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Operating Margins

Operating Margins. Lorraine Weir, Project Manager, Strategy and Support, Gas Operations, National Grid Darren Lond, Senior Commercial Analyst, Transmission Network Service, National Grid. Operating Margins.

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Operating Margins

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  1. Operating Margins Lorraine Weir, Project Manager, Strategy and Support, Gas Operations, National Grid Darren Lond, Senior Commercial Analyst, Transmission Network Service, National Grid

  2. 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

  3. 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.

  4. 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

  5. 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)

  6. Operating Margins • Group 3: Orderly Rundown – isolation of consumers due to reduction of supply over forecast demand • To manage the unpredictability of curtailing demand

  7. Operating Margins – Providers Who provides OM?

  8. 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

  9. 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?

  10. 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

  11. 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 BuyPrice (in p/kWh) for gas for the Gas Day in which the service has been delivered

  12. 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 BuyPrice (in p/kWh) for gas for the Gas Day in which the service has been delivered

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