Options for Energy Buyers Winter 2006/ 07 Sonia Brown Director, - - PowerPoint PPT Presentation

Options for Energy Buyers – November 2006

Options for Energy Buyers Winter 2006/ 07

Sonia Brown Director, Wholesale Markets, Ofgem

Options for Energy Buyers – November 2006

Why are we here?

W inter 2 0 0 5 / 0 6 : A challenging tim e for custom ers

Low continental flow s Explosion at Rough I ssues w ith LNG - UI OLI Tight supplies High + volatile prices Custom er response

National Grid w inter outlook process key for this w inter…

GB m oving from use of indigenous supplies to net gas im porter

• W inter

2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Outlook for Winter 2006/ 07 appears brighter…

…but still no room for com placency

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

The road to Winter 2006/ 07

W inter

Rough UKCS Pipelines LNG

May June July August Septem ber October Novem ber Decem ber January BBL Gasport Langeled IUK Expansion Rough Resumes injections Morecambe returns Rough Resumes injections Morecambe returns Rough Additional capacity IUK Expansion Langeled BBL Gasport IUK expected 1 month early IUK expected 2 months early Gasport gains planning permissions Rough Additional Capacity Met office forecast published BE announcement BBL testing

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

30.00 35.00 40.00 45.00 50.00 55.00 60.00 65.00 1 / 1 2 / 2 6 8 / 1 2 / 2 6 1 5 / 1 2 / 2 6 2 2 / 1 2 / 2 6 2 9 / 1 2 / 2 6 5 / 1 / 2 7 1 2 / 1 / 2 7 1 9 / 1 / 2 7 2 6 / 1 / 2 7 2 / 2 / 2 7 9 / 2 / 2 7 1 6 / 2 / 2 7 2 3 / 2 / 2 7 2 / 3 / 2 7 9 / 3 / 2 7 1 6 / 3 / 2 7 2 3 / 3 / 2 7 3 / 3 / 2 7 p/therm NBP US ZEE TTF

10 20 30 40 50 60 70 80 90 100 1 / 1 / 2 6 1 5 / 1 / 2 6 2 9 / 1 / 2 6 1 2 / 1 1 / 2 6 2 6 / 1 1 / 2 6 1 / 1 2 / 2 6 2 4 / 1 2 / 2 6 7 / 1 / 2 7 2 1 / 1 / 2 7 4 / 2 / 2 7 1 8 / 2 / 2 7 4 / 3 / 2 7 1 8 / 3 / 2 7 p/therm

april June Oct Nov

The market’s view… ..

W holesale prices falling… …and differential w ith Europe reduced

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Gas - outlook for a ‘split winter’

Storage cycling is likely to be im portant

October

BBL enhancement due But what will the storage position be?

November December

First flows observed from Rough BBL – early testing of pipe

March

Langeled on stream - high flows during commissioning Negative prices observed IUK enhancement in place – 2 months early Rough full – additional capacity made available BE plant announcement – gas market interactions BBL on track – schedule remains tight Gasport on track (1st flows expected early Jan)

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Experience so far this winter

Early Oct - negative prices Warm weather Langeled starts Grain flows at max IUK in export I llustrates rigidity in continental m arkets

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Early Nov Colder weather Flows from IUK Use of storage

50 100 150 200 250 300 350 3 / O c t 5 / O c t 7 / O c t 9 / O c t 1 1 / O c t 1 3 / O c t 1 5 / O c t 1 7 / O c t 1 9 / O c t 2 1 / O c t 2 3 / O c t 2 5 / O c t 2 7 / O c t 2 9 / O c t 3 1 / O c t 2 / N

• v

4 / N

• v

mcm/day 5 10 15 20 25 30 35 40 45 50 p/therm Beach Grain LNG IUK Langeled MRS Rough SRS SAP

Options for Energy Buyers – November 2006

Norwegian vs. Continental supplies?

Higher Norwegian flows - Langeled + Vesterled Reduced flows observed through IUK Draw down of GB storage

Displacem ent of I UK gas?

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Temperature and Gas Demand

October warmer than average Cold snap in early November Corresponding levels of demand observed

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Electricity – outlook for this winter

10 20 30 40 50 60 70 80

GW

1

2 0 0 6 / 0 7 Gas Coal I nterconnector Dual Renew able (inc hy dro) Oil Pum ped Nuclear

Loss of 2.4 GW of BE nuclear plant

Gas-electricity m arket interactions likely to be im portant again this w inter

NG winter

• utlook:

margins = ‘healthy’ BE plant announcements Reduces flexibility to gas market

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Information is key

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Developments in information release

Website performance Gas demand forecasting 5 day out demand forecast info now available from NG Gas Balancing Alert notification available via SMS/ email I nitiatives progressed together w ith custom ers & suppliers in Ofgem ’s DSW G NG wanted earlier submission of system demand data Will assist with more accurate demand forecasts Ofgem approved rule change to do this on 3 0 Oct Ofgem developed incentives on NG to im prove quality of inform ation provision I ncentives are now in place

• W inter

2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Daily gas market information – National Grid

Demand data Storage position Linepack position Summary of supplies Pricing information Weather data Market Alerts – ‘GBAs’ Transporter interruptions

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Gas flow information now available

Real time data – available to whole market Gas flows onto the system from each sub-terminal Users to develop understanding of variations in data

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

French storage data now available

Quantities of gas in store Examples of information available from GdF and Total Injection volumes Withdrawals

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Industry led initiatives

Seeks ex-post publication of interconnector

• ff-take flow data

Proposes D+ 1 publication of storage stock info at LNG Importation Facilities Provision of Ex-Post Demand Info for all NTS Off-takes

UNC 1 0 4

Seeks to enable further demand side response

Sought ‘near time’ publication of GB storage flows

Info on more sites but reduced transparency at key facilities Ofgem rejected on 29 Oct – balanced decision

UNC 9 7 / 9 7 A UNC 1 0 8 UNC 1 2 1 UNC 8 8 Other proposals still undergoing industry assessment…

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

What is Ofgem doing - work ahead

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

It’s not just about winter… !

Electricity Gas

Continued Decline of UK Continental Shelf UKCS maintenance reduced gas supplies Maintenance on NTS impact of constraints Summer 2006 maintenance and high temperatures… Led to tight supply / demand conditions 18 July : Demand control imminent notice Technical issues at Ratcliffe – protests at Drax This sum m er = record sum m er prices observed … UK will soon be net importer of gas during summer… “Sum m er outlook” needed?

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Making progress in Europe

Central West Northern UK and Ireland South West Central South Central East Baltic

Electricity Regional Initiative Gas Regional Initiative

North-West North South South-South East

Real progress being made – customer involvement is important

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Work of the European Commission

Preliminary results of sector enquiry published in February Final report due at the end of the year EC Direction: Increased levels of information transparency Unbundling of network and supply activities Ofgem is continuing to work with the EC on these issues

* Encouraging results for GB custom ers * Key question rem ains: How long w ill European m arket liberalisation take?

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Gas Quality – potential for supply constraints?

GB gas supply sources have differing quality specifications Working to establish materiality of this constraint Short / medium term issue? Range of options for regulatory framework for new treatment plants I m pact on GB custom ers Ofgem hosting gas quality w orkstream s Open dialogue with industry : customer input is valuable * Results of industry assessment to be published in January *

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Ofgem Seminar Series

To reserve a place contact: wholesale.markets@ofgem.gov.uk

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Summary

Discuss w ith suppliers Variety of

• ptions

Consider outlook for w inter

W inter 2 0 0 6 / 0 7 I nform ation is key Ofgem ’s w ork

Options for Energy Buyers – November 2006

Promoting choice and value for all gas and electricity customers