Long-Term Electricity Network Scenarios (LENS)

Second Workshop14 December 2007

2

Purpose for today

• Present update on LENS project– Methodology– Report on scenario inputs

• Receive feedback and generate new ideas on “information gathering” stage of project

• Receive feedback and further develop thinking on potential “themes” for scenarios

• Explain how project team will move from “themes” to scenarios

• Set out next steps to develop final scenarios for GB electricitynetworks in 2050 (and “way-markers” for 2025) by June 2008

3

Background

• Energy White Paper, May 2007 (pp141-2)

– “…it is important to ensure that the flexible five-year allowances set in price control periods are compatible with any plausible longer term outlook for the network.”

– “Ofgem therefore intends to look at a range of future scenarios that could arise as a consequence of Government policy and market development…”

– “Ofgem’s role in the process will mainly be to provide guidance and a framework for scenario planning to be conducted by industry.”

(Ofgem’s highlighting)

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Objective of project

• To facilitate the development of a range of plausible electricity network scenarios for Great Britain for 2050, around which industry participants, Government, Ofgem and other stakeholders can discuss longer term network issues

• To help set the context for future price control reviews by Ofgem, for example to ensure that the flexible revenue allowances set in price control periods are compatible with plausible long term outlooks

• However, the project will not prescribe particular strategies for regulated network companies

5

Methodology for scenarios

• We aim to produce four or five final scenarios that:– are sufficiently distinct from each other, and– between them, cover the full spectrum of plausible

outcomes for GB electricity networks in 2050

• This is why a formal methodology has been developed for the project– Methodology follows best practice steps derived from earlier

scenario initiatives– Methodology ensures that a sequence of logical steps is

applied, so that the final scenarios achieve the above-stated aim & are robust

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LENS project team

• Ofgem

• Lead academic partner: Institute of Energy and Environment (InstEE), University of Strathclyde

• Supported by– Policy Studies Institute (PSI), University of Westminster

• Peer review– SPRU (Science and Technology Policy Research), University of

Sussex

Input from stakeholders and other interested parties is through consultations and workshops

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Progress to date

• Initial Ofgem open letter – 15 June

• First stakeholder workshop – 17 August

• Methodology statement and open letter – 12 November

• Report on scenario inputs and consultation letter – 5 December

• All materials available at LENS page of Ofgem website http://www.ofgem.gov.uk/Networks/Trans/ElecTransPolicy/lens/Pages/lens.aspx

8

Overview of today’s workshop (morning)

• 10.10 – 10.25 Methodology (plus case study)

• 10.25 – 10.40 Key highlights of inputs report(plus case study)

• 10.40 – 10.50 Q&A/feedback on methodology andinputs report

• 10.50 – 11.00 Introduction to breakout sessions

• 11:00 – 11.15 Coffee break and split into groups

• 11.15 – 12.00 Breakout session 1:

Review of LENS “inputs”

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Overview of today (afternoon)

• 12.00 – 12.45 Lunch

• 12.45 – 13.30 Breakout session 2:

Development of LENS “themes”

• 13.30 – 14.00 Feedback from breakout sessions

• 14.00 – 14.20 Moving from “themes” to scenarios

• 14.20 – 14.50 Plenary discussion/Q&A session

• 14.50 – 15.00 Next steps and closing remarks

Methodology (plus case study)

Dr. Graham Ault

Scenarios process & terminology

REAL WORLD(2007)

ThemesIssues

SCENARIOSPROJECT

(2007)

Driving Forces

FUTUREWORLD?

(2050)

Scenarios

SCENARIOWORLDS

(2050)

SCENARIOWORLDS

(2050)

SCENARIOWORLDS

(2050)

SCENARIOWORLDS

(2050)

Pathways

Scenarios approach

Scenario development methodology follows tried and tested structure as set out in published methodology statement of 12 Nov:

1. Define the recipient2. Frame the focal question3. Information gathering4. Identify themes5. Sketch possible pathways6. Write scenario storylines 7. Model scenarios8. Identify potential implications of scenarios on the focal question

1. Define the recipientGB power network stakeholders

• Sets the boundaries on ‘internal’ and ‘external’ factors• Primary stakeholders:

• Electricity consumers (and representative organisations)• Network companies• Power generators• Suppliers• Government • Ofgem

• Other stakeholders including:• equipment suppliers• trade associations• lobby groups

2. Frame the focal questionWhat would be the impact of markets, policy,

environmental, geopolitical and technology futures on GB power networks and their regulation?

• Focuses scenario development activity on the issues of most importance for the recipients

• ‘External’ context and ‘internal’ interest defined• ‘Power networks’ taken to mean transmission and

distribution assets (primary and secondary)

3. Information gathering

• High quality information inputs required:– Output from other relevant scenarios initiatives– Inputs from GB power network stakeholders and other

interested parties– Economic modelling data inputs– Any other relevant information

• First LENS project output:– Report on scenarios inputs– Published on Wednesday 5th December 2007– Highlights provided in next presentation

4. Identify themes

• Themes provide a focus on certain aspects of the focal question and focus effort from the scenario team

• Prospective themes previously identified (17th August workshop):1. Demand2. Generation3. Consumer Participation

• Themes proposed in the inputs report• Themes are a key aspect of this workshop

5. Sketch possible pathways• Represent the interactions between the main driving

forces of scenarios• Check staging points, plausibility and similarity

A

B1

B2

C1

C2

C3

C4

D1

D2

D3

D4

D5

D6

D7

D8

activeconsumers

passiveconsumers

centralgeneration

centralgeneration

decentralisedgeneration

decentralisedgeneration

highdemand

highdemand

highdemand

highdemand

lowdemand

lowdemand

lowdemand

lowdemand

Decentralised generationnot consistent withpassive customers

Decentralised generationIs main feature of scenarioregardless of demand

6. Write scenario storylines • Common component of scenarios initiatives• Narratives provide the opportunity to paint a picture

of a future world rather than just a set of parameters • Identified issues are woven into scenarios to make

sure that all the possibilities identified are included

• Second LENS project output:– Draft scenarios report – Publication by February 2008

• Third LENS workshop:– Opportunity to discuss and refine draft scenarios– Start identifying implications of scenarios

7. Model scenarios• Test out the initial scenarios through quantitative

modelling• Enhances consistency/plausibility• Identifies further issues and some implications of

scenarios

8. Identify potential implications of scenarios on the focal question• Identify key issues for networks and their regulation• Assess the pathways, branching points and

milestones

Scenario Outcomes

• The scenarios developed for 2050 will be disseminated as follows:– Narratives: rich description of context, drivers,

outcomes and side issues– Data: quantitative data describing aspects of the

scenarios where appropriate– Graphics: makes for easier understanding and

discussion– MARKAL-MACRO results: inputs, outputs and

sensitivity studies

Next Steps

Dec’07-Feb’08:• Agree LENS themes• Develop pathways from inputs and themes• Identify ‘initial’ scenarios• Model initial scenarios• Write scenarios narratives• Identify draft scenarios

Mar’08-Jun’08:• Identify final scenarios for 2050 and 2025 ‘way-markers’• Identify key issues for networks and their regulation

Shell scenarios development:case study

Shell Methodology and Process

• ‘Scenarios: An explorer’s guide’• Shell develop a new set of

global scenarios every 3 years

• Initial research stage of 6 months followed by 12 month scenario development phase

Shell Methodology and Process• Scenarios project outline:

– Purpose of project and expected outcomes– Recipients of scenarios– Focal question– Research and information– Models to test the effect of key parameters– Development: Branches and Scenario outlines– Storytelling and illustrations

Inputs: ‘Gathering information across disciplines is essential for developing scenarios that challenge conventional wisdom and address blind spots’

Themes: ‘The aim was to deepen our understanding of the key questions within each theme, identifying which were the most importantly uncertain and what

directions they might take’

Shell Methodology and Process

• Initial Scenarios – an iterative process around focal question, branches and scenarios outlines– Deductive: pick two critical uncertainties, create four

quadrants, create storyline for moving into each quadrant and between quadrants

– Inductive: create chains of events (at least three) and induce storylines of how each could happen

– Normative: start from a set of characteristics at an end point and work backwards

• Key is to identify scenario structure and then populate with rich storylines

• Expect tensions between different approaches –scenarios do not evolve in organised, linear fashion

Shell Methodology and Process

Letting go of assumptions

Information overload

Too many scenario ideas

Some get swept away

Seeing the future afresh

Shell Global Scenarios 2002-2020

Key highlights of inputs report(plus case study)

Damien Frame

Information Gathering

• Methodology identifies stages:(3) Information gathering(4) Identify themes

• Inputs report primarily describes the information gathering process

• Information sources reviewed and analysed in the context of their relevance to future GB power networks

• List of inputs proposed for LENS scenario development • Three potential themes proposed for discussion

Information Sources

• Review of recent relevant scenario literature• LENS consultation• ENSG Horizon Scanning

• Main themes identified• Headline data extracted

where relevant• Comparison of results• Common elements

identified• Condensed list

summarising all potential inputs produced.

Literature Review

• Potential inputs listed for each stage

• Comparison of results• Common elements

identified• Condensed list

summarising all potential inputs produced.

LENS Consultation and ENSG

All potential inputs collated into a list of proposed LENS inputs and split into two groups

• High Level Inputs– Shape the wider external circumstances, describe the storylines and

dictate the overall energy demand

• Network Specific Inputs– Highlight the detailed inputs used to describe the role of networks, the

required functionality and possible constraints

Proposed Inputs

High Level Inputs

• Consumer Behaviour• Economic Landscape• Energy Demand• Environmental Landscape• Political/Regulatory Landscape • International Context

Proposed Inputs

Proposed Inputs

Network Specific Inputs

• Electricity Demand • Electricity Generation • Security, Quality and Performance of Supply • Transmission and Distribution Network Architecture• Network Technology Development and Deployment• Power Network Sector Structure• Transitional Issues

Potential Themes• External Landscape

– Primarily shaped by high level inputs

• Consumers– Consumer Behaviour – Also influenced by the

External Landscape• Network Role

– Primarily shaped by network specific inputs

• Flexible relationship between inputs and themes

– Some inputs will influence multiple themes

– Cyclical relationship between themes

Scenarios development:SuperGen 2050 case study

SuperGen Methodology

SuperGen Methodology• Initial Information Gathering• 4 key activities facilitated by electricity networks chosen• 5 or 6 partial scenarios generated for each key activity• An iterative review process including stakeholder workshops

to consolidate scenarios into a set of overall scenarios• Key themes identified to define final scenarios

– Economic Growth– Technological Growth– Environmental Attitudes– Political and Regulatory Attitudes

SuperGen Themes and Scenarios

SuperGen Themes and Scenarios• Each theme has between 2 and 4 potential states• Potential combinations 3x2x4x2 = 48• Iterative process to identify mutual similarity and agree

plausible combinations• Final scenarios generated

– Strong Optimism– Business as Usual– Economic Downturn– Green Plus– Technological Restriction– Central Direction

SuperGen Lessons Learnt• Four themes with up to four potential states resulted in almost

unmanageable quantity of scenario options• Chosen themes allowed rich qualitative descriptions of external

circumstances but did not provide scope to focus on networks• Final scenarios were criticised for “not working” in terms of the

generation profile meeting the demand conditions– Scenarios are not solutions– Identifying the problems to be addressed in future analysis is a

positive result• Academic perspective only

– Wider consultation could have provided richer and higher qualityscenarios and avoid some misunderstandings of the purpose of thescenarios

Q&A/feedback on methodology and inputs report

Introduction to breakout sessions

3

Objective of breakout sessions

• Main objectives for breakout sessions:

– Test project team’s thinking on LENS “inputs” and “themes”

– Generate new ideas on LENS “inputs” and “themes”

– Develop initial thoughts on what GB electricity network scenarios for 2050 might look like

4

Definitions of inputs, issues and themes

• “Issues” = Ideas, trends, problems, concepts, developments, or changes that are expected to be important in considering the future of the GB electricity sector, and more specifically GB electricity networks

Low-level information for scenarios

• “Themes” = Higher level groups of issues and main areas of interest to a scenario activity, obtained by grouping together issues under broader headings

High-level information for scenarios

• “Inputs” = Issues, themes and data of specific use to the LENS project (because of their relevance to GB electricity networks in 2050)

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Relationship between scenarios, inputs, and themes

• We aim to produce four or five scenarios for GB electricity networks in 2050 that are:– sufficiently distinct from each other, and– between them, cover the full spectrum of plausible

outcomes for GB electricity networks in 2050

• At this stage of the project, “inputs” and “themes” should be chosen to help achieve this aim

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Breakout session 1: Review of LENS inputs(11.15-12.00)

• Overview of steps:

– Step one: Confirm/clarify existing inputs and identify potential missing inputs [20 mins]

– Step two: Take (revised) list of inputs from previous step, and rank them in order of importance for GB electricity networks in 2050 [15 mins]

– Step three (only if there is spare time): Discuss one/more of a suggested list of questions on inputs [10 mins]

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Breakout session 2: Development of LENS themes (12.45-13.30)

• Overview of steps:

– Step one: Assess whether proposed themes are suitable or whether alternative set of themes works better [10 mins]

– Step two: Explore key trends within identified themes from previous step [15 mins]

– Step three: Identify the different kinds of networks that could plausibly result from the identified themes & key trends in previous steps [20 mins]

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Breakout sessions: guidance on steps and timings

• At the start of each breakout session facilitators will explain the format of the session, including details of:– proposed exercise for each step– timings

• Printed copies of instructions will be available to participants during the session, with details of:– proposed exercise for each step– timings

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Feedback from breakout sessions (13.30-14.00)

• Breakout session 1: Review of LENS inputs– Each group to present (5 mins per group):

• (revised) list of inputs from step one• ranking of inputs from step two• bullet summary of group’s opinions on detailed questions

from step three (if discussed)

• Breakout session 2: Development of LENS themes– Each group to present (5 mins per group):

• set of themes identified from step one• top 3 key trends for each identified theme from step two• pictures/verbal descriptions of plausible networks from step

three

Breakout session 1: Review of LENS “inputs”

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Step One (20 mins)

• Confirm/clarify existing inputs and identify potential missing inputs– 5 mins: Facilitators introduce session and explain three steps &

list of 13 proposed inputs visible on flipchart– 5 mins: Are there any changes you would propose to make to

the list, so that it becomes more relevant to GB electricity networks in 2050? (Examples include: identifying a missing input, renaming an existing input, or identifying an important issue underlying an input)Each person to suggest changes to the list by sticking post-it notes onto flipchart (one change per post-it note).

– 5 mins: Collate and reorganise post-it notes on the flipchart to identify common ideas and suggestions

– 5 mins: Discuss and agree a (revised) list of inputs and write these down on a new flipchart

12

Step Two (15 mins)

• Take (revised) list of inputs from previous step, and rank them in order of importance for GB electricity networks in 2050– 10 mins: Discuss relative importance of the various inputs for

GB electricity networks in 2050– 5 mins: Split inputs into three groups, using sticky dots of

different colours: • top (relatively most important) – [one colour]• middle (medium importance) – [another colour]• bottom (relatively least important) – no sticky dot

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Step Three (10 mins) (if there is spare time after previous two steps)

• Discuss one/more of these questions on inputs– Generation location: how to develop a range of plausible

assumptions? [Group 1]– Factors external to GB (eg interconnectors, transit via GB, global

resource and price trends): how important for networks? [Group 1]– Time of day/seasonal variations in generation or demand: how

important for networks? [Group 2]– Network security standards: how might they evolve, and how do

we develop a plausible range of assumptions? [Group 2]– Government policy on greenhouse gas reductions for 2050: how to

take this into account when developing scenarios? [Group 3]– Government nuclear policy: how to take this into account when

developing scenarios? [Group 3]

Breakout session 2: Development of LENS “themes”

15

Step One (10 mins)

• Assess whether proposed themes are suitable or whether alternative set of themes works better– 5 mins: Discuss whether three proposed themes are suitable

for developing LENS scenarios, given the project’s focus on GB electricity networks in 2050

• “External landscape”• “Consumers”• “Network role”

– 5 mins: If not, discuss further and identify an alternative set of themes [maximum of four] that works better (agree a name for each theme)

16

Step Two (15 mins)

• Explore key trends within identified themes from previous step– Start with themes identified from previous step & mark out

separate area for each theme on flipchart– 5 mins: What are the key trends within each theme that you

recommend need to be explored, given to project’s focus on GB electricity networks in 2050?Each person to write down suggested key trends on post-it notes (one trend per note), collate notes on flipchart under appropriate theme headings, look at other people’s ideas and continue adding post-it notes to flipchart.

– 2 mins: Facilitator presents all the key trends written on post-it notes to the group (by reading them out)

– 8 mins: For each theme, discuss and agree (a) which are top 3 trends and (b) how to rank the top 3 in order of importance. Then mark the top 3 ranking on the flipchart.

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Step Three (20 mins)

• Step three: Identify the different kinds of networks that could plausibly result from the identified themes & key trends in previous steps– Question: What different kinds of GB electricity networks in

2050 might plausibly result from the interactions between themes (and key trends) identified in the previous two steps?

– 10 mins: Discuss this question in order to identify three/five different kinds of plausible GB electricity networks for 2050

– 10 mins: Draw pictures/visual representations of the different kinds of plausible GB electricity networks for 2050 on flipcharts (one picture per flipchart, minimum of three & maximum of five pictures)

Feedback from breakout sessions

19

Feedback from breakout session 1: Review of LENS inputs

(13.30-13.45)

• Each group to present (5 mins per group):

– (revised) list of inputs from step one

– ranking of inputs from step two

– bullet summary of group’s opinions on suggested questions from step three (if discussed)

20

Feedback from breakout session 2: Development of LENS themes

(13.45-14.00)

• Each group to present (5 mins per group):

– set of themes identified from step one

– top 3 key trends for each identified theme from step two

– pictures/verbal descriptions of plausible networks from step three

Moving from “themes” to scenarios

Nick Hughes

Policy Studies InstituteOfgem LENS Stakeholder Workshop

14.12.07

Moving from “themes” to scenarios

In developing scenarios from themes, two key things to bear in mind:

Internal consistency

Plausible link to present

Internal consistency

• Various drivers, actors' motivations and behaviour all interact and influence each other

• Scenarios should take account of these interactions, not deal with them as if isolated from each other

Plausible link to the present

• In order for scenarios to be useful for near term strategic decisions, they must be shown to be plausible evolutions from the present day

• Allows user to shape or react to events as they begin to unfold (‘rabbit in the hat’)

‘Tools’ for developing scenarios

• Iterations of scenario development involving (as appropriate):– ‘Orthogonal axes’ (deductive) approach: pick two critical

uncertainties, create four quadrants, create storyline for moving into each quadrant and between quadrants

– Pathways (inductive) approach: create chains of events and induce storylines of how each could happen

– Back-casting (normative) approach: start form a set of characteristics at an end point and work backwards

– Modelling: with MARKAL MACRO

Hypothetical example: Eco-active vs. Switch me on

Modelling ScenariosHow can themes, inputs, drivers, be represented in

MARKAL MACRO?

• More options- generation technologies, demand technologies, infastructure, demand side participation

• Fewer options- constraints on capacities, ie for environmental sensitivity reasons

• Alter background parameters- levels of energy service demand, 'hurdle rates', technology 'learning rates'

Example: Recent MARKAL MACRO Scenario Modelling Project

IPPR & WWF: 2050 Vision- How can the UK play its part in avoiding dangerous climate change?

• A central scenario placed a range of constraints on the model, related to 'green' social concerns

– An 80% carbon reduction target to include international aviation and shipping

– Constraints on availability of imported and domestic biomass

– Reduced growth in demand for aviation

– No new nuclear

• Iterative process added new extensions to the model– Representation of electricity storage costs for high levels of renewables

• Additional sensitivities run– Higher fossil fuel prices; greater energy efficiency; accelerated development of

renewable technologies

IPPR & WWF: 2050 Vision- ResultsCarbon abatement by sector

0

20

40

60

80

100

120

2000 2010 2020 2030 2040 2050

%

UpstreamElectricityIndustryResidentialServicesTransport

IPPR & WWF: 2050 Vision- ResultsElectricity generation mix to 2050

0

100

200

300

400

500

600

2000 2010 2020 2030 2040 2050

TWh

StorageMarineImportsBio & wasteWindHydroNuclearFuel Oil & DieselGas CCSGasCoal CCSCoal

IPPR & WWF: 2050 Vision- ResultsGDP Growth with and without abatement

0

500

1,000

1,500

2,000

2,500

3,000

2000 2010 2020 2030 2040 2050

£ bi

llion Base case

60% reduction80% reduction

IPPR & WWF: 2050 Vision- Headline summary

• Offshore wind and CCS play a major role in a no nuclear low carbon UK

• Technical developments in regulation of large amounts of renewable energy would significantly affect penetration

• Electricity is a vital vector for decarbonisation, including in sectors such as residential heat

• FT diesel dominates in transport sector; hydrogen also significant, largely produced from electricity; rail mainly electrified

• Costs high, marginal carbon prices of £375 / tCO2

• However, still within range 2-3% GDP by 2050

Summary: Next steps

• Identification of key themes for future developments in electricity networks

• Consolidation of these into scenario storylines which are internally consistent and plausibly linked to the present

• Interpretation of storylines to provide parameters and constraints for MARKAL MACRO model

• Running of MARKAL MACRO model to support storylines and set them within whole energy system context

Plenary Discussion

Questions & Answers

Next steps and closing remarks

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Consultation on inputs report of 5 December

• Following this workshop, we invite written comments from stakeholders and other interested parties

• We welcome responses on the six consultation questions set out in the Ofgem consultation letter of 5 December

• Copies of the consultation letter and inputs report are available on Ofgem’s website (Ref. No. 287/07) http://www.ofgem.gov.uk/Networks/Trans/ElecTransPolicy/lens/Pages/lens.aspx

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Expected timeline going forward

• Consultation on inputs report closes 18 Jan 2008• Report/consultation on draft scenarios by Feb 2008• Third stakeholder workshop by Mar 2008• Final scenarios report by June 2008

Further details on project outputs and timeline can be found in the LENS methodology, published on 12 November

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