APPENDIX 63
Memorandum by National Grid
INTRODUCTION
1. National Grid plc (National Grid) owns
the electricity transmission network in England and Wales, and
operates the electricity transmission system throughout Great
Britain via its subsidiary company National Grid Electricity Transmission.
National Grid also owns the gas transmission network and four
of the eight gas distribution networks throughout Great Britain.
Our primary duties are to own, operate, maintain and develop our
networks in an economic and efficient way. We are also responsible
for the residual balancing in close to real time of the electricity
and gas markets.
2. Through our regulated and non-regulated
subsidiaries, National Grid also owns and maintains around 20
million domestic and commercial meters, the electricity Interconnector
between England and France, and a Liquid Natural Gas importation
terminal at the Isle of Grain.
3. National Grid has duties under the Electricity
and Gas Acts to develop and maintain efficient networks and also
facilitate competition in the generation and supply of electricity
and the supply of gas. Given that microgeneration may bring wider
choice into the energy markets, we are keen to ensure that the
commercial and technical arrangements associated with our networks
facilitate the efficient entry and participation of microgeneration
in the energy markets. We also understand the potential environmental
benefits of some microgeneration technologies and the importance
of ensuring that such benefits are realised in order to meet the
Government's climate change targets.
4. National Grid is prohibited by certain
licence obligations from acquiring electricity or gas for sale
to third parties (except for the purposes of system balancing).
These obligations prohibit us from developing microgeneration
as a product. This response therefore concentrates on issues that
concern us as an operator of gas and electricity networks and
a facilitator of the electricity and gas markets.
EXECUTIVE SUMMARY
5. We are pleased to have this opportunity
to contribute to the TISC inquiry. This response is intended to
inform the debate on some of the network issues which need to
be considered when pursuing greater penetration of microgeneration
technologies. Our evidence firstly considers the obstacles to
a fuller proliferation of microgeneration, encouraging competition
in microgeneration electricity and issues around metering technologies.
The major part of our submission discusses the potential role
of a number of technologies, including distributed and microgeneration
in the UK's electricity generation fuel mix, in the context of
the Government's aim to achieve a 60% reduction in carbon emissions
by 2050. We then consider the implications of various fuel mix
scenarios for the national electricity transmission network.
6. Certain renewable energy and energy efficiency
technologies will be small scale and therefore most efficiently
accommodated at distribution voltages.[26]
Distribution networks were designed as passive networks, taking
electricity off the active transmission network which enables
two way flows, and feeding it to locally connected homes and businesses.
Provision of distribution network capacity sufficient to accommodate
all potential generation and demand operating patterns is likely
to result in certain network assets with low utilisation only
being run at certain times of the day or during particular weather
conditions. Therefore actively operated distribution networks
are anticipated to be the most economic and efficient way of accommodating
these new small scale power sources.
7. The development of micro and distributed
generation and active distribution networks gives rise to a legitimate
question as to whether the high voltage electricity transmission
network has a useful role in future energy supply with a focus
upon reducing the impacts of climate change. Our analysis concludes
that there are a number of different fuel mix scenarios which
could help to meet the 2050 target of a 60% reduction in emissions,
involving a wide range of existing and potential technologies,
all of which probably have a role to play in achieving these targets.
In all of the scenarios however, the need for a national high
voltage electricity transmission system is at least as great as
it is today, and in many scenarios more so. As such, high voltage
electricity transmission system should be seen as an asset in
a low carbon economy.
8. Further, in the event that microgeneration
technologies do become widely utilised around the system, it is
envisaged that management of associated intermittency issues will
mean that the role of National Grid in terms of operating and
balancing the system, while needing to change, will continue to
be essential in order to accommodate this shift in how and where
power generation is supplied.
ACHIEVING A
SUSTAINABLE MICROGENERATION
MARKET
9. National Grid has been working with industry
parties for a number of years in order to facilitate the market
for embedded and distributed generation technologies. Such work
has included changes to the transmission charging regime which
allow distributed generators to realise additional revenue benefits
which accurately reflect the network cost savings that result
from the operation of such generation. The GB electricity transmission
charging methodologies[27]
fully recognise the benefits of distribution connected generation
(including those that are located in customer premises) by either
reducing charges to suppliers (such that the benefits can be shared
with distributed generators) or, by producing a direct payment
to registered distributed generators.
10. In order to establish efficient prices
for microgeneration it is important to ensure network charges
are sufficiently cost-reflective so that there is a true level
playing field between different microgeneration technologies,
other electricity production facilities (including remote renewable
generation) and energy saving options. Important development work
on electricity distribution charging methodologies is currently
being undertaken and consistency in the manner in which benefits
and costs accrue to generators at different voltage levels should
be welcomed.
11. National Grid welcomes the work announced
in the Government's energy review to assess the true potential
of micro and distributed CHP generation technologies to produce
efficiencies in carbon emissions over existing technologies. The
Carbon Trust are currently undertaking field trials into the potential
carbon emission reductions which micro CHP may provide. In their
interim report earlier this year they stated that "at the
current state of development of micro CHP, the emerging trial
data indicate there is unlikely to be a significant carbon emissions
reduction opportunity from wide deployment of the technology at
this stage in its evolution". We understand that the Carbon
Trust are continuing this work to establish robust data on the
potential contribution of micro CHP and look forward to the conclusions
of these trials.
12. It will also be important to fully understand
the interaction of the technology with other factors such as weather
patterns and wider societal behaviours. E.on UK's Whispergen trial
programme reported in May 2006[28]
that "[the] outputs [of the trial programme] confirm our
earlier beta results and conclusions—in particular that
the bulk of energy, financial and carbon savings from micro CHP
occur in winter months, and that owner-occupied homes with very
low thermal requirements are not well suited to micro CHP on purely
economic grounds." If micro generation technology is to provide
a significant addition to the UK's fuel mix and help to achieve
the UK's carbon reduction targets, it is essential that such fundamental
questions are answered as soon as possible, especially given that
plant margins are heading into a period of decline and investment
decisions into the replacement of large scale retirement of coal
and nuclear plant are imminent.
13. Generation capacity and other simple
volume measurements could misrepresent the efficiency and CO2
impacts actually delivered, criteria based on the latter should
be preferred. Microgeneration may be one of several ways of achieving
energy efficiency improvements. Therefore, it is also useful to
have information that enables comparisons to be made of the cost-effectiveness
of such measures.
14. With significant utilisation of microgeneration
technologies, National Grid's role as system operator will need
to change in a number of ways. These technologies can provide
benefits to the operation and balancing of the system particularly
when dealing with periods of peak demand, such as winter evenings.
These technologies can also provide useful back up support particularly
where large amounts of intermittent wind generation is connected
to the system but may not operate due to prevailing weather conditions.
The utilisation of micro and distributed generation may reduce
the need for large fossil fuelled back up plant to be held in
reserve.
15. In addition, widespread use of microgeneration
could mean that flows across the transmission and distribution
networks will change from current patterns eg it could be expected
that within day flows between the transmission and distribution
systems will change, which will require the system operator to
perform its role in a different way than at present in order to
continue to ensure that supply and demand are continuously matched.
National Grid will continue to work to ensure that the network
is robust yet flexible enough to allow this to happen and our
investment plans at the moment are robust in a situation where
microgeneration does play a significant role.
16. Government, in considering intervention
to set market prices for microgeneration, would need to consider
the potential unwarranted and adverse effects, not only in terms
of market confidence, but also by encouraging potentially inefficient
outcomes (for example, by inadvertently encouraging use of gas
in units that are in fact less rather than more efficient than
existing generation). Distortion of network charging to provide
additional support for microgeneration would represent a similar
unwarranted intervention.
17. Expensive and complex metering arrangements
may not be appropriate for microgeneration installations. However,
arrangements that would prohibit the development of accurate half-hourly
profiling should be avoided and new metering technology that would
permit real-time half-hourly data collection should be considered
and included in assessments when making microgeneration metering
policy.
ACHIEVING A
60% REDUCTION IN
CARBON EMISSIONS
BY 2050—THE
ROLE OF
THE TRANSMISSION
NETWORK
18. The properties of the high voltage electricity
transmission network complement the development of micro technologies.
In addition, transmission networks can facilitate the environmentally
sustainable energy scenarios that the Government seeks to achieve
in order to meet its climate change target.
19. Transmission networks have the following
properties:
(a) They efficiently carry bulk transfers
of electricity by virtue of having low unit costs for construction
and operation. The total loss for National Grid's high voltage
transmission lines in the UK is currently less than 1.4% of electricity
transported. We continue to investigate new technologies to help
us reduce losses even further and we will continue to fund research
and development into superconductivity, alongside looking at whether
there could be gains by making changes in the way we operate the
system using current technological options.
(b) The national coverage, low unit costs
and flexibility of a transmission system enables the most economic
and efficient generation to be used to meet demand wherever generation
and demand is located in the country.
(c) The national coverage and flexibility
of the transmission system means that mismatches between the generation
and consumption of electricity in each area can be averaged out
and the overall cost of balancing supply and demand thereby minimised.
This is particularly valuable as more variable (or inflexible)
generation needs to be accommodated.
20. It follows that, in a system comprising
a national patchwork of micro grids, transmission would only cease
to be of benefit if there was a negligible need to exchange power
between the micro grids. This would imply minimal differences
in the cost of producing electricity in each micro grid (at all
times) and a negligible value from sharing balancing services
such as flexible generation, loads, and perhaps storage.
21. To assess the potential long-term need
for transmission, National Grid has examined a number of scenarios
and inferred the network capacity that would be required. Our
analysis concentrates on the energy supply and demand scenarios
produced by the Royal Commission on Environmental Pollution for
their June 2000 report[29]
"The Changing Climate" which identify ways that the
UK could reduce CO2 emissions by 60% by 2050 and covers:
(a) Significant improvements in energy efficiency.
(b) Extensive use of CHP including microCHP
in domestic and small business premises.
(c) The potential very widespread use of
renewables of different types as an alternative to nuclear or
fossil fuel fired power stations with carbon sequestration.
22. The Royal Commission's scenarios are
comprehensive in terms of enumerating demand conditions and generation
requirements and this makes it possible to identify network requirements
with the minimum of additional assumptions.
23. The Royal Commission's scenarios may
be summarised as follows:
Scenario 1
— Basic levels of consumer demand remain
unchanged from the year 2000.
— A shift in the majority of heat load
to being provided by electricity.
— A major renewables programme.
— Continued use of nuclear and/or fossil
fuels with carbon sequestration technology.
To achieve the required cut in CO2
emissions in this scenario without a major improvement in energy
efficiency, the Royal Commission envisaged a significant shift
to the use of electricity for heating applications. This scenario
would require a major increase in electricity generation capacity,
derived from non carbon sources, ie the extensive use of both
renewables and nuclear (or fossil fuel fired stations with carbon
sequestration).
Scenario 2
— The successful implementation of
an extensive energy efficiency programme with reductions in demand
for heat of 50%, electricity of 25%, and in the transport sector
of 25%.
— A major renewables programme.
— No nuclear or base load fossil fuelled
generation.
Scenario 2 demonstrates that the desired CO2
reduction could be achieved without nuclear power (or a fossil
fuel/carbon sequestration alternative) if significant energy efficiency
was combined with extensive exploitation of renewables.
Scenario 3
— The successful implementation of
an extensive energy efficiency programme with reductions in demand
for heat of 50%, electricity of 25%, and in the transport sector
of 25%.
— A major renewables programme.
— Continued use of nuclear and/or fossil
fuels in conjunction with carbon sequestration technology.
Scenario 3 examines the same demand conditions
as Scenario 2 (ie extensive energy efficiency) but with a reduced
requirement in the amounts of renewables if some nuclear power
was used.
In both scenarios 2 and 3, there would be little
scope for using natural gas in home heating. Biomass fired district
CHP would be expected to provide much of this heat load.
Scenario 4
— The successful implementation of
an extreme energy efficiency program with reductions in the demand
for heat of 66%, electricity of 33%, and in the transport sector
of 33%.
— A major renewables programme.
— No nuclear or base load fossil.
Scenario 4 shows how very extensive energy efficiency
would make it significantly easier to meet a 60% CO2
reduction target. In this scenario the Royal Commission identified
the potential for limited use of natural gas fired domestic and
micro CHP.
24. As a sensitivity study (Scenario 4A),
National Grid have examined the impact of more extensive use of
domestic and micro CHP, this technology corresponding to a high
penetration in domestic and commercial premises.
25. Taking these scenarios, we are able
to define different generation fuel mixes which would enable the
RCEP 60% target to be met, and analyse what effect this would
have upon the high voltage transmission network. The fuel mixes
for each of these scenarios is illustrated in Fig 1 below;
Figure 1
RCEP ELECTRICITY GENERATION FUEL MIX SCENARIOS
TO ACHIEVE 60% REDUCTION IN CARBON EMISSIONS BY 2050
26. Despite a radical reduction in demand
in Scenario 4 due to energy efficiency, the total amount of electricity
generation capacity installed is not expected to be significantly
lower than today's levels. This is because significant volumes
of renewable generation capacity are required as a consequence
of their generally lower load factors and also backup generation
is also additionally required in order to provide electricity
in low wind/low wave periods. The other scenarios have significantly
larger installed generation portfolios than today.
LONG-TERM
TRANSMISSION REQUIREMENTS—BULK
TRANSFERS
27. In order to estimate the transmission
requirements consistent with the Royal Commission's scenarios
we have had to make additional assumptions, principally concerning
the location of generation and demand. For demand in 2050 we have
simply assumed that it remains geographically distributed around
UK as now. We have made the following assumptions concerning generation
locations:
| Generation type |
Location/distribution assumptions |
| Hydro | As now (mainly Scotland, some Wales)
|
| Solar PV, CHP and micro-CHP | Evenly with demand
|
| Onshore wind | As per current activity (Scotland, Wales, NW, SW and East England)
|
| Offshore wind | Predominantly in the three strategic areas and Scottish islands
|
| Wave | Mainly Scottish coastline
|
| Tidal | Barrage: Severn and Thames/Tidal stream: South coast
|
| Nuclear | Re-use existing nuclear power station sites
|
| Peaking and backup | Re-use existing power station sites
|
28. To assess the transmission capacity that would be
required we have examined average load and peak demand conditions.
Solar power is not expected to contribute during the winter evening
conditions (the time of peak demand) but at this time demand on
the transmission system will be suppressed by full operation of
CHP. As wind and wave power output will be variable, we have examined
average wind/wave output and high output days (the latter examines
conditions when 80% of the installed capacity might operate simultaneously).
Backup and peaking generation is assumed to meet any shortfall
between available low emissions generation and demand nationally.
29. Our results are summarised in the following flow
diagrams which identify the power flows between regions that would
arise if generation and demand is distributed according to the
above assumptions.
30. As a reference case we have reproduced below a typical
peak demand flow pattern from our latest Seven Year Statement.
The blue and red bars represent the generation and demand in each
region, respectively. The grey pipes show the transfers required
from one region to another to achieve regional and national balance.
All numbers are power in MW.
Figure 2
TYPICAL EXISTING PEAK POWER FLOW PATTERNS 2005-06
31. The black lines on the diagram represent pinch points
on our network and these are monitored to ensure that there is
sufficient capacity for key inter-region transfers. For existing
winter peak conditions approximate flows are: Scotland to England
2,200 MW, North to Midlands 7,000 MW, Midlands to South 8,000
MW.
Figure 3
RCEP SCENARIO 1—HIGH ELECTRICITY DEMAND AND NUCLEAR
POWER
32. Scenario 1 sees an increase in the demand profile
as all low grade heat (ie domestic household requirements) is
served by electricity. This demand is met by a large amount of
nuclear, solar PV, offshore wind and onshore wind, much of which
is produced in Scotland. Even under average conditions, flows
across the network are significantly higher than at present.
33. In the Royal Commission's first scenario there is
a significant increase in electricity use generally and a significant
contribution from both nuclear power and renewables. A large proportion
of domestic heat comes from renewable biomass fuels burnt in district
CHP schemes. Compared to today's system, even under average load
conditions, power transfers would be expected to be significantly
higher across all inter-regional boundaries.
Figure 4
SCENARIO 2—ENERGY EFFICIENCY NO NUCLEAR
34. At peak periods, there is no solar photovoltaic generation
available. In this scenario, the existing nuclear generation fleet
has been retired and not replaced. On a windy peak day, flows
across the transmission network are similar to current flows.
35. Scenarios 2 and 3 have similar consumptions levels
but illustrate the effect of using nuclear rather than relying
solely on renewable generation sources. The following power flow
patterns illustrate meeting the winter evening peak demand with
a significant contribution from wind and wave power.
36. In both of these scenarios, electricity transfers
are higher than current levels when there is a high contribution
from wind and wave power.
Figure 5
SCENARIO 3—ENERGY EFFICIENCY, NUCLEAR FLEET AS EXISTING
37. In scenario 3, energy efficiencies have reduced the
demand profile, similar to Scenario 2. A significant amount of
nuclear generation is utilised and located around the country
as per the current nuclear fleet. On a windy peak day, flows across
the transmission network are greater than current flows.
Figure 6
SCENARIO 4 HIGH ENERGY EFFICIENCY, NO NUCLEAR FLEET
38. In Scenario 4 there is a much lower demand profile
due to significant improvements in energy efficiency. The nuclear
fleet has not been replaced. In this case, significantly higher
exports from Scotland are evident in order to transport wind resource
to demand centres.
39. In Scenario 4 the Royal Commission illustrated the
effect of very large improvements in energy efficiency. This scenario
contains some scope for using fossil fuels in domestic heating
using domestic CHP. Our sensitivity analysis to the Royal Commission's
fourth scenario assumes that a suitable fuel is available for
a very much larger installation of domestic CHP units corresponding
to 15 million households (one half of all GB households).
Figure 7
ADDITIONAL SCENARIO 4A—HIGH PENETRATION OF DOMESTIC
CHP, HIGH ENERGY EFFICIENCY AND NO NUCLEAR
40. The RCEP scenarios all assume relatively low level
of domestic CHP as fossil fuels are largely reserved for transport.
National Grid modelled an additional scenario based upon Scenario
4 (which has the lowest flows across the network), and assumes
three times the level of domestic CHP assumed by the RCEP. Figure
7 demonstrates that even with such a high micro CHP assumption,
significant flows across the network exist, and are driven by
large amount of wind generation in Scotland and the north.
41. The reason for the small difference between Scenarios
4 and 4A, is that all the RCEP Scenarios, and particularly Scenario
4, assume a significant use of district CHP. Replacing district
CHP (centralised facilities for towns and cities) with distributed
domestic CHP does not change the net flows from the transmission
network.
42. On days with high contributions from wind and wave
power, transmission power flows in even these scenarios are generally
similar to those on current peak days, with resulting reinforcement
of the network in Scotland and the north of England required similar
to current levels.
43. Each of the RCEP scenarios utilise significant levels
of renewable generation resource. The transmission network will
enable renewables, particularly wind and wave power, to be transmitted
from areas where they are most abundant to demand centres. In
Great Britain this could be expected to be demonstrated with a
flow from Scotland through the North of England to the Midlands
and South East.
CONCLUSIONS
44. The potential for microgeneration to impact on the
long-term need for transmission is limited, especially so given
the currently unproven ability of micro CHP to reduce carbon emissions.
We believe that even in the event that field trials provide robust
evidence that micro CHP can help to reduce carbon emissions, the
above analysis demonstrates that the high voltage electricity
transmission system is, and will continue to be, a key strategic
asset in meeting the Government's 2050 carbon reduction target.
45. The transmission network enables diversity between
different generation sources to be exploited and the need for
flexible backup to be minimised. An increased amount of variable
generation is expected with new power generation technologies
and as system operator, National Grid's role will change to accommodate
different power flow patterns across the transmission network
and between the transmission and actively operated distribution
networks and microgrids.
46. Investment to renew and reinforce capacity in Scotland
and the north of England is required in order to exploit these
benefits and ensure that Government targets for renewables can
be achieved. The transmission networks in Scotland and England
and Wales can provide a strategic long term asset that will be
instrumental in reducing carbon emissions.
26
In Great Britain, the Connection and Use of System Code and the
Grid Code identify the threshold between transmission and distribution
networks. In England and Wales 132kV is a distribution voltage
whereas in Scotland it is a transmission voltage. Back
27
For more detail on the electricity transmission charging methodologies
please visit http://www.nationalgrid.com/uk/Electricity/Charges/ Back
28
http://www.micropower.co.uk/publications/eonfieldtrial260606.pdf Back
29
The Royal Commission on Environmental Pollution's 22nd Report
"Energy-The Changing Climate" is available at www.rcep.org.uk/newenergy.htm Back
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