Inter-day Energy Transfer – Opportunity and Risk Review Group 291 – July 2010

Inter-day energy transfer product Shippers pay to transfer fixed amount of energy (+/-) from today to tomorrow System neutral over the 2 day period of the service Commercial Position Example: Park 2mcm 2 Long 2 1 Day 1 Day 2 Short Shipper was 3mcm long Shipper transfers +2mcm to Day 2 Now 1mcm long Expect linepack to fall by 2mcm Expect linepack to rise by 2mcm

Commercial opportunity – day ahead assessment Estimated value based on differential between within-day and day-ahead (or weekend) price, on working days. Average absolute difference 1.2 ppt => Max potential market opportunity £2.3m based on 2 mcm release Park Loan

Commercial opportunity – theoretical maximum Theoretical maximum value based on differential between within-day and tomorrow’s within-day price (or closing weekend), on working days. Assumes perfect foresight of price. Average absolute difference 2.9 ppt Theoretical maximum potential market opportunity £5.5m based on 2 mcm release

Interaction with residual balancing Operational needs Service could reduce need for balancing actions Would only offer service on the day if not expected to lead to balancing actions on day of release But possibility of subsequent operational need for balancing actions Counteracted with residual balancing buy Example: Loan 2mcm, Buy 5mcm Expect CLP 2mcm lower Note: with reference to UNC J.4.5.7 (National Grid can accept nominations with ramp rates and notice periods outside of NEXA), it is recognised that such a service may contribute to balancing actions at a later time Day 1 Balancing Neutrality Cost Service Cashflow – excludes gas cost Effect on market, SMP Buy, and later through subsequent sell

Interaction (2) Inter-day energy transfer could interact with residual balancing role. Would be difficult to identify when and how much residual balancing linked (whole or in part) to the service. Price of energy transfer ~ Cashout differential and ~ Day Ahead / Within Day differential <~ 1ppt Apparent price of reversal = Within Day Price ~ 40ppt Risk could be managed through incentive