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Memorandum submitted
by the Executive Summary 1. National
Grid owns and operates the high voltage electricity transmission system in
England and Wales and, as Great Britain System Operator (GBSO), we operate the
Scottish high voltage transmission system. 2. In the UK, our primary duties under the Electricity and Gas Acts are to develop and maintain efficient networks and also facilitate competition in the generation and supply of electricity and the supply of gas. Our activities include the residual balancing in close to real time of the electricity and gas markets. 3. Through our subsidiaries, 4. The Government's vision for 2020 must be of a transmission system which evolves to connect extensive renewable generation to achieve climate change objectives. This sustainability objective must be achieved whilst maintaining a diverse generation background and appropriate network standards in order to maintain security of supply and to do so affordably. 5. We set out
a blueprint for the evolution and operation of the electricity transmission
system, including strategic investments in physical assets and the challenges
in operating a generation fleet with radically different operating
characteristics. The regulatory and market frameworks appropriate to the
incremental changes in generation of the past must now be revised; 6. Since June
2008, we have worked with other energy companies, Government and 7. Our vision,
which is shared by ENSG, was based on an energy scenario developed by 8. Whilst further work is necessary to fully cost the solutions, our current estimate is that onshore transmission network investments will total £4.7 billion. We estimate that this amounts to about £6 on domestic consumers' annual electricity bills. 9. This will result in a challenging investment programme which we believe can be delivered providing a number of policy and regulatory hurdles are overcome; 9.1. Effective implementation of National Policy
Statements recognising the investment in the transmission network identified by
ENSG and the establishment and maintenance of an 9.2. Timely changes to the current regulatory framework to deliver the required network investment to allow network companies to make strategic, rather than piecemeal investments. 9.3. Review the proposed offshore transmission arrangements in light of the 2020 targets such that offshore transmission[1] networks are delivered most effectively within a strategic plan for offshore investments rather than ad hoc connection applications. 9.4. We have led the industry in putting forward
proposals for a root-and-branch reform of the regime prescribing the use of the
transmission network. Agreement within the industry and with 10. Operating the system described by ENSG poses significant challenges. Variable wind generation together with larger and potentially more inflexible plant will require additional balancing services. Yet much of the older, more flexible fossil-fuelled plant that has traditionally provided these services will retire. 11. We expect the generation market to deliver many of these services. However, we are working hard to develop new providers. Smart metering may unlock a new source of these services from households and from distributed generation. It may also provide increasing energy efficiency, improved demand forecasting and facilitate electric vehicle adoption. We will be consulting on our need for greater volumes of balancing services in April 2009. However, given the potential that smart metering presents, we advocate the efficient and rapid roll out of the technology to capture the benefits as soon as possible. 12. Distributed generation and smart technologies are likely to play a significant role in meeting the UK's renewable energy targets. Our scenario for 2020 includes contributions from embedded biomass CHP, solar thermal and solar photovoltaic technologies. The transmission system must work alongside small scale generation and demand technologies to maintain historical levels of security of supply and to achieve our renewable energy ambitions. 13. We
are active in working with partners to understand and exploit these new
technologies. R&D funding through What should the Government's vision
be for 1. National Grid supports Government in addressing climate change. We welcome the commitment to sustainability by agreeing the EU 2020 renewables target and setting a greenhouse gas reduction trajectory towards meeting the 2050 target. The electricity transmission network of the future must connect renewable and low carbon generation to the country's demand centres. However, it must also provide security of energy supply and do so at an affordable cost. 2. It is our view that the electricity, heat and transport sectors must significantly contribute to carbon emissions reductions to meet all climate change objectives up to the year 2050. Our scenario modelling of the country's future sources of power generation suggests three key strategies are required; · Use less energy through simple and economic efficiency measures across the heat, transport and electricity sectors. · Decarbonise electricity through renewable wind deployment and low-carbon technology. Wind generation offers huge near term potential combined with a mature and economic technology platform. Electricity decarbonisation also unlocks the long-term potential for eliminating emissions from the transport sector through the gradual electrification of the vehicle and rail fleet. · Reduce the carbon content of heat. This can be achieved by increasing the use of renewable heat sources or by substituting carbon-intense incumbent fuel with a cleaner fossil fuel. 3. Based on an energy scenario which
meets climate change objectives, a 4. Our vision economically facilitates 32 GW of transmission connected offshore and onshore wind generation by 2020. We must also connect new carbon capture and nuclear technologies which will provide base-load and /or mitigate the effects of intermittent wind-generation. 5. A map of the strategic investments is provided in appendix 1. How do we ensure the regulatory framework is flexible enough to cope with uncertainty over the future generation mix? How can the regulatory framework ensure adequate network investment in light of the current credit crunch and recession? 6. A more flexible mechanism is required to deliver the infrastructure investment in our vision. These are 'strategic investments', because they are undertaken prior to specific connection signals from generators. Moreover, strategic investment ensures that the construction programmes of the transmission companies and (particularly) the wind farm developers are aligned. This strategic approach underpinning our vision avoids the inefficient and piecemeal connections that would have been driven by an approach based on individual applications. 7.
Strategic investment requires changes to the current regulatory regime and What are the technical, commercial and regulatory barriers that need to be overcome to ensure sufficient network capacity is in place to connect a large increase in onshore renewables, particularly wind power, as well as new nuclear build in the future? For example issues may include the use of locational pricing, or the availability of skills. 8.
Our vision comprises of some technologies which have yet to be employed in the 9.Further operational challenges are posed by the increase in wind powered, nuclear and carbon capture-ready generation. This is exacerbated by the closure of older, conventional fossil-fired generators as European Directives come into effect. Each challenge requires additional balancing services and can be described thus; · reserve required to complement intermittent renewable generation · reserve/response that may be required against the potential for new generation plant to be delivered without the required flexibility · fast-acting reserve (called response) against the expectation that larger plant will increase the maximum potential instantaneous loss of generation from its present level of 1320 MW. 10.These additional balancing services
may derive from generation or from new and existing demand side players. In
order to explore the potential for new services, 11. There are three major commercial/regulatory challenges to be overcome in order to deliver the networks in the ENSG. The first is strategic investment, to which we have earlier referred. 12. The second is to optimise new and existing transmission capacity through reform of the Transmission Access Regime (TAR) and optimisation of the generation 'queue'. · In
respect of TAR, · The management of our existing network capacity is no less important to efficient capacity allocation. Unused long term access capacity available on the GB Transmission System can be utilised by those projects that are able to take advantage of this capacity. Where long term capacity is not available, we examine alternatives that may still provide options for connection. 13.Thirdly, In respect of planning,
we require the effective
implementation of National Policy Statements recognising the investment in the
transmission network identified by ENSG. We also require the establishment and
maintenance of an 14.
What are the issues the Government and regulator must address to establish a cost-effective offshore transmission regime? 15. We believe that the regulatory
regime currently being developed could lead to sub-optimal network design, higher
costs to consumers and delays to the connection of offshore generation. No
organisation has certainty that it will be required to deliver offshore
transmission. There is little incentive on potential Offshore Transmission
Owners (OFTOs) to develop the capability to deliver offshore transmission
infrastructure. Ultimately, we believe
that the proposed regime threatens the ability of the 16. Ensuring some certainty for the various organisations to deliver offshore transmission could be achieved by extending the onshore regime offshore. Alternatively, the following generic process could be envisaged. · A Transmission Design Authority (TDA) develops a coordinated and strategic plan. · A body is charged with approving the physical/engineering activities within a defined zone. · The enduring regime is advanced in a coordinated way through the early appointment of regional OFTOs, which enables early and co-ordinated planning activity. This process forces windfarm developers proactively to coordinate amongst themselves to avoid the risk that early developments interfere with, or worse sterilise, the effective and efficient rollout of the latter (significantly bigger) developments. 17. Whilst more complex than an extension of the onshore regime, the alternative proposal is likely to deliver strategic reinforcement in a timely manner, in contrast to the piecemeal and inefficient approach of the currently envisaged regime. What are the benefits and risks associated with greater interconnection with other countries, and the proposed 'supergrid'? 18. Interconnectors provide access
to the European electricity markets so increasing competition in electricity
supply. The 19. Interconnectors are also capable of providing a range of balancing services, including response and reserve; which aids liquidity and competition in the market. Indeed, the unpredictable nature of electricity from renewable energy sources means that firmness and duration of balancing services from providers such as interconnectors will be of greater importance. Of course, interconnectors impact upon the transmission system and can cause constraints on our network and those of our European neighbours. These effects are generally considered in the business case for the project. 20.
Renewable wind projects are likely to be developed further from the European
mainland and the What are the estimated costs of upgrading our electricity networks, and how will these be met? 21. Whilst there is further work necessary fully to cost the solutions, our current estimate is that onshore transmission network investments will total £4.7 billion. This means that the end-consumer will see an additional circa £6 annual charge on an electricity bill. . What challenges will higher levels
of embedded and distributed generation create for 22. Meeting the renewables target requires a contribution from embedded generation. However, we regard embedded generation as complementary to, not a substitute for, transmission connected generation. It is the energy security delivered by the interconnected national transmission system which provides intermittent renewable energy with a platform for growth and to enjoy volume-driven unit cost reductions. 23. Embedded generation technologies (including micro generation) must contribute to, rather than detract from power system security. Large power stations must comply with strict technical connection standards (called the Grid Code) and appropriate standards must also be developed for embedded generation of all sizes. 24. We believe that the funding level is inadequate in the face of the significant technical challenges ahead. We propose that our existing IFI funding should be doubled and that that the scope of the IFI funding rules are relaxed. This would enable us to explore the network impact of a wider range of emerging energy technologies such as carbon capture and storage, energy storage and the downstream adoption of smart technologies. What
can the 25. March 2009 Appendix 1 [1] For non transitional projects including later round 2, round 3 and Scottish territorial waters [2] http://www.ensg.gov.uk/ |