A beginners guide to ELEXON, balancing and settlement and the - - PowerPoint PPT Presentation

Introducing ELEXON

12 September 2012

A beginner’s guide to ELEXON, balancing and settlement and the electricity industry

Introduction and Housekeeping

Victoria Moxham

2

What we’ll cover today:

Welcome to ELEXON

• Overview of the BSC, ELEXON and how

the industry fits together

• Ideal if you’re new to the industry
• General session – more information

available in your packs and from our website

3

Today’s Agenda

Understand the BSC Arrangements Meet the experts and understand the roles

• f Suppliers, National Grid and Ofgem

If you have any questions, please ask us or visit www.elexon.co.uk

4

ELEXON Evacuation Muster Point » If there is an alarm, follow the instructions

• f the Fire Wardens

» The evacuation point is here…

Welcome

ELEXON and the BSC

The Basics

Victoria Moxham

7

ELEXON : who we are and what we do Established in 2000 Role defined by the BSC Not for profit and impartial We’re the Balancing and Settlement Code company for GB At the centre of the GB electricity trading arrangements Funded by the industry

8

» We make balancing and settlement work… Or…

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Homes and businesses Suppliers Generators Small scale generators Generators Big industry

Central Volume Allocation (CVA) Supplier Volume Allocation (SVA)

Grid Supply Points

Transmission Network ‘The Grid’ Distribution Network

Interconnectors

The GB Electricity Market

10

Some stats

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So what’s the BSC?

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Budget and Strategy www.elexon.co.uk/about/corporate/

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BSC Governance BSC Panel

Trading Disputes Committee (TDC) Performance Assurance Board (PAB) Supplier Volume Allocation Group (SVG) Imbalance Settlement Group (ISG)

14

The Change and Modification Processes

Authority Decision Modification Process BSC Panel Committee Decision Change Process CSDs and BSC Systems

Driven by Industry Driven by Industry

Overseen by the BSC Panel Administered by ELEXON

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» Information on Modification Proposals and Change Proposals is in the Modifications, Change and Implementation section of the ELEXON website (www.elexon.co.uk) » Register for the Modification distribution list by emailing modifications@elexon.co.uk » Contact details for analysts leading on particular changes are available via the ELEXON website » For information on Change Proposals please email ccc@elexon.co.uk » Sign up to Newscast to receive updates when new Modifications and CPs are raised

We’re here to help Contact details

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The wider picture: how is electricity traded?

17

» ‘How do the electricity trading arrangements work?’ video » http://www.elexon.co.uk/pages/introductiontothebsc.aspx

The Trading Arrangements: an overview

18

A reminder: who does what?

National Grid

• Balance physical generation and demand on the

Transmission System

BSC Parties

• Produce and use energy in line with their contracted

position, or pay for differences via imbalance settlement charges

ELEXON

• Calculate imbalances and charge/pay Parties accordingly

deliver the BSC

effectively, efficiently and economically drive improvements forefront of the changes in energy markets remaining independent identifying and exploiting new

• pportunities

benefit our customers and stakeholders leader in the efficient

transformation

• f energy markets

shared solutions to address common industry problems Questions?

Imbalance Settlement

Roger Harris

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Roger Harris

Market Analyst Imbalance Settlement Group Chairman Operational Support Manager

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Introduction Electricity - the basics Transmission & Distribution Metering Trading Balancing Settlement

Today

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Electricity

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Electricity Consumption

Approximately 29,600,000 meters recording consumption in Great Britain

Source: www.bmreports.com

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Electricity Generation

Generators

Source: 2011 National Electricity Transmission System (NETS) Seven Year Statement

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Generation Fuel Types Coal Gas Nuclear

Source: www.bmreports.com

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Transmission

Source: 2011 National Electricity Transmission System (NETS) Seven Year Statement

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Generation, Transmission, Supply

Generators Suppliers

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ELEXON

Generators Suppliers Imbalance Settlement

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Settlement Period

Settlement period

30 minutes 1 hour Years in advance 14 months

BSC Central Services

32

1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers 2. ELEXON’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume 3. National Grid, provide data on balancing actions 4. Prices are calculated by ELEXON 5. Payment is made to and from our customers

Imbalance Settlement

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1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers

Imbalance Settlement Part 1 M Meter

34

Meters

Generators Suppliers Imbalance Settlement

M M M

Grid Supply Point

35

Transmission and Distribution

Generators

36

Balancing Mechanism Units

37

Supplier Base BM Units

38

Metered Energy Volumes M

Generators

M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M

Suppliers

∑M M

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1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers 2. ELEXON’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume

Imbalance Settlement Part 2

40

Energy Contracts

Forwards and futures market Settlement period

30 minutes 1 hour Years in advance 14 months

Gate closure

Power exchanges BSC Central Services

41

sells electricity to

Energy Contract

• bilateral contract made between Generator & Supplier

Submitted to ELEXON by

• Dedicated ‘High Grade’ communications line
• ‘Low Grade’ web connection
• ‘ECVAA Web Service’ (EWS)

Trading: Bilateral Contracts

Generator Supplier

42

Trading: Contract Notifications

Trading Party 1 Trading Party 2

Energy Contract Volume Notification Agent

Bilateral Contract Contract volume details Trading Party/ Agent Systems

Invisible to ELEXON

ELEXON Systems

ECVAA

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Trading: Power Exchange

Trading Party 1 Trading Party 2 Power Exchange ELEXON Systems Contract details BSC Central Services

Invisible to BSC

ECVAA

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Energy Imbalance M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M Energy Contracts Metered Energy

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1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers 2. ELEXON’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume 3. National Grid provides data on balancing actions

Imbalance Settlement Part 3

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Balancing Mechanism

Forwards and futures market Balancing mechanism Settlement period

30 minutes 1 hour Years in advance 14 months

Gate closure

Power exchanges BSC Central Services

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System Balancing System constraints managed

Balancing Actions

Energy Balancing Generation = Demand

M

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(Balancing) Notifications Initial Physical Notification (IPN)

• expected operating levels throughout the whole day

for each BM Unit

• submitted by 11am day ahead

Final Physical Notification (FPN)

• Expected operating level for Settlement Period for

each BM Unit

• submitted by Gate Closure

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an FPN of 100MWh would look like this...

Bid/Offer Submission

100MWh 125MWh 75MWh 50MWh 150MWh Time Energy

Contracted Sales FPN

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A Bid/Offer submission from a Generator with an FPN of 100MWh would look like this...

Bid/Offer Submission

100MWh 125MWh 75MWh 50MWh 150MWh £50/MWh £30/MWh £15/MWh £35/MWh

Offers Bids FPN

Time Energy

Contracted Sales

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Bids and Offers are a BSC Party’s willingness to operate the BM Unit ≠ FPN Used by National Grid to balance the system Offer energy to the system

• Increase generation or decrease demand

Bid to buy energy from the system

• Decrease generation or increase demand

Bids and Offers

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A Bid/Offer Acceptance to increase generation would look like this:

Bid/Offer Acceptance

100MWh 125MWh 75MWh 50MWh 150MWh £50/MWh £30/MWh £15/MWh £35/MWh

Offers Bids FPN

Time Energy

Contracted Sales

Offer Price £50/MWh Offer Price £30/MWh

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The BMRA

The Balancing Mechanism Reporting Agent (BMRA) publishes a range of live market data at www.bmreports.com

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1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers 2. ELEXON’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume. 3. National Grid, provide data on balancing actions. 4. Prices are calculated by ELEXON

Imbalance Settlement Part 4

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System Price Calculations Main Price Reverse Price

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System Energy Imbalance Party Imbalance Long Long Short Paid @ SSP (Main Price) Buy @ SBP (Reverse Price) Two Prices/Two Calculation Methods System is long = BIDs taken to reduce energy on system

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System Energy Imbalance Party Imbalance Short Long Short Two Prices/Two Calculation Methods Buy @ SBP (Main Price) Paid @ SSP (Reverse Price) System is short = OFFERs taken to increase energy on system

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Publication Live and historic prices on www.bmreports.com Best View Prices www.elexonportal.co.uk

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1. ELEXON’s systems and processes capture information to understand who consumed or generated energy and makes sure the right energy is assigned to the right customers 2. ELEXON’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume 3. National Grid, provide data on balancing actions 4. Prices are calculated by ELEXON 5. Payment is made to and from our customers

Imbalance Settlement Part 5

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Imbalance Settlement

Forwards and futures market Balancing mechanism Imbalance settlement Settlement period

30 minutes 1 hour Years in advance 14 months

Gate closure

Power exchanges BSC Central Services

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Imbalance Volume is difference of

• metered volumes
• bilateral contract volumes
• Balancing Mechanism volumes

Parties are charged for any mismatch (Imbalance) Settlement: How do we add it all up?

Energy Contracts Accepted Bids and Offers Metered Volumes Settlement Process Energy Imbalance = (Contracted & Bid-Offer Volume) vs. Metered Volume

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Funds Administration

Financial Settlement

BSC Party BSC Party BSC Party BSC Party BSC Party BSC Party BSC Party BSC Party

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ELEXON a Summary

Generators Suppliers Imbalance Settlement

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Trading

• Energy Contract Volume Aggregation Agent (Collects bilateral

contract information)

• National Grid (Operates the Balancing Mechanism)

Settlement

• Central Data Collection Agent (Collects CVA Metered Volumes)
• Supplier Volume Allocation Agent (Collects SVA Metered

Volumes)

• Settlement Administration Agents (Adds it up and converts

from energy to money)

• Funds Administration Agent (Sends out the invoices, financial

transactions)

BSC Central Services

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More Information

Imbalance Prices

Roger Harris

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» Imbalance prices are intended to incentivise you to balance your position (i.e. we would like your contracts to equal your metered volumes) » If Parties are not balanced, the System Operator may incur a cost taking actions to balance the system » The price calculation is designed to target the cost of these actions to the parties who created those costs » You can avoid exposure to cash out prices by balancing your position ahead of time Why?

69

All trades with National Grid Markets, exchanges, etc (inter party trading)

Gate Closure and National Grid’s role

Forwards and futures market Balancing mechanism Imbalance settlement Settlement period

30 minutes 1 hour Years in advance 14 months

Gate closure

Power exchanges

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» ELEXON accounts for generation/demand mismatches

• Parties submit energy contracts (ECVNs)
• Metered Volumes collected
• Difference is the Energy Imbalance

» Imbalance Prices:

• System Sell Price (SSP)
• Paid to BSC Trading Parties with too much energy
• System Buy Price (SBP)
• Paid by BSC Trading Parties with not enough energy

Energy Imbalance

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» Party is long

• more metered generation/less consumption than contracted volume
• Gets paid for the excess imbalance

» Party is short

• less metered generation/more consumption than contracted volume
• Pays for the deficit imbalance

» System is long

• System Operator pull back generation/increase demand

» System is short

• System Operator has to increase generation/decrease demand

Long or Short Terminology

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How we use Energy Imbalance Prices (1 of 2)

Party’s total notified contract volumes Metered generation Party is paid SSP MWh Paid bilaterally

Generating more than the contracted volume

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How we use Energy Imbalance Prices (2 of 2)

Party’s total notified contract volumes Metered generation Party buys @ SBP Paid bilaterally MWh

Generating less than the contracted volume

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» Main Pricing Method

• Costs of balancing the system
• National Grid accepted short term actions

» Reverse Pricing Method

• Market price of electricity
• Power exchange(s) trading in short term market

» Two-price mechanism

• Incentive to contract ahead
• Main price based on costs of energy balancing actions
• Potentially less favourable than contracting

Two Calculation Methods

Reverse Price

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» Also known as the ‘Market Index Price’ » Derived from specific trades on power exchange(s) » Volume weighted average of the price of qualifying market trades » Need at least 25MWh to set price Calculating the Reverse Price

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Calculating the Reverse Price

Balancing mechanism Imbalance settlement Settlement period

30 minutes 1 hour 12 hours 14 months

Gate closure

Power exchanges

» Average weighted volume of qualifying trades » Half hour, 1 hour, 2 hour and 4 hour blocks » Traded in the 12 hours preceding Gate Closure

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» The MIDs is a document that determines how the reverse price is calculated » Reviewed annually » Presented to

• Imbalance Settlement Group
• Industry via consultation
• The Panel
• Changes require authority approval

MIDS Market Index Definition Statement for Market Index Data Provider(s)

Main Price

80

BSC Central Services

Central Volume Allocation CVA Supplier Volume Allocation (SVA) Participant Systems Funds Administration Agent (FAA) System Operator Systems

GSP and Generator HH meter readings GSP Group Takes Supplier BMU HH data Generation BMU HH data Billing Report Imbalance Charges and Payments Contract data Energy Contract Notifications Physical Notifications Accepted Bids and Offers BSAD and Bid/Offer data Market Index Data (MID)

SVAA CDCA

Outstations

SAA

Participant Systems

CRA ECVAA ECVNA FAA BMRA

Power Exchange

ECVAA

Balancing Mechanism

MPID

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Balancing Mechanism

BOAs

Balancing Services (BS) contracts

BSAD Balancing Mechanism and Balancing Services

Forwards and futures market Balancing mechanism Imbalance settlement Settlement period

30 minutes 1 hour Years in advance 14 months

Gate closure

Power exchanges

One day before gate closure Commit or stand down on BSC contracts

82

» The Main Price is based on the Balancing actions taken by National Grid. These can be:

• Accepted Bids and Offers; or
• Balancing Services Adjustment Actions

What is the Main Price Based On?

FPN

Time

Energy 50MW 100MW 150MW £35/MWh

Accepted Offer (↑Generation) Volume = 20MWh

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Main Price Calculation

Main Price Calculation

Offer (↑Generation) : (20MWh @ £35/MWh) BSAA (↑Generation) : (19MWh @ £30/MWh) Bid (↓Generation) : (0.5MWh @ £27/MWh) Offer (↑Generation) : (100MWh @ £38/MWh) BSAA (↓Generation) : (20MWh @ £40/MWh) Offer (↑Generation) : (9MWh @ £94/MWh) Bid (↓Generation) : (20MWh @ £40/MWh)

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» BUT not all data is used in the calculation

• Include Energy Balancing actions
• actions taken to maintain gross national HH balance
• Exclude System Balancing actions
• Actions taken to balance system in a geographic area

and/or for shorter term balancing, e.g. frequency control

Main Price Calculation

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Main Price Calculation

Processes (in order) 1

Disaggregated BSAD

2

System Operator flagging

3

Emergency Instruction flagging

4

CADL flagging

5

De Minimis tagging (includes BSAD)

6

Arbitrage tagging (includes BSAD)

7

Classification

8

NIV tagging

9

Replacement Price

10

PAR tagging

11

BPA/SPA

Process works out what Bids, Offers and BSAD used in Main Price calculation and removes the rest National Grid Settlement Administration Agent (SAA)

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Main Price Calculation

Main Price Calculation

Offer (↑Generation) : (20MWh @ £35/MWh) BSAA (↑Generation) : (19MWh @ £30/MWh) Bid (↓Generation) : (0.5MWh @ £27/MWh) Offer (↑Generation) : (100MWh @ £38/MWh) BSAA (↓Generation) : (20MWh @ £40/MWh) Offer (↑Generation) : (9MWh @ £94/MWh) Bid (↓Generation) : (20MWh @ £40/MWh)

CADL: under 15 mins DMAT: less than 1 MWh SO Flagged CADL: under 15 mins

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» Once all the relevant System Balancing actions have been removed… » Calculate a volume weighted average price

• ver those remaining

Main Price Calculation

Offer (↑Generation) : (20MWh @ £35/MWh) BSAA (↑Generation) : (19MWh @ £30/MWh) Offer (↑Generation) : (100MWh @ £38/MWh)

=((100*38)+(20*35)+(19*38))/ (100+20+19) =£37.57/MWh

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» In some circumstances, SBP and SSP are not set at Main/Reverse Price

• If insufficient market trades to set Reverse Price

(minimum 25MWh required)

• If SSP is greater than SBP

Default Rules and Capping

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Detailed System Prices » BM Reports website (www.bmreports.com):

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http://www.elexon.co.uk/wp-content/uploads/2012/03/imbalance_pricing_guidance_note.pdf

Want to know more?

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» ELEXON website (www.elexon.co.uk)

• Imbalance Pricing Guidance
• Section T of the BSC
• Trading Operation Report

» Balancing Mechanism Reporting Service (www.bmreports.com) » ELEXON Portal (www.elexonportal.co.uk)

• Best View Prices

» National Grid website (www.nationalgrid.com) Further Information

Supplier Volume Allocation

Jonathan Priestley

94

Compare what a Generator agreed to produce… Compare what a Supplier agreed to buy… With what a Supplier consumed… With what a Generator produced…

Imbalance Settlement

And calculate payments where the two don’t match And calculate payments where the two don’t match

95

Supplier Volume Allocation works out how much electricity a Supplier consumes each half hour.

96

Large sites have Meters which record each half hour’s consumption, making them straightforward to settle.

97

The domestic dilemma

How do we get half hourly values from a meter that is read a few times a year?

98

Sampling customers’ consumption… produces profile data giving a typical usage pattern across a year… which we can apply to all similar customers

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Data Collector Collect Meter reads and convert to annual value For each Supplier group consumption together by profile class Produce half hourly values from profile data and consumption values Data Aggregator Settlement

100

[Supplier Hub] Data Collector Meter Operator Distributor Data Aggregator

The Supplier Hub

101

Unmetered Supplies

We can manage small, predictable loads as Unmetered Supplies.

102

Distributors meter what goes onto their network, GSP Group Correction adjusts Supplier volumes to match, meaning errors are socialised.

103

Settlement Calendar

Settlement takes place after 16 Working Days but we revisit the calculations four times to ensure accuracy, finishing after 14 months.

104

Settlement results in

• payments. We have an

assurance framework to ensure data quality and payment accuracy.

Ofgem – a regulatory perspective

Jon Dixon 12 September 2012

106

Introduction

• Ofgem – About us
• Ofgem’s role in the BSC change process
• Recent and future developments affecting BSC

107

About Ofgem

• Who are we? The Office of Gas and Electricity Markets (the Regulator)
• How are we governed? Ofgem is governed by an Authority, which

consists of non-executive and executive members

• What do we do? Protecting the interests of existing and future

customers is our first priority

• How do we do this? By promoting effective competition, wherever

appropriate, and regulating the monopoly companies which run the gas and electricity networks

108

Statutory duties primarily prescribed by …

• Gas Act 1986
• Electricity Act 1989
• Utilities Act 2000
• Sustainable Energy Act

2003

• Energy Act

Principal objective …

• Protect interests of existing

and future consumers

• Interests include reduction
• f greenhouse gas

emissions and security of supply

• Wherever appropriate, by

promoting efficient competition

• New Third Package
• bjectives

… whilst having regard to

• Security of supply;
• Diverse and viable long

term supply;

• Ability to finance licensed

activities;

• Vulnerable customers;
• Sustainable development;
• Efficiency and economy of

network etc.

Our Principal Objective and Statutory Duties

109

How is the electricity market regulated?

• ss.6-7A of the Electricity Act 1989 set out scope of

electricity licensing

• Authority grants licences to carry out certain activities

Licensable activities

• Standard Licence Conditions set out licensee obligations
• Require creation of codes and set out scope and relevant
• bjectives

Licences

• Licensees must become party to the relevant codes

under their licences

• There are 7 electricity codes, including the BSC

Codes 110

The Balancing and Settlement Code (BSC)

• Standard Licence Condition (SLC) C3 of National Grid’s Transmission Licence

sets out the scope and objectives of the BSC: a) Efficient discharge of licence obligations b) Efficient, economic and co-ordinated operation of GB Transmission System c) Promoting effective competition in generation/supply and sale/purchase of electricity d) Promoting efficiency in implementation and administration of balancing and settlement arrangements e) Compliance with the Regulation and any relevant legally binding decisions

• f the European Commission and/or the Agency for the Co-operation of

Energy Regulators Changes to the BSC may only be made where it furthers the Relevant Objectives

111

Making changes to the BSC

• The process for making changes is set out in the BSC
• Modification proposals may be raised by code signatories or by consumer

representatives

• The BSC Panel oversees the assessment of proposed changes
• A change can only be made if:
• it better meets the code’s relevant objectives (compared to the current

arrangements);

• is consistent with Ofgem’s statutory duties

112

113

Modification process

• Modification raised
• Development phase
• Consultation with industry
• Recommendation by the Panel*
• Final Modification Proposal sent to the Authority*
• Authority makes a decision*

*For Self Governance modification proposals the Panel votes on implementation and Ofgem does not make a decision

Ofgem’s role in the change process

Focus on 3 areas:

• Attendance at Panel meetings (entitled to speak, but do not vote) and

presence at working groups, standing and issue groups (can raise questions as part of group discussions)

• Respond to requests for views on process and some early decisions on

urgency

• Decision maker on modifications that are not Self Governance

11

Decision Maker

Decision Letter

• Includes:
• A basic overview of mod proposal;
• Explanation of decision by reference to

code objective and our duties;

• Due regard to context (consultation

responses, previous decisions etc);

• Direction or notice to National Grid that

BSC should/should not be amended and implementation date if approved;

• Public domain: Elexon and Ofgem both

publish

Appeals

• If our decision is contrary to the Panel’s

recommendation, it may be appealed to the Competition Commission (ss.173-177 and Schedule 22 of the EA 2004).

• Authority can exclude appeal if delay

caused by it would have material adverse effect on availability of electricity for meeting reasonable demands (Art. 12 of The Electricity and Gas Appeals (Designation and Exclusion) Order 2005).

115

*Ofgem is not the decision maker on Modification Proposals that are Self Governance

Code Governance Review (CGR)

116

• A 3 year project with the aim of:
• Encouraging best practice and making the change process more robust
• Making the change process more accessible and transparent especially

for small parties and new entrants

• Main changes are:
• Charging methodologies into the code
• Introduction of Self Governance
• Possibility for Ofgem of raising a Significant Code Review
• Send-back powers
• CGR changes implemented in the BSC on 31st December 2010

SCR and Self Governance criteria

Significant Code Review (SCR)

Significant impact upon:

• competition;
• consumers;
• the environment or sustainability;
• security of supply, and

It is likely to have cross-code or cross-licence issue

Self Governance (SG)

Immaterial impact upon:

• competition;
• consumers;
• safety or security of supply or sustainable

development;

• the operation of the (relevant) system;
• modification procedures, and

Is unlikely to discriminate between classes of party

Any modification not meeting these criteria will continue to follow the standard modification process

117

BSC Mods

• How often are mods raised?

Mods can be raised on an ongoing basis and the amount varies year

• n year
• In 2011, 15 modifications proposals were raised in the BSC
• Around 20% of these were Self Governance

118

Industry developments affecting BSC (1/2)

European Third Package

• changes came in force 10 Nov 2011
• New relevant objective introduced for BSC:
• Compliance with the Regulations and any relevant legally binding

decisions of the European Commission and/or the Agency for the Cooperation of Energy Regulators

• Development of EU ‘network codes’ to directly apply to GB
• Impact on national codes – i.e. balancing and settlement arrangements
• Authority may raise code modifications – where considered necessary to

comply with/implement the Regulation and/or any relevant legally binding decisions of the EC and/or ACER Regulators

119

Industry developments affecting BSC (2/2)

Smart metering

• Implementing smart metering: increasing settlement based on actual readings
• Creation of the Smart Energy Code (SEC) and the Data Communications

Company (DCC): there may be some consequential changes on BSC

DECC Electricity Market Reform (EMR)

• Interactions with electricity cash-out arrangements

120

Ofgem – a regulatory perspective

Jon Dixon 12 September 2012

121

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Our Role as National Electricity Transmission System Operator (NETSO)

Tariq Hakeem

123

Presentation Outline

 National Grid?  Our Legislative Framework  National Grid as National Electricity Transmission System Operator (NETSO)  The Future Challenges

National Grid?

125

Our Networks

Transmission UK – electricity and gas Transmission US – electricity Gas Distribution US Gas Distribution UK

126

Our Networks

Transmission US – electricity Gas Distribution US Transmission UK – electricity and gas We own the electricity transmission system in England and Wales. Our assets comprise: ~7,200km of overhead line ~675km of underground cable 338 substations We own the gas national transmission system in Great Britain. Our assets comprise: ~7,600km of high pressure gas pipe 26 compressor stations We own and operate gas distribution networks across upstate New York, New York City, Long Island, Massachusetts, New Hampshire and Rhode Island. Our assets comprise: ~58,000km of pipeline We provide services to ~3.5 million consumers. We own and operate an electricity transmission network spanning upstate New York, Massachusetts, Rhode Island, New Hampshire, and Vermont. Our assets comprise: ~13,700km of overhead line ~160km of underground cable 525 substations. Gas Distribution UK We own and operate four of the eight regional gas distribution networks in Great Britain. Our assets comprise: ~132,000km of pipeline We transport gas on behalf of approximately 26 active shippers from the gas national transmission system to ~10.8 million consumers.

127

Transmission UK - Electricity

SPTL SHETL NGET National Electricity Transmission System Operator

Our Legislative Framework

129

Legislative Framework: Overview

Transmission Licences Distribution Licences Generation Licences Supply Licences STC BSC CUSC Grid Code Transmission Licence

C10 C3 C14 B12

Legislation 1989 Electricity Act 2000 Utilities Act 2010 Energy Act

Seven Year Statement System Charging Connection Charging

C11 C4 C6

130

Legislative Framework: Transmission Licence Themes

 Efficient and economic development, maintenance and operation of the system (C14)  Non-discriminatory (e.g. C7)  Prohibition on buying and selling electricity for sale to third parties (C2 for SO and D6 for TO)  Codes (B12, C3, C10, C14) and Balancing Services (C16)  System Charging (C4)  Obligations to provide information to Ofgem (e.g. B4)  Information on GB Transmission System (C11)  C16 statements – BSAD, ABSVD, PGs, BPS, SMAF

National Grid as National Electricity Transmission System Operator (NETSO)

132

We do: Economically balance supply and demand, second by second for the National Electricity Transmission System (NETS) to keep frequency within statutory limits. Facilitate the energy market by maintaining adequate transmission capability within agreed security standards. We do not: Have an obligation to supply

National Grid as System Operator (SO)

133

Demand Forecasting

SO Balancing Tools Frequency Response Plant Reserve Plant Bid-Offer Acceptances (BOA) Forward Trading SO Balancing Tools Demand Reduction Low Frequency Relays

Key Challenges: Supply vs Demand

Generation Demand Physical Notifications

134

• Expected changes in demand
• Maintenance outages on

equipment

• Expected changes in generation
• utput
• Sudden unexpected changes in

demand

• Losses of Transmission assets

(e.g. circuit faults)

• Unexpected changes in generation
• utput (e.g. equipment fault)
• Changes in weather conditions
• Unexpected events (9/11)

Planned Unplanned

Must ensure transmission equipment is not overloaded and that voltage & frequency are within tolerance limits

Key Challenges: Managing System Outages

135

2 double cct faults 6 simultaneous faults 105 single cct faults 5 cable faults 2000 communication

• r protection faults

4 busbar faults 10 transformer faults 21 circuit breaker faults

99.99974% 2008/09 99.99979% 2009/10 99.99969% 2010/11 Reliability Year 2006/07 2007/08 99.99985% 99.99950%

Reliability Performance

Key Challenges: System Security and Reliability

136

Gen 1000MW = Demand 1000 MW Scenario: Intact Network

Maximum allowable flow per circuit is

500MW

Gen A Generation 1000MW Demand 1000MW Scenario: Circuit Out of Service Gen A 500MW + Gen B 500MW = Demand 1000 MW Gen A Generation 500MW Demand 1000MW

X

Gen B Generation 500MW

Circuit out of service for maintenance or a fault may have

• ccurred

Key Challenges: Capacity/Constraints

137

Nuclear 48 hours Coal Fired 12 hours Oil Fired 8 hours 6 hours Gas Turbines 2 minutes CCGT 10 seconds Hydro Wind N/A

5 gCO2eq/kWh 1000 gCO2eq/kWh 650 gCO2eq/kWh 500 gCO2eq/kWh 1000 gCO2eq/kWh 10 gCO2eq/kWh 5 gCO2eq/kWh

Key Challenges: Managing Frequency

138

Real time balancing: Frequency

Target speed 50 miles/hour (+/- 0.5mph) Accelerator = Generation Gradient = Demand

 Statutory duty (License – balancing)  To maintain secure operation of the system  To maintain quality of supply  To operate economically

50.0 49.5 50.5

Generation Demand

139

10 s 60 s Time 49.5 49.2 Frequency (Hz) 50.0 49.8 50.2 30 s Primary

(10-30s)

Incident (e.g. generation loss) Secondary

(30s - 30min)

Reserve 49.0 48.8 47.0

Lower Statutory Limit

50.5

Upper Statutory Limit

52.0

Key Challenges: Managing Frequency

Demand Disconnection Generation Tripping

Upper Operational Limit Lower Operational Limit Lowest ‘Planned’ Limit

30 mins

140

Statutory Limit (< 1 minute) Longannet (345MW) Sizewell B (1237MW) 3rd Frequency Drop Automatic Operation of Low Frequency Relays (~580 MW Demand in England & Wales)

48.6 48.8 49 49.2 49.4 49.6 49.8 50 50.2 11:30 11:31 11:32 11:33 11:34 11:35 11:36 11:37 11:38 11:39 11:40 11:41 11:42 11:43 11:44 11:45 11:46 11:47 11:48 11:49 11:50 11:51 11:52 11:53 11:54 11:55 11:56 11:57 11:58 11:59 12:00

Key Challenges: Managing Frequency (May 2008)

Time Frequency (Hz)

141

System Operator Overview

Title:

Monitoring and responding to the demand for electricity

Location: http://www.bbc.co.uk/learningzone/clips/monitoring-and-

responding-to-the-demand-for-electricity/7977.html

Link:

Video – BBC

142

Predicting the Unpredictable: Impacts on Demand

143

Weather has a significant effect on demand

+ 0.5 GW + 0.5 GW + 1 GW + 1.5 GW + 1 GW

• 2 GW

Temperature (1°C fall in cold conditions) Cloud cover (clear sky to thick cloud) Precipitation (no rain to heavy rain) Temperature (1°C rise in hot conditions) Cooling power (10 mph rise in cold conditions) Embedded Wind Power (Maximum output)

144

Predicting the Unpredictable: World Cup 2006 (England v Portugal)

National Grid demand (MW)

31500 32000 32500 33000 33500 34000 34500 35000 35500 49.8 50.0 50.2 15:30 15:45 16:00 16:15 16:30 16:45 17:00 17:15 17:30 17:45 18:00 18:15 18:30 18:45 19:00 19:15 19:30

KO 16:00 Half-time 16:45 Full-time 17:45 Extra-time 18:30

Frequency (Hz)

Penalties 18:44

Time

145

Predicting the Unpredictable: Top 5 TV Pickups

• 1. 4th July 1990
• 4. 5th April 2001

EastEnders (Who Shot Phil Mitchell) 2,290MW

• 3. 12th June 2002

World Cup (England v Nigeria) 2,340MW

• 2. 21st June 2002

World Cup (England v Brazil) 2,570MW World Cup (England v W Germany) 2,800MW

• 1. 4th July 1990
• 5. 28th April 1991

Darling Buds of May 2,200MW

Future Challenges

147

Gas from UK sources

~25%

• f total supplies by 2020

Sustainability Affordability Security of supply Existing powerstation closures

~25%

• f total capacity by 2020

The Energy Challenge: Changing Energy Landscape

148

The Network Challenge: A Changing System

future potential investment to connect Scottish renewables existing network potential wind farm sites future potential load related investment to 2017 potential nuclear sites

149

The Network Challenge: A Changing Generation Mix

future potential investment to connect Scottish renewables existing network potential wind farm sites future potential load related investment to 2017 potential nuclear sites

Gas CCGT Coal CCS Nuclear Wind Renewable Interconnector CHP Other

2020

~110GW

2012

~75GW

150

The Network Challenge: Smart(er) Networks

Bulk generation Grid-scale storage

Nuclear Wind CCS Solar

Energy mix

Gas Other renewables Pumped hydro Flywheel Battery

Transmission grid Local distribution grid

Smart transmission substations Smart distribution substations

Smart building and home Interconnection to super-grid

Smart transmission substations

To remote micro-grid

Distributed wind, solar, CHP, other Distributed storage +

• Heat pumps &

district heating

Multi-way flows & distributed resources

Plug-in EV Smart buildings

Active demand side

Smart meter Energy management system Smart HVAC Smart appliances Smart EV charging On-site storage Micro- generation Compressed air

Wide area situational awareness

Source – Bloomberg Consortium on Digital Energy 2010

151

How to meet these challenges in the most economic and sustainable way whilst maintaining security of supply?

Inflexible generation Variable generation Large generation Variable generation Variable generation

?

The SO Challenge: Operating the System in 2020

152

Electrification of transport… …electrification of heat The SO Challenge: New Sources of Demand

153

60 55 50 45 40 35 Time of Day 00:00 04:00 08:00 12:00 16:00 20:00 24:00 Electricity Demand (GW)

Optimal charging period Typical winter daily demand

Peak commuting time Peak commuting time

The SO Challenge: New Sources of Demand

154

2.8 GW 0.8 GW 2.0 GW 2.6 GW 1.7 GW 1.8 GW

1 2 3

Domestic Refrigeration Heat Pumps Electric Vehicles Domestic Wet Appliances Industrial Refrigeration Air conditioning

Technical Potential (GW)

National Grid Analysis based on 'Gone Green' and the MTP 'Early Best Practice' dataset. Load factor and time of use assumptions apply

Future Opportunities: Balancing Services

155

In Summary

National Grid is the TO for England & Wales and the System Operator for the National Electricity Transmission System (NETS) We have obligations through our licence to maintain the network within defined limits Generation and demand must be balanced second by second in spite of daily challenges The energy landscape is changing and as System Operator we must change with it

156

Questions

Contact info: Tariq Hakeem tariq.hakeem@nationalgrid.com

Smart Metering

David Jones

Smart Metering in Context: Long & Short Term Challenges & Opportunities

MARKET SIMPLIFICATION

• Business Processes &

systems

• Industry Codes

NEW TECHNOLOGIES

• Intermittent Generation
• Distributed Generation
• Electric Vehicles

MARKET REFORM

• Security of Supply
• Sustainability

CONSUMERS

• Consumers to understand

and adapt energy use

• New energy services &

tariffs SUPPLIERS/NETWORKS

• Reduced costs to serve
• Better outage

management & investment decisions

• Smart grids

£7bn Benefits

End to End Smart Model

Data Communications Co (DCC) Services DCC Users Supplier Services Consumer

WAN Module (Comms Hub) Smart Meter Gas Smart Meter Elect IHD

HAN

Other devices

Data Function

WAN

G a t e w a y Authorised Parties Suppliers Network Operators Settlement

SMIP Timetable

Challenges Privacy

Policy Charter Third Party Access

Security

Meters IHDs Comms Data Remote Disconnect

Difficult Installations

Flats Meter Boxes Asbestos Extensions Remote premises

Delivering & Measuring Benefits

Consumer Acceptance Consumer Energy Savings Supplier Costs Network Benefits

Governance

Smart Energy Code (SEC) Licence Conditions Contracts Legacy Systems/Processes Installation Code of Practice

Rollout

50+ million meters IHDs Supply Chain Procurement Installation Engineers

162

Ofgem: Smarter Markets Propositions

Policy area Long Term Objective Initial Question First Deliverable Change of Supplier

Fast, reliable & cost-effective change of supplier process What are the potential

• ptions for reform to deliver

an appropriate balance between speed, reliability and cost? Consultation on options for reform and the framework for evaluating them Q2 2013

Electricity Settlement

Settlement uses smart metering data to allocate energy in an accurate, timely and cost-effective way What is the most effective process for delivering longer- term reform of electricity settlement arrangements? Request for BSC to undertake a scoping exercise Open letter stating how reform will be progressed and Ofgem’s role Q1 2013

Demand Side Response

Create a market environment that supports the efficient, system-wide use

• f DSR

How might current market arrangements constrain the development of DSR? Consultation considering the potential of existing arrangements to support efficient system-wide DSR Q1 2013

Consumer Empowerme nt and Protection

Regulatory arrangements that empower and protect consumers to participate in smarter retail energy markets Are existing regulatory arrangements and the retail market fit-for-purpose for the smart roll-out? Initial assessment of the regulatory arrangements that may need change Q2 2013

www.elexon.co.uk/smart

What is ELEXON looking at in Smart? DECC & Ofgem Programmes

Review & respond to consultations Support to working groups Consequential changes Education on BSC Review of Settlement for Smarter Markets Smart opportunities (SEC & DCC)?

Impacts on BSC

Review of existing Settlement timetable (<14months!) Perceived barriers to HH Settlement Roadmap for HH Settlement Accuracy of existing NHH Profiles Supporting changes in consumer behaviour (ToU) Cost benefit analysis and modelling Identifying transition issues Thought leadership pieces

Day in the life of a Supplier

• 164 -

SS Who?

• 165 -

• 166 -

Many different models – that’s competition! SUPPLIER ROLE

• Safety
• Service
• Sustainability

energy made better

• Sustainability
• Excellence
• Teamwork

Generation – Energy Supply – Contracting – Energy Services – Energy Systems Gas Storage – National Networks – Retail – Scotia Gas Networks - Telecoms

• 167 -

Let’s go behind the counter

• 168 -

Meet the Buyers

Forecast and meet demand What’s likely to happen? Past history Known differences Sales projections Etc….. What do we need? prices, outages, special events, marketing performance, trends What have we got already? Long term contracts Own capacity Offers Etc….

• 169 -

Taking risk – Meeting demand

?

• 170 -

Electricity can’t be stored contracts are promises performance critical Contracts, Contracts

• 171 -

Lowrie Bec AccuRead S+S S+S Seimens Aquilla

Le Centrica

TXu Southern Electric Southern Electric Virgin

£95.30 £94.62 £92.99 £83.36 £43.46

Virgin Gas

£53.46

Virgin Gas

£62.99

Abbey National METER Abbey National METER S+S METER Abbey National METER S+S METER TRANS GAS Abbey National GAS METER

Le Centrica

£95.30

TRANS GAS

R E A D E R S M A I T A I N E R S S U P P L I E R S S S D I S T

Knightmere Avenue

The Mess

B&R Frank & Co. Smiths SSE SSE James Electric Supplier N Supplier V Supplier SSE Supplier SSE Supplier N

• 172 -

DISTRIBUTION NETWORK Service Pipe / Cable Metering MPRN / MPAN a unique identifier which describes this physical point.

Customer fuse box

Joint Often in street Property boundary Cut out / Tap

• 173 -

Meters – our hidden secret!

Customer Service

• 174 -

Though we are many – we all fit one profile….. Estimated Averaged Consumption

Time of day

C

• n

s u m p t i

• n
• 175 -

Readings bring reality = Annualised Actual

Time of day

C

• n

s u m p t i

• n
• 176 -

• 177 -

• 178 -

The ‘gremlin’ effect of Our legacy, Mergers, Technology improvements, Eased by:- Entry testing, Supplier hubs, Audits Have Supplier, have Meter Operator, have Data Collector MPAS

‘Supplier Hubs’

Data aggregator

• 179 -

Supply MOPco

Read Ltd

IF it all works:

• Correct billing – customer perception
• Purchase / Demand balance right
• No rework cost

The Supplier’s TEAM Manage contracts Manage team

• 180 -

• 181 -

And we haven’t even met a salesman……..

• 182 -

Suppliers – do it for you!

• 183 -