hydro generation Wind generation Coal Oil Pumped storage OCGT CCGT
Normal demand and assumed generation availability 7 65 6 GW 55 5 45 26/1/9 2/11/9 9/11/9 16/11/9 23/11/9 3/11/9 7/12/9 14/12/9 21/12/9 28/12/9 4/1/1 11/1/1 18/1/1 25/1/1 1/2/1 8/2/1 15/2/1 22/2/1 1/3/1 8/3/1 15/3/1 22/3/1 Normal Demand 86% generation with 2GW French Imports Short term operating reserve
Gas power interaction, 1in 2 weekday 7 6 OCGT Gas Marginal 5 Pumped Storage GW 4 3 2 1 Optimised gas ~5 mcm/d, excluding distillate ~6 mcm/d Gas at base load ~1 mcm/d Distillate Oil Gas Non-NTS Gas Baseload French Interconnector Coal Wind Hydro Nuclear 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 Settlement Period
1 in 2 demand and assumed generation availability 7 65 GW 6 55 5 45 26/1/9 2/11/9 9/11/9 16/11/9 23/11/9 3/11/9 7/12/9 14/12/9 21/12/9 28/12/9 4/1/1 1 in 2 Demand Short term operating reserve 86% generation with 2GW French Imports 11/1/1 18/1/1 25/1/1 1/2/1 8/2/1 15/2/1 22/2/1 1/3/1 8/3/1 15/3/1 22/3/1
Summary Winter 29/1 likely to be milder than last year for the UK, with a 1 in 7 chance of a cold winter Forecast gas demand (weather corrected) 2.5% lower, on top of 6% reduction last winter Forecast non storage supply similar to last winter with more upside, notably through LNG Generation availability exceeds forecast peak. Capacity margin 34%, operational margin 15% Economics of coal vs gas for base load generation are marginal but coal expected to be used at higher demand (prices) Gas for CCGTs continues to provide flex for electricity market and potentially a market response for gas Events happen!