Saturday, December 31, 2005

Recent First Quarters

Someone has kindly sent me an analysis of the first 3 months in recent years. This shows the variability in demand:

PeriodDaily Average
30/12/4 - 31/3/5346
30/12/3 - 31/3/4356
30/12/2 - 31/3/3373

NISM was issued on Thursday

The tightness of the Energy Market was clear on Thursday when National Grid issued a notice of Insufficient Margin (NISM).

The problem for the energy markets is that in cold weather both electricity and gas demand goes up. I did look at the Electricity supply situation during the day (if the frequency is low you can see there is insufficient power), but was not aware of the NISM.

The point about last Thursday remains that for both Electricity and Gas demand it was the Christmas week that always has lower demand. If that had happened mid a normal week - any even more so if we don't have the imports from Russia via Ukraine then we would probably have seen either a national brownout of 3% of voltage or some people having a blackout.

There are plans to have a website with details of where the blackouts are scheduled to be.

Friday, December 30, 2005

Exercise Ostrich

Exercise Ostrich was the National Grid's dry run of cutting gas users off because of a shortage of gas. (See link)

Yesterday in the end only had 382 mcm consumption, but took a lot from long and medium term storage. Christmas week always has lower consumption. There was, however, a good import via the interconnector at 30.1 mcm. We just have to hope that the Russians don't reduce supply to Ukraine on Sunday.

Thursday, December 29, 2005

Gas Crisis: Gas Consumption Expected to peak over 390,000,000 cubic metres on 29th December - imports running too low - prices double

Natural Gas Consumption on Thursday December 29th is expected to be at its highest so far for winter 2005/6 according to the Chairman of the Independent Energy Scrutiny Panel, John Hemming MP.

"National Grid's prediction at 4.12pm today was that demand for December 29th would be 392 mcm (million cubic metres). This will be the highest throughput so far during the winter of 2005/6. Yesterdays consumption was 370 mcm. This involved taking 38 mcm from Long Term Storage, 6 mcm from Medium Term and 3 mcm from the linkpack (pipes). Nominations from Centrica indicate that today more will be taken from Long Term Storage.", said Mr Hemming.

"The government's attempts to increase imports have failed. Only 18.6 mcm (206515.041 MWh) were imported from Belgium on Wednesday. National Grid's original assumptions were based upon 42 mcm/d, adjusted on 22nd Decmber to 30 mcm/d coming in on cold days via the Interconnector. The Isle of Grain LNG plant does look like it is almost hitting the Winter Outlook Assumptions, but figures will not be available until Friday for yesterday's movements via Grain."

"It is possible when the dust settles that today's gas day (which ends at 6am tomorrow morning) will involve more than 400 mcm. It remains, however, that an additional 22 mcm will need to be taken from storage on top of yesterday's figures."

"If he is not going to take action to deal with our gas supply problems then Malcolm Wicks needs to get out his prayer mat and pray for warm weather. The UK gas system's ability to cope with demand relies entirely on there being relatively mild weather. This cold snap will turn almost mild over the weekend. However, January is normally the coldest month."

"Current predictions from numerical models indicate that this may not be the end of cold weather. NOAA and Unisys are predicting that the North Atlantic Oscillation has turned negative. The US Global Forecast System control in the 06Z forecast is predicting cold weather towards the end of the first week of January. The UK Met Office synoptic charts are also hinting at high pressure over Scandinavia. Mr Wicks needs what is known as "a Bartlett" to save his job, this is looking less likely by the day."

"Local Delivery Zone consumption has swung from 209 mcm on 24th December to a probable 340 mcm today. That shows how extreme the swings are in consumption as the weather shifts. Direct connection to the NTS is remaining at around 50 mcm/d."

"If the weather moves in this direction then we will need some action from the government to avoid a situation in which the UK encounters electricity brownouts or blackouts."

"Gas prices have jumped with the weather from 1.2 p/kWh on Monday to 2.5 p/kWh yesterday."


Sources of information: National Grid, Spectron, Centrica, IESP analysis

Wednesday, December 28, 2005

Cold Weather means more gas consumption

The gas demand table on the National Grid's website is slightly misleading. There are two types of gas consumption that are easily distinguished between. One is the use of gas through Local Delivery Zones (mainly normal heating and cooking gas for domestic, commercial and small industrial users). The second is that directly attached to the National Transmission System - big users including the electricity generators.

It is possible, but a bit of work, to separate out the figures for the local delivery zones. This show the real volatility in consumption linked to temperature.

Today's estimated demand total is about 370 mcm. The direct attach is about 50 mcm/d at the moment.

Recent LDZ demands have been Tues 295, Mon (Boxing Day) 252, Xmas Sunday (229), XMas Eve Sat (209), Fri 215, Thur 235, Weds 246, Tues 246, Mon 274. The fact that this can swing from 209 through to 295 over 4 days shows its volatility. Most of this is not price sensitive as they are on long term contracts.

If this week's weather had hit next week we would be looking at demands of around 400 mcm. That would seriously stretch the supply system, but it should be able to cope for 3 days at least.

The Weather forecasts are predicting the end of this cold spell at the weekend. There are possibilities of another cold spell next week, however.

There is a debate on Gas Supplies in the second week of January. Whether this will coincide with consequential problems depends as usual entirely on the weather.

Tuesday, December 27, 2005

Easterly puts up gas consumption

Who is surprised. No-one as far as I know. The peak demand last year was actually about 420 mcm/d (information obtained from reading a very small graph so prone to a lot of error).

The interconnector figure recently are Mon-5, Sun-14, Sat-5. The warmings from the Isle of Grain have also dropped off into the low digits. The price has dropped as well to a reasonable level. This may be affecting those figures.

With Europe cold the big question is how much flow do we get from the Interconnector as it get cold here. At the time of writing there are planned withdrawals from storage. This week has perhaps a colder blast of weather than November, but as it is Christmas week that keeps demand low.

The big question is the breakdown of the blocking Easterly flow. When and how. Then what happens during January.

Saturday, December 24, 2005

Easterly takes a turn for the cold

I have linked to the 16 day average temperature forecast that Net weather have kindly sorted out for me from the GFS feed. Although UKMO look for a break in the Easterly near the end of next week, the current GFS feed indicates something that could even challenge the Christmas Week Gas Supply.

29/12/5 is actually on an average across the UK of below zero for the whole day.

Easterlies give very cold (for the UK) weather as they come from the continent which is well cold.

The records of frozen rivers etc arise from Easterlies.

Friday's imports at minimum (4.32 mcm)

Friday 23rd December 2005 shows the real failings of the system. Only 4.32 mcm were imported via the Interconnector. Yes quite a bit went into storage (29 mcm in total), but we could have injected another 10 mcm quite easily into Long Term. Medium term is not full either.

We are now looking at a week with some really cold spells. Even at this short notice it would have been good to import more gas and put it straight into storage.

Today (Christmas Eve) should have seen about 12 mcm into storage. Christmas Day is predicted for injection, but this could change.

Government's experiment with Gas Supplies encounters key test

As part of the Government's experiment with Energy Security to see what happens when they "leave it to the market" a further key test component looks like being brought to bear.

Apart from the rather low levels of gas coming in from the North Sea and the hence inadequate storage that we have we are also importing gas from Belguim (and actually Norway as part of Beach) and via Liquid Natural Gas.

The weather forecasts that give a cold spell just after Boxing Day also give cold weather in Europe. This brings greater urgency into the question as to which way the interconnector will flow.

No-one seems to fully understand the gas markets and the interrelationships between Continental Europe and the UK. We know that the Spaniards operate effective penalty clauses to ensure that they get gas.

By Friday we will know what happens in those situations and whether to press the panic button in the first week of January.

What can the government do?

At the time of writing there is a substantial agreement between weather forecasters that we will see a reasonable amount of snow on Great Britain (mainly South/South East/East) from Tues/Weds onwards.

The GFS (Global Forecast System) ensembles predict temperature coming back to average after that. This is, however, too far out for reliable predictions. If the cold weather remains into January then the Gas system will be under strain as industry starts up again.

None of this is necessarily "news" save that it it looks more likely that what has been predicted as possible is actually going to happen.

The government's response is to write to the European Commission - probably Peter Mandelson.

The big question, of course, is what the government could have done.
  1. Firstly, it would be possible to encourage imports from Europe. Ofgem could act to do this. This involves insuring transport risk against the whole market.
  2. Secondly, a premium could be placed via market regulation on importing gas into storage under certain defined circumstances.
  3. Thirdly, a public information campaign could be run to reduce gas usage in commercial environments by turning down thermostats.

At the moment for many people there already is a gas crisis as they are likely to lose their jobs. However, if the government were to face reality and the urgency of the situation then they would act. This is one of those situations where it is all about handling contingencies. It could be that the weather will turn nice and mild and there will not be a problem. On the other hand it could be that the snow stays on the ground and we have a need for urgent crisis action.

The reason why the government have failed the UK is that they have not acted to reduce the risk of problems and they have not acted to minimise the severity of any outcome.

There remain things that can be done, but it is all getting a bit too late now. A million cubic metres of gas (mcm) is a lot of gas. Shifting it around takes quite a bit of doing. I personally think this is one of the biggest failings of the Blair Government as it is quite clear what the problem is, but they are essentially ignoring it.

Friday, December 23, 2005

Easterlies that caused previous cold spells

The current 850hPa predictions are much the same.

Will late Dec - Jan see an Easterly

The big question for gas supplies is whether we have an Easterly from the day after Boxing day or not. At the time of writing temperatures below -10C will be above the country (at a pressure height of 850 hectoPascals).

The Christmas week tends to have lower gas consumption because people are on holiday. I would not expect any problems during that week.

January, however, is the coldest month. Some people are predicting a 1987 equivalent winter.

Gas supplies insufficient for a really cold winter - It's official

On Tuesday National grid revealed new calculations for Firm and Safety Monitors.

I am unsure and asking questions about the basis of the calculations. However, the calculations for Firm monitors indicated that the UK cannot now supply firm demand through a really cold winter. Luckily it looks like we may have an average winter rather than a cold one.

(see the link for the basis of this)

There remains a real problem that people are not importing gas to store it on warm days. Responsibilty for that lies with Ofgem and the DTI who permit this situation to remain.

Gas over Christmas

Although it looks like a cold patch just after Christmas the Gas Position looks reasonable. A lot of demand closes down so predicted demand is relatively low. At the time of writing Friday 23's predicted demand is under 300 mcm/d/. However, as the really heavy industrial users have already cut demand the drop for the Christmas week will not be as great as it normally is.

Tuesday, December 20, 2005

National Grid Changes Safety Monitors

The National Grid changed the Safety Monitors today. They accept that supply is reduced, but they argue only by 10 mcm/d (I would say 20-30 mcm/d). They claim a reasonable figure for the reduction in price sensitive demand of 25 mcm/d. (I have generally gone for 20-30 mcm/d so I cannot complain).

Then they argue for less gas to be required in total for the safety monitors although more for the short and medium term. I have reviewed the report and am not at all comfortable with it. The original proposals (Sep 2005) may have been wrong, but they had some margin for error. This report does not seem to have any margin for error.

As usual everything depends upon the weather, but I am unhappy with what appears to me to be a shaving of safety margins on key concerns and the removal of contingencies.

About average weather

Chilly for Charles is a good way of looking at the 7 day near ground level weather forecast and the 850 hPa 16 day forecast.

What is important from the 850hPa is that this winter is about the same as the last 30 on average. That implies this year's gas consumption is likely to be about the same as last year minus the approx 20-30 mcm/d that has stopped using gas because of the price.

The evidence of utilities now losing money on supplying gas has become clear from British Gas who have the advantage of also having gas supplies. Of course there are those who don't have the advantage of having their own gas. They could have hedged their bets, but I would not be shocked if one or two shippers hadn't.

There was a good event run last Friday in London and I have just received the papers from it. It does show that the chances of an emergency are touch and go. The really interesting question is whether the safety monitors should be recalculated on the basis of a lower forecast of gas availability from day to day supplies.

Last year's demand peaked at about 440 mcm/d in Jan/Feb. If the weather is about the same or colder than last year then the situation is really not clear. Something like 21% of Electricity Generation is spare, but 30% of Generation Capacity is from Gas. This implies that a cold stretch of say 2 days would result in power cuts. There are supposed to be 16 mcm/d of extra North Sea gas coming on line in January. This will make a big difference to marginal situations.

Sunday, December 18, 2005

Cold Weekend

The Cold Weekend did, as expected, result in a large withdrawal from storage. Weather forecasts are, however, predicting a mild average December. This is unlikely to see any substantial amounts of gas placed in Storage, but we are likely to end December with still over 70% left in Long Term Storage.

Tuesday, December 13, 2005

Short weekend Cold snap still quite likely

If this happens it will be a useful indicator of the levels of normal heating gas usage as the industrial weekend usage is relatively low.

Monday, December 12, 2005

Weekend looking cold

There seems to be a general sentiment from a weather perspective that the weekend will be cold. There are even predictions of being below 0C in London. The gas system should be able to cope with that although it will involve taking gas from the "linepack". Today and tomorrow are taking from storage although the weekend saw gas put back into storage.

Isle of Grain is performing far better and Beach is at its winter peak so far.

This prediction for London weather looks quite worrying from a gas perspective. It does, of course, depend upon what happens across the rest of the country as to how well the systems cope.

It is possible for the use of short term storage to start earlier, but that basically depends upon the weather. We have, so far, managed to avoid making use of short term storage.

We have done a bit more research on the UK's previous energy crisis of 1947 and it is ironic how many things are similar. As now people were arguing that the country should have economised on fuel usage in December and the proverbial hit the fan in Feb.

Sunday, December 11, 2005

Forecast gives a few cold days are providing a UK wide 16 day forecast that we use for looking at the gas situation.

On Friday we had the best ever production from Beach and IOG with IOG now running at 11 mcm/d. Beach will, of course, vary around an average. The interconnector is, however, still importing less gas when less is consumed. That is the biggest medium term problem as we really should be trying to import and store gas. Prices have gone down because the market today is not as tight. Over the weekend gas has been reinjected into storage, but whereas if this was happening in February one could relax, in December it is far too early to relax.

The current 16 day forecast gives a low on Tuesday 13th Dec at 3C and two low days on 18 and 19 C both at around 1C.

Obviously everything can change between now and then the 18/19 forecast could start calling on short term storage, something we have not had to do until now.

We should be able to cope with 2 days, but some predictions would require an urgent cutback of NTS load. There is, however, some leeway in the "linepack" - the gas in the pipes which could help to balance out these pressures.

On the other hand it may not be that cold.

US Natural Gas Crisis

Similar problems in the UK are happening in the US. Natural Gas has hit $14 per million BTUs (10 Therms). One problem with the use of natural resources is that it appears that governments really think that the speedo is the fuel gauge.

In the case of Natural Gas there always was a question as to when the gas market for LNG (Liquid Natural Gas) went global. Well it appears that this is about now.

One problem for the UK is that during the period of the country being an energy exporter we have also exported jobs - and particularly jobs which could obtain export earnings. This means we are now in a position whereby one of more main growing USPs is now inefficient government which is difficult to obtain export earnings from.

The energy prices will lead to a reduction in exports and increase in imports as well.

Thursday, December 08, 2005

Gas Day 7th December

This shows the same as previously. A relatively low amount of withdrawal from storage, but a lower than normal demand as a result of price sensitivities.

It remains that the relatively warm temperature is helping, but the beach and imports are still too low.

I have heard rumours that the government has been running adverts asking people to turn down thermostats "for the environment". I suppose this is a way to argue for the right form of action without admitting the real problem.

It remains, however, that commercial premises should be asked to reduce their ambient temperatures.

Déjà Vu?

Fuel Crisis 1947
The Link above is to a public information film telling the nation to 'Watch Your Meters'.

The possibility of a coal crisis was recognised early but the country still faced great hardship. According to the 'Cripps Plan', the government's response to the possibility of winter shortages, absolute priority for coal delivery was to be given to power stations, and the normal quota of solid fuels was halved for industry, although supplementary supplies were to be provided for essential goods.

However, not only did the plan hope for a mild winter, it assumed a higher level of production than the civil service predicted and was in fact produced. When a harsh winter came, further restrictions had to be put in place. Large sectors of industry could not be supplied with electricity. Domestic usage was also rationed. The most explicit result of this was massive temporary unemployment that, according to historian Trevor Burridge, was as high as four and a half million in February. The crisis lasted three weeks until the cold weather subsided and coal supplies could be restored. By 12 March unemployment had been reduced to three quarters of a million.

Attempts were made to increase and modernise coal production. The decision by Emmanuel Shinwell (Atlee's Minister for Fuel and Power) to abandon open cast mining was reversed. Lignite was used to temporarily bolster coal and coke supplies. Temporary licences were granted to small privately owned mines. In deep mines, use of conveyor belts was increased to free up extra man power for the coal face. Collieries with low productivity were closed down so that their workforce could be diverted to collieries with higher production levels.

It is difficult to measure the impact of the Fuel Crisis, as there were so many other factors prominant in defining Britains economic position: in particular the Anglo-American loan agreement.

Comparing this to this winter's potential Gas shortages leaves us wondering whether we should have learned from this experience of civil servants' optomistic over-predictions and underestimation of the weather's severity, and leads us to ask whether the market conditions are right for the best response to any problems that may arise.


Ashworth, W., The History of the British Coal Industry, vol. 5 1946-1982: The nationalized industry, (Clarendon Press, 1986)

Burridge, T., Clement Attlee, (Cape, 1985)

Harris, K., Attlee, (Wiedenfeld and Nicolson, 1995)

Wednesday, December 07, 2005

Gas day 6th December

This saw a slight retrieval from both Medium Term and Long Term storage. Work is being doing to produce a gas forecast based upon the weather forecast. So far this winter has been warmish in comparison to history, but the weather forecasters still predict a relatively cold winter perhaps 1 in 10.

Monday, December 05, 2005

Independent Energy Scrutiny Panel - budget success - gas day 4th December

We don't have the details yet, but it appears that two IESP proposals to improve imports have been accepted in the budget statement. One relating to Use It or Lose It (UIOLI) at Isle of Grain and the other relating to the Interconnector.

It remains that the market is acting in a perverse manner although about 39 mcm of gas was in fact stored over the weekend (the original figure of 120 for Saturday was a typo sadly). The country is, however, reverting to taking gas out of storage on Monday/Tuesday.

Demand on Saturday was 308 and Sunday 315. That says it all really. Demand on coldish days has been more like 370 mcm.

Sunday, December 04, 2005

Gas Day 3rd December

About 7 mcm was added to Long Term storage. A big jump in Medium Term Storage by about 100 mcm strikes me as odd and will need explanation during the week.

The 5 day forecast is turning colder which would imply back to the previous conditions. If it stays the same as was previously the case this would delay problems until mid February.

Saturday, December 03, 2005

Gas Press Release 3rd December 2005

Studies by the Independent Energy Scrutiny Panel have revealed that imports via the Interconnector crashed to a 3 week low of 15 million cubic metres of gas on Friday.

John Hemming MP the Chairman of the Panel said, "Although people may not worry because it is warm it is crucial for the UK that we continue to import gas via the interconnector and start storing it. On Friday which was a nice warm day 2 million cubic metres of gas were actually withdrawn from storage."

"Our model of gas supply and demand indicates that the UK can cope with an average temperature of below 2 C for 3 days, 4 C for 10 days and 5 C for 45 days. This is far from a secure energy position. Clearly turning off the CCGTs reduces demand by about 60 mcm/d. This would enable the UK to handle 0 C for 3 days and 1 C for 10 days."

"The behaviour of storage and imports is clearly not rational from an energy security perspective. It may be rational from a market perspective, but the market is clearly working against the UK's energy and national security at this stage. This is where there is a role for intervention from Ofgem."

"I welcome Ofgem's conference last Thursday at which the question of how to handle rolling blackouts was discussed. I continue to argue the case that avoiding rolling blackouts is a key objective."

"The only bit of good news is that it looks like we will inject some gas into storage today and tomorrow. The injection limit for Rough is 15 mcm/d. It does not at this stage look like we are even close to this limit."


Note for editors
The gas demand model relates to the average temperature for a month against the average gas consumption. The Composite Weather variable used by the National Grid uses the temperature on two days. Gas takes about a day to get through the NTS to the end user - a bit longer in the South West. The temperature is an average one for the whole country.
The National Grid do energy modelling for each of the Local Delivery Zones.

A copy of the model is available on request. Updates are sent daily in the early evening.

Friday, December 02, 2005

Gas Day 1st and 2nd Dec

Today (2nd Dec) appears that it will be the first day to see an injection into storage. We should have seen this yesterday, but there was still 7 mcm taken from storage. At least Ofgem held a conference yesterday on how to plan for the scenarios in which we end up breaching the safety monitors.

Unlike electricity where a brownout can happen with voltage going down with gas there are dangers that arise from low pressure that lead to gas either having a pressure of around 19mb or greater or being cut off.

Market Security and Profit

In the warm weather - as one would expect - demand has gone down. However, people are still taking gas from storage rather than via the interconnector or LNG. As a student of markets I presume it is because the notional historic price of the stored gas is "lower" than that of the gas brought in.

What is "rational market behaviour" for participants substantially undermines the UK's energy security. I have sent a note to Malcolm Wicks about this. (and Ofgem)

Thursday, December 01, 2005

Gas Day 30th November

TermBalance above safety margin7 day rateNo of daysDate for breach
All268754316231 Jan
Short/Medium4491568118th Feb

This is superseded by the warm weather. I will probably stop doing this table until the weather moves cold again.

Gas Press release 1st December 2005

Warm weather has given the government a "breathing space" on Gas Supply according to the Chairman of the Independent Energy Scrutiny Panel, John Hemming MP. He has, however, tabled a commons motion putting pressure on the government to act now before things get colder.

"At 2pm today the National Grid's forecast demand for Thursday 1st December was 332 million cubic metres of gas. This is actually 36 mcm less than is normal for this time of year." said Mr Hemming.

"With a bit of luck the UK could heat itself at these temperatures without drawing much from Storage. However, although this gives a breathing space and possibly prices could come down this does not mean the UK is now safe from the possibility of a Gas Emergency. I cannot stress how important it is that we avoid such an emergency. It would lead to the CBI's worst case where much or all of the gas generators are closed down to maintain gas supply to peoples properties. This could entail rolling blackouts if brownouts were not sufficient."

"Everyone knows that gas usage links directly to temperature. A study of 5 years gas demand and its correlation to temperature came out with a second order formula for demand linking monthly average temperatures and gas demand. This formula is

GD = 0.525 * C**2 - 28.8 C + 508.

C is the temperature in degrees Centigrade and GD is the average Gas Demand in cubic metres per day.

"The effect for the UK is that if temperatures get colder again then we should start the heavy demand on gas storage. Tuesday's withdrawal was 693 GWh (or 62.4 mcm) which was the highest seen so far this year."

"I have tabled a commons motion calling for government action on the Gas Crisis. This reads as follows:"
"This House notes that at the rate at which gas was being taken from storage on Tuesday 29th November the UK would have entered into a Gas Emergency and be required to switch off some and potentially all gas electricity generation (which is 40% of supply) by mid-January; further notes that it was warmer on Thursday 1st December and if it stays at similar temperatures, which is unlikely, the UK will not face a Gas Emergency this winter; further notes, however, that 13% of the gas in Long Term Storage was withdrawn in the last 2 weeks and that on the rolling 7 day average of storage withdrawals on Tuesday the UK would face a Gas Emergency by 1st February and believes that the Government should do more than pray for warm weather and should be looking at further action for preventing and minimising the severity on the UK of a Gas Emergency as a matter of urgency."

Key urgent actions that are needed from the government are:

1. The market to insure transport risk on imports via the interconnector

2. Changes to ensure usage of the facilities at Isle of Grain - improved UIOLI contracts

3. A contingency plan to handle potential Russian supply cut offs

4. A plan to reduce heat demand in commercial premises through turning down thermostats - the House of Commons would be a start

5. Research into other possible non-price sensitive demand reductions.

6. Action to ensure that LNG imports are brought into the UK

John Hemming "It is sad that security of supply has been sacrificed for short term price benefits. The costs of security of supply are of the order of 1p per therm. If we got to the stage of having to cut off domestic customers, and I don't think it will get that bad, then there are estimates that it would take 3 months to reconnect supply if as many as 1.5 million customers were cut off. Security of supply has to be key. Universal Network Code 044 seems to put cost before security."
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