1. Flow Margin Assumptions for NTS Planning and Development Transmission Planning Code Workshop 3 5 th June 2008

2. Introduction  Aim of this presentation is to  Describe the flow margin used in planning network analysis for the NTS  Summarise the findings of a recent study into the application of the flow margin

3. Introduction  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  NTS supply levels, flow profiles, distribution and supply availability  NTS demand levels, flow profiles and distribution  Plant availability  Planning is conducted using network analysis models  Deterministic models i.e. rely on a fixed supply and demand pattern to determine flows and pressures that would arise on the NTS as a result  Operational issues can not be easily modelled in the long term due to uncertainty in within-day data

4. Flow Margin  Provides a small degree of additional physical capability in the system to allow for unforeseen events and imperfect forecast information  Applied automatically within the network analysis  Slightly exaggerates the pressure drops across the system  Allows for uncertainty in modelled flows  If system is constrained, or only just meets required pressure and flow obligations, introducing a flow margin may signal that a reinforcement is required  Alternatives to reinforcement such as use of constrained LNG are also considered

5. Example  Pressure drop across system = 30  Min pressure at C just satisfied, no reinforcement identified  Compressor trip on gas day likely to lead to breach of min pressure at C Compressor A Compressor B Supply A Supply B Demand C Operating Margins gas in store

6. Example 1. No flow margin applied  Pressure drop across system = 30  Min pressure at C just satisfied, no reinforcement identified  Compressor trip on gas day likely to lead to breach of min pressure at C Design Flow 40 Design Flow 60 min pressure = 40 Operating Margins as LNG storage Currently not flowing standby = 2 hours Demand C calculated pressure = 40

7. Example 2. Flow margin 5% applied in planning analysis  Pressure drop across system = 31.5  Reinforcement identified Design Flow 40 Design Flow 60 min pressure = 40 Operating Margins as LNG storage Currently not flowing standby = 2 hours calculated pressure = 38.5

8. Example 3. System reinforced  Pressure drop across system = 30  System meets required pressure at extremity Design Flow 40 Design Flow 60 min pressure = 40 Operating Margins as LNG storage Currently not flowing standby = 2 hours calculated pressure = 40 Reinforcement

9. Example 4. Gas flow day  Operating pressure prior to trip = 41.5  Pressure cover of 1.5 is obtained from use of flow margin in planning stages Design Flow 40 Design Flow 60 min pressure = 40 Operating Margins as LNG storage Currently not flowing standby = 2 hours pressure before trip = 41.5

10. Example 5. Within-day compressor trip  Extremity pressure affected by compressor trip, however pressure cover is used to absorb impact of trip  After 2 hours, OM gas assumed to be available Design Flow 40 Design Flow 60 min pressure = 40 Operating Margins as LNG storage Currently not flowing standby = 2 hours pressure decays after trip

11. Flow Margin – current values Analysis typeDemand Condition Transmission component Transient component Long term planning analysis - steady state 1 in 20 peak day3%2% “Severe” demand conditions 3%2% “Average” demand conditions 1%2% Long term planning analysis - transient All0%2% Operational analysis - transient All0%  Two components to margin  Currently varies from 0-5% depending on type of analysis undertaken

12. 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 allows for annual plan changes due to  Geographical redistribution of supply between entry points  Geographical redistribution of demand between LDZs  Demand variation due to changes in economic assumptions  Supply level variations  Uncertainty in model pipe efficiency parameters

13. Transient Component  Long-term planning analysis is conducted assuming 100% plant availability including upstream infrastructure  Within-day variations are not predictable years ahead of the gas flow day  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  LDZ demand forecast error i.e. initial under-forecasts requiring DN flow rate changes later on the gas day  Offshore supply outages leading to temporary reductions in supply  Supply (re)nominations requiring NTS reconfigurations e.g. compressor fleet operation changes  Compressor trips

14. Design Margin  Design margin is a generic term to describe the different ways of obtaining pressure cover in the system through modelling  Flow margin has been used since 1986  Applied to calculated flows with the network analysis models  Implicit calculation of pressure cover  Simple to automate within network models  Pressure cover can be explicitly calculated  Analysis is undertaken assuming additional pressure is required above contractual pressures  Requires additional analysis to determine appropriate levels at key offtakes  Network sensitivities more transparent  A combination of the two approaches can also be used

15. Operating Margin  National Grid NTS currently holds Operating Margin gas in storage facilities to provide contingency against unexpected events on the NTS  Supply losses  Forecast errors  Major plant or pipeline outages  Delivery of Operating Margin gas from storage facilities is not instantaneous  4-8 hours delivery on normal standby (longer if facilities are injecting)  2 hours delivery on short standby  Design Margin provides contingency for short period up until Operating Margins gas can be delivered into the system  Current assumption is that storage will deliver OM after 2 hours

16. Timescale for Design Margin cover Event occurs Need for OM gas identified, OM supplier requested to deliver gas OM gas delivered Lag in delivery of stored gasPotential for other compensating actions to be explored Operating Margin gasDesign Margin cover

17. Design Margin Review  National Grid NTS recently commissioned a design margin 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 models to confirm level of design margin required for various events  Rationale behind the design margin and the operating margin, and whether these could overlap  Main conclusion was (for peak day analysis) design margin transmission component is 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  Study confirmed that the design margin and operating margin are used for different purposes and therefore do not overlap

18. Flow Margin 2008 review recommendations Analysis typeDemand Condition Transmission component Transient component 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% *Assumption is that peak day models require highest level of flow margin

19. Summary  Flow margin is currently used to allow for supply and demand uncertainties, and other operational events prior to operating margin gas becoming available  2008 design margin review has recommended transmission component for flow margin is no longer required  National Grid NTS currently considering whether to proceed with a reduced flow margin or implement pressure cover at offtakes  Any changes to the current flow margin will require discussions with HSE and DNOs and revision of the Safety Case  Agreed changes to the Safety Case will be reflected in the Transmission Planning Code when appropriate