1. 195AV “Future work” – system flexibility
7 May 2009

2. Background 116 modifications focused on flexibility around exit only
During WG166/UNC195 discussions, became clear that:
there were divergent views about impending scarcity of exit flexibility
behaviours at entry points could have a significant affect on the availability of exit flexibility
July 2008 IA raised the issue of looking at system-wide flexibility rather than exclusively at exit flexibility

3. Is flexibility as important at entry as at exit?
Planned offtake profile
Quantity
6am
Planned entry profile
6am
Quantity
Single pipeline system
Potential entry profile
Linepack and flow margin buffer the profile difference between input and output
Potential offtake profile
Quantity
Quantity
6am
6am
6am
6am

4. IA views and questions
Ofgem cannot adopt a “wait and see” approach to the potential scarcity of flexibility capacity
Is there a way to manage the requirement for flexibility capacity without introducing the 116V type of product?
Proposed the establishment of:
Operational arrangements to manage flexibility constraints
An incentive to move to more commercial arrangements eg provision of flexibility services
NGG would benefit from reducing costs of managing flexibility but suffer penalties if it needed to curtail flows
Consultation responses offered support for this approach

5. 195AV decision based on progression of system flexibility work
Instigate procedures for managing the availability of flexibility
Could be effected by:
Clarifying & simplifying NGG’s existing operational tools for limiting shipper flows at entry and exit
Establishing an incentive scheme for NGG NTS on the management of system-wide flexibility
Review the impact of entry & exit on the availability of system-wide flexibility
Any licence changes/ UNC modifications required to facilitate this should be in place by October 2009

6. Future network challenges
Government targets on renewables and CO2 reduction
Significant amounts of wind generation come on to the system, gas could become the marginal plant for electricity generation in calm times
Significant swings in system load
Can NTS cope and provide the level of security & reliability required under this scenario?

7. Tools for flexibility management
Entry
Scaleback of interruptible capacity
Constraint management agreements eg forwards & options with Users
Undertake prompt buy-back
Terminal Flow Advice to restrict flow
Exit
Offtake rates in Network Exit Agreements for Direct Connects
OCS flex bookings for GDNs
Curtailment of interruptible loads
Direct liaison by NGG with DCs/GDNs as necessary
NGG can also undertake system balancing actions

8. Key questions on flexibility management tools
Can we simplify/clarify/augment existing operational tools available to NGG to manage flex?
Are the commercial incentives when these tools are used appropriate?
Decision letter suggested placing a new financial incentive on NGG when it uses these tools to manage flex
Determine “price” for use of tool and give them target costs and sharing factors if they beat (exceed) the target
And allow them to keep a proportion of any revenues if they introduce useful commercial linepack/flexibility products

9. Reviewing system-wide flexibility
What drives the need for flexibility from shippers/GDNs?
What information items could NGG usefully release that would:
Help users understand the level of system flexibility available
Inform users/Ofgem on the likelihood of future scarcity at entry or exit
Identify future products that NGG could use to manage system flexibility
Would need to identify frequency & granularity of information release

10. How to proceed? By Oct 09, would like to have :
Completed review of flexibility management tools
Implemented any new tools where practical
Devised appropriate flexibility information reports for release
Over longer term:
Derive flexibility products as appropriate
Develop incentives to optimise flexibility management
Conclude on capability of system to cope with future requirements for flexibility