Rise reflects high level of procurement in capacity market early auction

National Grid has predicted an increased capacity margin for the coming winter, mainly due to the high level of procurement in the capacity market early auction.

The de-rated margin is expected to fall somewhere between 3.7 and 4.9 GW, according to a preliminary forecast from the system operator, compared to a final forecast of 3.4GW in the winter outlook for 2016/17. The loss of load expectation is 0.25 to 0.05 hours per year.

Expressed as a percentage, the de-rated margin is 6.2 to 8.2 per cent. For the first time, the figure has been calculated on the basis of underlying demand rather than transmission demand, as was the case in previous years.

The change was introduced due to the start of the capacity market as well as the growing volume of distributed generation connected to the grid. “Using this new approach, distribution-connected generation is treated as generation rather than as a reduction in demand”, National Grid wrote in its 2017 winter review and consultation.

According to the old method, the forecast for this winter is 7.2 to 9.9 per cent. The equivalent figure from last year’s winter outlook is 6.6 per cent.

The rise not only reflects the high volume of capacity procured in the early auction, but also the increased plant availability witnessed over the past winter. National Grid gave a range for the forecast to allow for the possibility that generators which failed to secure capacity market contracts remain available to participate in the balancing market.

At the top of end of the range, 64.9GW of de-rated capacity is expected to be available over the coming winter, consisting of 54.7GW of transmission-connected generation and distributed wind generation as well as 10.2GW of conventional distributed generation. Net imports via interconnectors are forecast to provide an additional 2.4GW of available capacity.

Forecast available generation by fuel type for winter 2017/18

Source: Winter Review and Consultation, National Grid

Note: Capacity figures not de-rated

Average cold spell peak demand is predicted to be 61.4GW. The system operator added a further 0.9GW for reserve to give a total expected peak demand of 62.3GW.

National Grid director of UK system operation Cordi O’Hara said the increased capacity over last winter is “encouraging as we enter the first main delivery year of the capacity market”.

“We expect there to be sufficient gas supplies this winter and expect them to be met from a wide range of supply sources,” she added.

Energy and Climate Intelligence Unit energy analyst Jonathan Marshall commented: “As National Grid’s former boss Steve Holliday said earlier in the year, it’s time to move on from the unfounded exaggerations of ‘blackout Britain’.

“This is the second successive annual increase in the grid’s capacity margin and with upper estimations of excess capacity nudging ten per cent, the security of supply debate is largely settled in the medium term.”

However, Marshall argued this extra security has “come at a cost” as the capacity market has extended the lives of older, dirtier power stations. “The government can and should look at amending it so that it incentivises the bill-cutting technologies of tomorrow, such as storage and demand shifting, rather than those of yesterday,” he added.  

The responses to the consultation will be used to inform the upcoming winter outlook for 2017/18.

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