Shale Gas

Memorandum submitted by National Grid (SG 06)

Introduction to National Grid

1. National Grid owns and operates the national gas transmission system (NTS) throughout Great Britain and, through its four gas distribution networks, distributes gas in the heart of England to approximately eleven million offices, schools and homes. National Grid also owns and operates the high voltage electricity transmission system in England and Wales and, as National Electricity Transmission System Operator (NETSO), operates the Scottish high voltage transmission system. In addition National Grid owns and operates significant electricity and gas assets in the US, operating in the states of New England and New York.

2. In the UK, National Grid’s 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. Activities include the residual balancing in close to real time of the electricity and gas markets.

3. Through its subsidiaries, National Grid also own and maintain around 18 million domestic and commercial meters, the electricity Interconnector between England and France, and a Liquid Natural Gas importation terminal at the Isle of Grain. The wholly owned subsidiary National Grid Carbon Limited has advanced the transportation and storage elements of the Carbon Capture and Storage (CCS) supply chain.

4. This response is on behalf of National Grid Gas (NGG).

Shale Gas inquiry

5. If UK produced shale gas can be developed economically then it could make a useful contribution to the UK’s gas supply in terms of diversity and security of supply. There are likely to be technical challenges associated with the use of shale gas (in particular the UK requirements for gas quality and for entry capacity). However we do not anticipate that these should be insurmountable and we have experience of working with shale gas from our US operations which may be beneficial in developing the use of this new source of gas in the UK.

6. If shale gas becomes a significant contributor to UK gas supplies, this would represent an important development that we would need to take account of in relation to future network investment (potentially in relation to both the NTS and the Distribution Networks), so it will be important that developers provide us with a clear understanding of the scale, timing and locations of shale gas developments. This inquiry into shale gas is therefore timely given the fact we are currently undertaking a Price Control Review under the new RIIO [1] framework as it should give us some ability to reflect the implications of UK shale gas development in our submissions to this process.

7. If plans for significant UK shale gas development are forthcoming, we will reflect the impact of this new source of gas in our "Ten Year Statement". This report is published annually and provides a ten-year forecast of the gas transportation system usage and likely system developments. It is produced in response to obligations placed on us under our Gas Transporters’ Licence and the Uniform Network Code and is designed to help current and future potential users of the NTS who are contemplating connecting to or using our system to identify and evaluate opportunities.

8. Subject to meeting existing network entry arrangements (including in relation to gas quality) NGG would welcome the additional supply diversity that indigenous shale gas production would deliver.

9. NGG are not in a position to comment further on the questions raised in the call for evidence. NGG would look forward to supporting and working with the Energy and Climate Change Committee, DECC and other stakeholders to address the challenges that development of shale gas may present.

January 2011