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 GB m oving from use of indigenous supplies to net gas im porter Low continental I ssues w ith LNG - Explosion at Rough flow s UI OLI High + volatile Custom er � � � Tight supplies prices response National Grid w inter outlook process key for this w inter… W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Outlook for Winter 2006/ 07 appears brighter… …but still no room for com placency W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
The road to Winter 2006/ 07 May Rough Rough UKCS Pipelines LNG Resumes June injections Rough July Morecambe Met office Resumes Morecambe IUK expected 1 returns forecast August injections returns month early published Septem ber Rough IUK expected 2 Rough IUK Additional months early Additional October Expansion Gasport gains Capacity capacity Langeled Novem ber planning BE announcement IUK Decem ber permissions BBL testing Expansion January BBL Langeled Gasport W inter BBL Gasport W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
The market’s view… .. 65.00 100 90 60.00 80 55.00 70 60 50.00 p/therm p/therm 50 45.00 40 30 40.00 20 35.00 10 30.00 0 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 7 7 7 6 6 6 6 6 6 6 7 7 7 7 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / / / / / / / 2 2 2 2 2 1 1 1 1 2 2 2 2 3 3 3 3 3 / / / / / / / / / / / / / 0 1 1 0 1 0 1 1 1 0 1 0 2 0 2 0 0 1 0 1 0 0 2 0 2 0 3 0 0 3 0 1 / / 1 / 1 / 1 / / 1 / 1 / 1 / / 0 / 0 / 0 / / 0 / 0 / 0 / / 1 8 5 2 9 5 2 9 6 2 9 6 3 2 9 6 3 0 / / / / / / / / / / / / / 1 0 0 5 1 9 2 2 2 0 6 1 0 1 4 2 0 7 0 1 1 4 2 0 8 0 4 1 2 8 3 0 1 2 1 2 1 2 0 2 0 1 0 1 april NBP June US Oct ZEE Nov TTF W holesale prices falling… …and differential w ith Europe reduced W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Gas - outlook for a ‘split winter’ � Langeled on stream - high flows during commissioning � Negative prices observed � IUK enhancement in place – 2 months early October � Rough full – additional capacity made available � BE plant announcement – gas market interactions � First flows observed from Rough November � BBL – early testing of pipe � BBL on track – schedule remains tight December � Gasport on track (1st flows expected early Jan) Storage cycling is likely to be im portant � BBL enhancement due March � But what will the storage position be? W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Experience so far this winter 350 50 Early Oct - Beach Grain LNG IUK Langeled MRS Rough SRS SAP 45 negative prices 300 � Warm weather 40 � Langeled starts 250 35 � Grain flows at max 30 � IUK in export 200 mcm/day p/therm 25 I llustrates rigidity 150 in continental 20 m arkets 15 100 10 Early Nov 50 � Colder weather 5 � Flows from IUK 0 0 v v t t t t t t t t t t t t t t t c c c c c c c c c c c c c c c � Use of storage o o O O O O O O O O O O O O O O O N N / / / / / / / / / / / / / / / / / 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 2 4 0 0 0 0 1 1 1 1 1 2 2 2 2 2 3 0 0 W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
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 Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Temperature and Gas Demand � October warmer than average � Corresponding levels of � Cold snap in early November demand observed W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Electricity – outlook for this winter Loss of 2.4 GW of BE nuclear plant � NG winter outlook: margins = ‘healthy’ 2 0 0 6 / 0 7 � BE plant 1 announcements � Reduces flexibility to gas 0 10 20 30 40 50 60 70 80 market GW Gas Coal I nterconnector Dual Renew able (inc hy dro) Oil Pum ped Nuclear Gas-electricity m arket interactions likely to be im portant again this w inter W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Information is key W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Developments in information release � Gas demand forecasting Ofgem developed incentives on NG to � Website performance im prove quality of inform ation provision I ncentives are now in place � 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 � 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 W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Daily gas market information – National Grid Demand data Storage position Summary of supplies Linepack position Pricing information Weather data Transporter interruptions Market Alerts – ‘GBAs’ W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
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 Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
French storage data now available Examples of information available from GdF and Total Injection volumes Withdrawals Quantities of gas in store W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Industry led initiatives � Sought ‘near time’ publication of GB storage flows UNC 1 0 8 � Info on more sites but reduced transparency at key facilities � Ofgem rejected on 29 Oct – balanced decision Other proposals still undergoing industry assessment… UNC 8 8 Seeks to enable further demand side response Seeks ex-post publication of interconnector UNC 9 7 / 9 7 A off-take flow data Proposes D+ 1 publication of storage stock info at LNG UNC 1 0 4 Importation Facilities UNC 1 2 1 Provision of Ex-Post Demand Info for all NTS Off-takes W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
What is Ofgem doing - work ahead W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
It’s not just about winter… ! Summer 2006 maintenance and high temperatures… � Led to tight supply / demand conditions Electricity � 18 July : Demand control imminent notice � Technical issues at Ratcliffe – protests at Drax � Continued Decline of UK Continental Shelf Gas � UKCS maintenance � reduced gas supplies � Maintenance on NTS � impact of constraints 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 Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
Making progress in Europe Gas Regional Initiative Electricity Regional Initiative Central West Central South Northern Central East North-West South North South-South UK and Ireland Baltic East South West Real progress being made – customer involvement is important W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
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 * Encouraging results for GB custom ers * Key question rem ains: How long w ill European m arket liberalisation take? Ofgem is continuing to work with the EC on these issues W inter Ofgem ’s I nform ation Options for Energy Buyers – November 2006 2 0 0 6 / 0 7 w ork is key
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