Future Energy Scenarios 2016 – Gas supply webinar Energy insights – Gas supply team Simon Durk, Chris Parsons and Navdeep Kahlon 10.00 am

Future Energy Scenarios 2016 The 2016 scenarios are an evolution of those published in 2015 So what do the 2016 scenarios look like?   We are keeping the four scenarios from last year: Gone Green, Slow Progression, No Progression and Consumer Power. We feel these are all still valid and in line with the strong feedback for consistency between iterations of the FES. But we have evolved them in three main ways to enhance the data, analysis and approach. We have made our approach clearer – bringing more structure to our scenario framework of inputs and assumptions We are communicating more effectively – through greater narrative and strengthening our summary FES in 5 document And we have made them more accessible – through increasing our online presence and use of webinars

Gas Demand When we turn to Gas Demand, unlike electricity, we’ve moved beyond the recent trend of falling demand. It’s important to remember that gas demand is the product of residential heating plus industrial processes which require high grade heat along with demand for electricity from gas-fired power stations. In the short-term, all the scenarios experience a rise in gas demand due mainly to favourable gas prices increasing the use of gas-fired power stations over coal. In the mid-term, 3 of the 4 scenarios retain high gas demand in both residential and industrial sectors throughout the 2020s with only Gone Green seeing a decline as it moves towards more renewable power generation and the electrification of heat progresses. Towards the end of the scenarios, the 2 most interesting scenarios we found as we undertook our analysis are Gone Green and No Progression. No Progression is our highest gas demand scenario with unabated gas for power and a continuation of gas boilers to heat homes and commercial properties similar to today. Gone Green after reducing gas demand considerably sees a resurgence from 2030 with the inclusion of Carbon Capture and Storage in this scenario. From our gas demand analysis, demand remains high over the mid-term.

Gas Supply Scenarios Prosperity Lower levels of gas demand in the scenarios with higher green ambition (GG/SP) – improved building regs, higher levels of insulation, heat pumps… Continental imports – low case is minimum contractual LNG – low case is boil off volumes Generic could be either. Existing infrastructure is adequate in all the scenarios to meet the supplies from generic imports…. CP = high prosperity but low green ambition. High UKCS & Shale (as more money is available for investment in offshore & onshore E & P activities) and therefore low import depenadance GG = Biomethane it at its highest in GG as green policies encourage environmentally friendly energy production. No Shale gas production however so import dependency is the 2nd highest at almost 80% by 2040 SP = No Shale & UKCS is low and therefore Imports from Norway and ‘Generic Imports’ are high. Import dependency is at its highest in SP at over 90% NP = Some shale that reduces import dependency to ~70% Green Ambition

UKCS

Shale As there is no real UK production data, we have based our 2016 shale gas projections on information published in a report by the institute of Directors in 2013 (same as 2015). Report refers to a high & low case – each with 3 different flow rates based upon different well production rates The low case assumes a pad (or onshore drilling site) with 10 vertical wells each with 1 horizontal or lateral well. The high case assumes each pad had 10 vertical well each with 4 horizontal or lateral wells. We have used the high case scenario / central well production rate as current drilling technology is multi lateral drilling CP has highest shale gas production as the economy is growing which means more money for investment. There is less focus on green technologies ans Government policies support onshore & offshore production. NP has assumed half the number of pads due to the lower economic conditions and therefore half the flows GG & SP assume zero shale gas supply onto a gas network due to the increased focus on green technologies

Shale gas What volume of Shale gas do you believe we will have in 2030? 0 bcm (8%) 10 bcm (50%) 20 bcm (21%) 30 bcm (0%) No Answer (21%) Should we include shale gas in Gone Green? Yes (36%) No (52%) No Answer (12%)

Green gas GG = high case at ~4bcm/year by 2040 Biomethane connections 2015 = 53 Apr 2016 = 65 20140 = 462 Flows derived from Gemini [actual] flows. Assumes some efficiency improvements. From 2026 – growth rate declines due to feedstock issues. BioSNG connections 2018 = 1 2023/4 = 2 2040 = 40 Gas flows derived from DNs NIC submission 1.8 – 2.3 mcm/a for demonstration plant 30-60 mcm for commercial projects

Green gas What volume of Green gas do you believe we will have in 2030? 0 bcm (4%) 2 bcm (28%) 4 bcm (36%) 6 bcm (4%) Not sure (12%) No answer (16%) Which source will make up the highest percentage of Green gas by 2030 ? Bio methane (48%) Bio SNG (20%) Hydrogen (4%) No answer (28%)

Norway supply to UK

LNG & Interconnectors Prosperity Lower levels of gas demand in the scenarios with higher green ambition (GG/SP) – improved building regs, higher levels of insulation, heat pumps… Continental imports – low case is minimum contractual LNG – low case is boil off volumes Generic could be either. Existing infrastructure is adequate in all the scenarios to meet the supplies from generic imports…. CP = high prosperity but low green ambition. High UKCS & Shale (as more money is available for investment in offshore & onshore E & P activities) and therefore low import depenadance GG = Biomethane it at its highest in GG as green policies encourage environmentally friendly energy production. No Shale gas production however so import dependency is the 2nd highest at almost 80% by 2040 SP = No Shale & UKCS is low and therefore Imports from Norway and ‘Generic Imports’ are high. Import dependency is at its highest in SP at over 90% NP = Some shale that reduces import dependency to ~70% Green Ambition

Do you feel this is still a sensible approach? Generic imports Do you feel this is still a sensible approach? Yes (52%) No (0%) No answer (48%) Which source of imports should we favour in the short to medium term? LNG (30%) Continental gas (19%) No answer (52%)

Seasonal swing

Swing profile in Consumer Power

What will provide Seasonal swing in Consumer Power? Existing domestic storage (33%) New domestic storage (22%) Norwegian gas (48%) Traditional continental gas/ storage (48%) LNG (37%) Russian gas (11%) No answer (30%)

Upcoming events Webinars Register now Pathways towards a 2050 future 29th July 10-11 am Workshops More information to follow Edinburgh 3rd Oct Warwick 11th Oct Cardiff 13th Oct London 19th Oct Nav Today’s objective was to cover the high level subjects about what FES, how and why it might be useful and just touching upon some of this year’s key messaging. We appreciate that not everyone’s personal interests can be covered in a short webinar and hence we have planned 4 more over the coming weeks where all our stakeholders have the opportunity to get into the detail of our analysis with the analysts themselves and ask questions at these upcoming webinars. You will have already received the links to join these webinars, if you have not, then please get in touch with the team and we can send you the invites. And finally, we want to bring to your attention that both our FES documents are now available to download online from our website which you can see on your screens right now. Download the 2016 FES and FES in 5: http://fes.nationalgrid.com/

Future Energy Scenarios 2016 – Electricity supply webinar Thank you