Draft Mod: Update of default System Marginal Prices

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Presentation transcript:

Draft Mod: Update of default System Marginal Prices Review Group 0291 11 August 2010 Transmission Workstream 02/09/2010

Background Current Default System Marginal Prices; Buy = SAP + 0.0287p/kWh Sell = SAP – 0.0324p/kWh What are the drivers for change? Licence Condition C27: “Balancing Arrangements” European Regulation Default System Marginal Prices (SMPs) unchanged since April 2001 Review Group 0291 Initiated to discuss a number of options to update SMPs National Grid believes this proposal better facilitates relevant objectives more than other options

Nature of Mod Proposal seeks to reflect the operational costs of managing a imbalance on a per kWh basis using; Compressor Fuel use (compression & withdrawal from Linepack) Transmission Owner Allowed Revenue less over / under recovery (space / use of pipeline) In addition proposal seeks to; Publish methodology in UNC Use methodology to update default SMPs in time for 1 April each year Proposed April 2011 update is 0.0544 p/kWh (1.594p/Th)

Benefits of Proposal Updates widely accepted best practise balancing regime with more appropriate values (rather than the current proxy for ‘avoided’ costs) More appropriate values will lead to a more balanced system Mitigates cross subsidy between users by using appropriate value of system flexibility Satisfies C27 Licence condition Ensures greater transparency of cashout / balancing within UNC

Next Steps Incorporate feedback from Transmission Workstream Discuss at Review Group 0291 meeting (10th Sep) Discuss at Panel – seeking consultation (16th Sep) Panel determination (21st Oct) Ofgem decision (Nov) Implementation (1 April 2011)