1. Transmission Planning Code – Design Margin Update Transmission Workstream, 4 th February 2010

2. Introduction  National Grid NTS has revised the Design Margin used in long term planning analysis following a review by Advantica (now GL Industrial Services UK Ltd.)  Intention is to consult on the required changes to the Transmission Planning Code in February 2010  Following slides describe the Design Margin and how it is used, to supplement the consultation process

3. Design Margin – Brief Overview (1)  National Grid NTS must be able to maintain sufficient pressure for gas leaving the NTS, to ensure safety and security of supplies to downstream parties (DNOs, directly connected customers)  Planning and development of the system is undertaken over a ten year timescale but must consider uncertainties present ahead of and within the gas flow day such as  NTS supply levels, flow profiles, distribution and supply availability  NTS demand levels, flow profiles and distribution  Plant availability  Design Margin is applied as a % uplift to forecast flows within long term planning analysis to account for uncertainties or unplanned events  Key assumption is that Operating Margins gas is available within 2 hours of the event occurring and will be used to support the system from this time onwards

4. Design Margin – Brief Overview (2)  Design Margin in use since 1986, reviewed in 2000 and 2008  Level of design margin required is calculated through statistical modelling of within day events and network analysis to verify proposed design margin  Applied automatically within planning software to increase the flows used within network models  Effect is to slightly exaggerate the pressure drops across the system  Provides a small degree of pressure cover across the system for a limited time until Operating Margins gas can be deployed  If system is constrained, or only just meets required pressure and flow obligations, introducing a Design Margin may signal that a reinforcement is required

5. Design Margin Review 2008  National Grid NTS recently commissioned a review from Advantica to consider  Previous flow margin studies undertaken in 1986 and 2000  Statistical analysis of within day variations over a 2 year period  Network modelling to confirm level of design margin required  Rationale behind the design margin and the operating margin, and whether these could overlap  Main conclusion was transmission component no longer required due to  Development of contractual/market-based commercial regime  Increased use of supply and demand scenarios to understand sensitivity away from Base Case flows  Additional pressure cover at system extremities was recommended  Study confirmed that the design margin and operating margin are used for different purposes and therefore do not overlap

6. Design Margin Components

7. Transmission Component  Typical lead-times for NTS investment projects are 3-4 years from inception  Peak day supply and demand forecasts may change in this period  NTS must be maintained to the 1-in-20 peak day security standard and to ensure gas is delivered at the required pressures to downstream parties  Transmission component intended to counteract annual plan changes due to  Geographical redistribution of supply between entry points and demand between exit points  Demand variation due to changes in economic assumptions  Supply level variations  Uncertainty in model pipe efficiency parameters  Original requirement for transmission component driven by uncertainty around central case planning assumptions  Increased use of scenario planning has reduced the requirement to model uncertainty by use of a fixed uplift factor

8. Transient Component  Long-term planning analysis is conducted assuming 100% plant availability including upstream infrastructure  Plant failures and supply outages may occur in reality  Daily balancing regime means that instantaneous/cumulative NTS supply and demand levels are often not balanced within day  Total supplies may lag behind demand especially if back-loading is present  Linepack (NTS gas stock) may be depleted in some areas and increased in other areas as a result  Transient component allows for within-day effects (and is still required)  LDZ demand forecast error  Offshore supply outages leading to temporary reductions in supply  Supply (re)nominations requiring NTS reconfigurations  Compressor trips

9. Design Margin - prior to 2008 review Analysis typeDemand Condition Transmission component Transient component Design Margin Long term planning analysis - steady state 1 in 20 peak day3%2%5% “Severe” demand conditions 3%2%5% “Average” demand conditions 1%2%3% Long term planning analysis - transient All0%2% Operational analysis - transient All0%  Varies from 0-5% depending on type of analysis undertaken

10. Design Margin – recommendations from 2008 review Analysis typeDemand Condition Transmission component Transient component Design Margin Long term planning analysis - steady state 1 in 20 peak day0%2% “Severe” demand conditions 0%2% “Average” demand conditions 0%2% Long term planning analysis - transient All0%2% Operational analysis - transient All0%  Review concluded Transmission component not required due to  Development of contractual/market-based commercial regime  Increased scenario analysis to understand sensitivities around TBE Base Case flows  Additional pressure cover for sensitive geographic locations required

11. Pressure Cover  Use of a Design Margin inherently provides pressure cover for operational circumstances as pressure drops are slightly exaggerated in long term planning analysis  Extremities of the system may still be sensitive to unplanned plant failures e.g. where they are immediately downstream of a compressor station  Additional pressure cover can be calculated by simulating the compressor trip at different times during the gas day to determine  The pressure cover implied by the Design Margin  The pressure decay immediately after the compressor trip, up to two hours after the trip  Additional pressure cover is applied as an increment to the Assured Offtake Pressures at the extremity to ensure minimum pressures are not breached within two hours of the compressor trip  Two system extremity points are currently considered

12. Transmission Planning Code  National Grid NTS has a licence obligation to maintain a Transmission Planning Code to describe how it undertakes the planning and development of the network  Current version available at: http://www.nationalgrid.com/uk/Gas/TYS/TPC/http://www.nationalgrid.com/uk/Gas/TYS/TPC/  During development of the planning code, National Grid discussed its intention to revise the value of the Design Margin used within its long term planning models  Presentations available on Joint Office website (TPC Workshop 3 on 5 June 2008)  Design Margin revised from 5% to 2% following a review by Advantica (GL) in 2008  Design Margin described with National Grid’s Safety Case for the NTS and therefore required discussion with the HSE before modification

13. Transmission Planning Code – Required Updates  Modifications to Safety Case are now complete and National Grid will be launching a consultation in February 2010 to update the Transmission Planning Code as required by its NTS Licence  Further consultations are planned in 2010 to reflect changes in the Exit regime and Planning legislation  Please contact Chandima Dutton on 01926 653231 or chandima.dutton@uk.ngrid.com if you wish to discuss any aspects of the Transmission Planning Code chandima.dutton@uk.ngrid.com  Design Margin will be kept under review  Design Margin value will be stated in Transmission Planning Code rather than the Safety Case  Changes will still require discussion with HSE

14. Appendix: Example

15. Example: Design Margin impact after a compressor trip Compressor 1 Compressor 2 Supply A Supply B Demand C Operating Margins gas in store, availability within 2 hours  Example assumes that only one supply/demand scenario used for long term planning  In reality various sensitivities around the TBE Base are considered to ensure that a range of flow patterns and flow levels are modelled  Explicit modelling of sensitivities and obligations reduces level of design margin required

16. Case 1: No Design Margin applied System meets min pressure requirements  Pressure drop calculated across system = 30 bar(g)  Min pressure at Demand C just satisfied  Long term planning analysis identifies no reinforcement requirement design flow = 40 mscmd design flow = 60 mscmd min pressure = 40 bar(g) supply pressure = 70 bar(g) modelled pressure = 40 bar(g) Supply A Supply B Demand C Long Term Planning Long Term Planning

17. Case 1: No Design Margin applied Within-day compressor trip  Compressor trip causes extremity pressure to fall below min pressure before operating margins gas can be brought online Operating Margins gas in store, 2 hours availability system pressure = 40 bar(g) before trip decays rapidly after trip flow = 40 mscmd flow = 60 mscmd supply pressure = 70 bar(g) Supply A Supply B Demand C min pressure = 40 bar(g) Operations

18. Case 2: Design Margin applied e.g. 5% used in planning analysis  Pressure drop calculated across system = 31.5 bar(g)  Min pressure at Demand C not satisfied  Long term planning analysis identifies that reinforcement is required supply pressure = 70 bar(g) design flow = 40 x 1.05 mscmd design flow = 60 x 1.05 mscmd Supply A Supply B Demand C modelled pressure = 38.5 bar(g) min pressure = 40 bar(g) Long Term Planning Long Term Planning

19. Case 2: Design Margin applied System reinforced to meet min pressure requirements  Pressure drop across system = 30 bar(g) after reinforcement  System meets required pressure at extremity  Pressure cover of 1.5 bar(g) at Demand C has been provided by Design Margin for operational use Reinforcement design flow = 40 x 1.05 mscmd design flow = 60 x 1.05 mscmd Supply A Supply B Demand C modelled pressure = 40 bar(g) min pressure = 40 bar(g) Long Term Planning Long Term Planning

20. Case 2: Design Margin applied Within-day compressor trip  Extremity pressure affected by compressor trip, however pressure cover of 1.5 bar(g) is used to absorb impact of trip for two hours  After 2 hours, Operating Margins gas assumed to be available Supply A Supply B Demand C Operating Margins gas in store, 2 hours availability system pressure = 41.5 bar(g) before trip and decays rapidly after trip flow = 40 mscmd flow = 60 mscmd min pressure = 40 bar(g) Operations