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RG 0291 – Cumulative Linepack Option

This outline discusses the Linepack product, a proposed strawman solution, and questions regarding the valuation and management of Linepack flexibility. It also suggests next steps for further development and workshops.

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RG 0291 – Cumulative Linepack Option

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  1. RG 0291 – Cumulative Linepack Option 11 August 2010

  2. Outline • Linepack Product • Strawman • Cumulative Linepack – example • Next Steps

  3. Linepack Product • C27 Licence obligation to consult and if appropriate, introduce a Linepack Product; • Primary objective is to establish a market value for the use of Linepack flexibility • Cashout “Default System Marginal Prices (SMPs)” can be a proxy for User’s access to Linepack flexibility • System Operator (SO) Incentive to keep daily NTS Linepack change within 2.8 mcm – this restriction might be deemed an inefficient use of Linepack flexibility • Does the Linepack incentive preclude Users from accessing, and placing a market value on their of use of Linepack?

  4. Summary • Cashout “Default SMPs”; • Are a proxy for User’s use of Linepack flexibility • Default SMPs are outdated and require updating • Is original Default SMP calculation still relevant today? • Linepack; • Users have access to Linepack flexibility but it is valued through the Default SMPs rather than conditions on the day • Is it still appropriate to incentivise National Grid NTS to minimise Linepack flexibility in this manner

  5. Strawman • SO Incentive for Linepack (LP) Measure is removed • National Grid NTS continues to manage LP within set boundaries (calculated daily based on competing LP uses) • Re-introduction of Users’ cumulative imbalance quantity but modified: • Cleardown of Users’ cumulative imbalance by either rolling [20] Day period or, a day when National Grid NTS takes a Market Balancing Action • Cumulative imbalance charge might be fixed diff (SMP – SAP) based on operational cost (compressor fuel + pipe space)

  6. Users’ cumulative imbalance – Rolling [5] Day example • Users’ rolling cumulative imbalance (CI) ‘cleared’ every [5] days or when National Grid NTS takes a Market Balancing Action • CI charged at SMP differential dependent on direction of imbalance • Revenue into Balancing (or Capacity?) Neutrality

  7. Questions • How do we deal with seasonal Linepack build i.e. the value we see in LP? • Create an LP account as per Residual Balancer Role to trade gas to increase LP in winter and sell in summer? • Could there be an incentive around this? • Are there any unintended consequences? • Should this option be considered in conjunction with a Linepack Product e.g. Inter-day Park & Loan?

  8. Next Steps • National Grid (through Joint Office) to facilitate additional Workshops to discuss / develop business rules • Raise draft proposal • Others….

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