rg0291 – nts licence sc27 – balancing arrangements linepack – commercial...
TRANSCRIPT
RG0291 – NTS Licence SC27 – Balancing ArrangementsLinepack – Commercial Considerations/Options
Review Group 291 – 19th July 2010
Contents
1. What is the C27 Linepack Product?
2. Key Measures
3. End-of-Day Linepack Product - assumptions
4. Pricing Mechanism
5. Options
6. Options scored against Key Measures
7. Issues
8. Recommendations
What is a C27 Linepack product?
What is the C27 linepack product?
NBP EoD balance transfer
When are Users most likely to need the product?
To benefit from a more favourable D+1 price?
Benefit from a more favourable export price on D+1 (arbitrage between European prices and UK market)?
To balance Users portfolio within day and avoid cashout on D, carryover imbalance to D+1.
Others?
Consider interactions between the development of a Linepack product and the SMP defaults.
National Grid NTS believes;
SMP default, and any proposed revision or replacement, places a value on Linepack.
SMP default is a component used to establish the value for an interday Linepack product
Key Measures
Relevant Objectives
Better facilitates competition
Efficient and economic operation of the system
Viable commercial opportunity
No adverse impact on Physical Linepack and other flexibility utilisation
Doesn’t prevent future potential development of additional within day flexibility products
No adverse effect on the Residual Balancing Role
Should not impact Safety Case/obligations
EoD Linepack Product Assumptions
Inter-day product
NBP product
Made available within day
Park and Loan
NG NTS is the counter-party to all LP product transactions
NG NTS will have a Linepack account
Linepack released as a discretionary quantity
One or Multiple Linepack releases within day to be discussed
Timing of release (within business hours/ after hours) to be discussed
Pricing Mechanism options
Price determined through;
Administered price Fixed price
SAP differentials How is the price derived?
differential between: ?
D and D+1 Cashout price
OCM cashout price on D and TTF price on D+1
Market based Auction
Determined by participants
If a release is oversubscribed, how will product be allocated ?
Options
1. EOD Linepack product made available within day:
a) Single release
b) Multiple releases
2. EOD Linepack product made available within day through a single release (out of hours)
3. Hybrid Model (hybrid of SMP default cashout and C27 Linepack product)
Option 1a) EOD Linepack made available within day:single release
1. Single product release within business hours
2. Discretionary release of product
Considerations;
- Appropriate time of release?
Pros - Product available to all User within business hours
Cons - Less certainty of linepack volumes available within day may mean less product quantity is made available.
Option 1b) EOD Linepack made available within day:multiple release
1. Multiple product releases within business hours
2. Discretionary release of product
Considerations;
- What quantity is made available in each release?
Pros - Facilitates opportunities to adjust User imbalance positions through the day.
- Additional releases could be available closer to EoD when available quantities are clearer.
Cons - Multiple releases may represent less product quantity available in each release.
- Possibly more complex to administer
Option 2 - EOD Linepack made available late in the day through a single release
1. Single product release at [24:00]
2. Discretionary release of product
Consideration;
- Time of release
Pros
- Increased confidence of flexibility available
- Mitigates impact on physical operation and flexibility management
- After hours release may reduce potential conflicts with Residual Balancing obligations
Cons
- May exclude Users that do not operate out of hours
Flow/demand information and timing of product release
upside and down side associated
with release time
Later Release Early Release
Accuracy of flow/demand information
Risk of getting it wrong
Incentive to release quantity
Option 3 – Hybrid Model
1. Hybrid of SMP default cashout and C27 Linepack product
2. Seeks to value linepack through applying a charge or cashout differential to a User’s EoD imbalance position, which reflects the cost using linepack to absorb the imbalance.
3. Application of the price differential for short, long or balanced positions may be different depending on whether or not the User’s imbalance position was in line with the movement in linepack position for the D.
4. National Grid Transmission would enable linepack to move more between days to accommodate the service, linepack incentive revisions would be required.
5. This is not a Park and Loan service
This hybrid option does not fit with the assumptions of the EoD Linepack Product. National Grid Transmission proposes to discuss this in greater detail at the August review group session.
Options initial scoring against Key Measures Options 1(a) 1(b) 2Discretionary Release Within day Single
releaseWithin day Multiple release
Late day single release
Key MeasuresRelevant Objective:
Facilitates Competition
Relevant Objective:
Improves Operation of the Pipeline System
to be discussed to be discussed to be discussed
Does not impact NG NTS Residual Role
to be discussed to be discussed
Commercial opportunities to be discussed to be discussed to be discussed
Does not impact on Safety to be discussed to be discussed
No impact on Physical Linepack and flexibility utilisation
to be discussed to be discussed
Minimal impact on development of additional within-day flexibility products
to be discussed to be discussed
Interactions
Interaction between Linepack Product with Residual Balancing Role
Impact on, and trade-offs with, future potential development of additional within day flexibility products
Recommendations – Way Forward
NG NTS would like to further develop Option 2
NG NTS believes that the development of this option:
May be achieved at potentially minimal system development cost
Dependent on the costs associated with the development of a Bulletin Board on Gemini systems
Compliments the Default SMP developments
Option 3 to be discussed at the next Review Group session in August, in conjunction with SMP default cashout discussions