UK Future Energy Scenarios - National...

UK Future Energy Scenarios

Richard Smith

Future Transmission Networks Manager

January 2012

Cautionary Statement

This presentation contains certain statements that are neither reported financial results nor other historical information. These

statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section

21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid’s

financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as ‘anticipates’, ‘expects’,

‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘targets’, ‘may’, ‘will’, ‘continue’, ‘project’ and similar expressions, as well as statements

in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of National Grid’s future

performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ materially from

those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and uncertainties relate to factors

that are beyond National Grid’s ability to control or estimate precisely, such as changes in laws or regulations and decisions by

governmental bodies or regulators; breaches of, or changes in, environmental, climate change and health and safety laws or

regulations, including breaches arising from the potentially harmful nature of its activities; network failure or interruption, the inability to

carry out critical non network operations and damage to infrastructure, due to adverse weather conditions, including the impact of

Hurricane Irene and other storms; performance against regulatory targets and standards and against National Grid’s peers with the aim Hurricane Irene and other storms; performance against regulatory targets and standards and against National Grid’s peers with the aim

of delivering stakeholder expectations regarding costs and efficiency savings, including those related to investment programmes,

restructuring and internal transformation projects; and customers and counterparties failing to perform their obligations to the Company.

Other factors that could cause actual results to differ materially from those described in this presentation include fluctuations in

exchange rates, interest rates and commodity price indices; restrictions in National Grid’s borrowing and debt arrangements, funding

costs and access to financing; National Grid’s status as a holding company with no revenue generating operations of its own; inflation;

seasonal fluctuations; the funding requirements of its pension schemes and other post-retirement benefit schemes; the loss of key

personnel or the ability to attract, train or retain qualified personnel and any disputes arising with its employees or the breach of laws or

regulations by its employees; accounting standards, rules and interpretations, including changes of law and accounting standards and

other factors that may affect National Grid’s effective rate of tax; and incorrect or unforeseen assumptions or conclusions relating to

business development activity. For a more detailed description of some of these assumptions, risks and uncertainties, together with

any other risk factors, please see National Grid’s filings with and submissions to the US Securities and Exchange Commission (the

‘SEC’) (and in particular the ‘Risk factors’ and ‘Operating and Financial Review’ sections in our most recent Annual Report on Form 20-

F). The effects of these factors are difficult to predict. New factors emerge from time to time and National Grid cannot assess the

potential impact of any such factor on its activities or the extent to which any factor, or combination of factors, may cause results to

differ materially from those contained in any forward-looking statement. Except as may be required by law or regulation, National Grid

undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this presentation. The

content of any website references herein do not form part of this presentation.

2

The UK energy landscape is changing

Sustainability

Existing power station closures

~25%

3

Gas from UK sources

~25%of total supplies by 2020

Affordability

Security of

supply

~25%of total capacity by 2020

The future: efficiency, decarbonisation

and electrification

TransportElectricity Heat

4

new homes & retrofit

Heat pump

Decarbonised electricity…

and decarbonisetransport

Efficiency and innovationInsulate and reduce

Smart Meters & Appliance efficiency

De-carbonise heat

Biomethane

CNG

Gas backup& embeddedgeneration

Our scenarios

Electricity generation capacity (GW)

100

125

150

Our scenarios are designed to explore a range of possible outcomes

Gone Green:

Renewable and

carbon targets are hit

Slow Progression:

Electric cars (m)

5

10

15

5

75

2010 2015 2020 2025 2030

Slow Progression:

2020 targets are not

hit until after 2025

Accelerated Growth*:Faster deployment of

offshore wind than in

Gone Green

* Accelerated Growth only varies from Gone Green in the mix of power generation –

all other variables e.g. demand, EV’s, heat pumps etc are the same as for Gone Green.

0

2010 2015 2020 2025 2030

Domestic heat pumps (m)

0

5

10

15

2010 2015 2020 2025 2030

Annual gas demand (TWh)

0

200

400

600

800

1,000

1,200

2010 2015 2020 2025 2030

Gone Green: total UK energy requirements

1,500

2,000

2,500

En

erg

y r

eq

uir

em

en

t (T

Wh

)

Wind

Renewable

Nuclear

6

0

500

1,000

1,500

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

En

erg

y r

eq

uir

em

en

t (T

Wh

)

Nuclear

Gas-CCS

Gas

Coal-CCS

Coal

Oil

Gone Green: some key themes

2010 2020 2030 2040 2050

2020 targets

� 15% of energy from

renewables

� 37% reduction in CO2

2050 target


2030 target


7

� Generation mix is radically

‘overhauled’

� Transmission is a key enabler

– connecting & balancing new,

diverse sources of energy

� Electricity demand increases, driven by electric cars

& heat pumps; gas demand declines

� Distribution network capacity significantly increases

� Carbon Capture & Storage is deployed at significant scale

� Significant technology uncertainty, ‘disruptors’ may emerge

� 80% reduction in CO2 is achieved

� Consumer energy behaviour is unrecognisable from today

When do you switch to electric?

Emissions intensity pre appliance (g/kWh)

400

600

800

1,000 ‘Window’ for transport

‘Window’ for heat

8

Appliance efficiency will also determine the optimum transition pointand may extend the ‘window’

0

200

2010 2015 2020 2025 2030 2035 2040 2045 2050

Electricity (total grid) Marginal electricty for transport Marginal electricty for heat

Natural Gas Gas-Biogas mix Oil

Oil-Biofuel mix

How much do you switch to electric?

~1,000 GWh / day

Electricity demand

(avg. November day)

~4,000 GWh / day

Gas demand

(avg. November day)

Energy use is variable…Full electrification of all heat:

what you have to believe…

9

what you have to believe…

~100 GW of heat electrified =

Nuclear? ~30 sites at 3.3GW / site

Renewables?~20,000 wind turbines

at 5MW / turbine

CCS? ~50 sites at 2GW / site

Solar PV? ~27m homes at 17m2 / home

Inter-connectors? ~100 BritNed’s at 1GW each

…even after significant energy efficiency

GWh

0

1,000

2,000

3,000

4,000

60 120 180 240 300 360

Days

Electricity demand Heat pump electric load Environmental heat

2020 to 2030: Distribution network

capacity will need to increase

Peak domestic electricity demand increases significantly…

Distribution networks will need to more than double their capacity…

2010 2030 2050

Household

demand*~2.5kW ~4.7kW ~7kW

~2.5kW peak appliance demand for an average house

+ ~3kW charge for an electric car

10

Number of

homes26m 31m 36m

Embedded

generation~8GW ~15GW ~20GW

Network

loading

(kW/km)

~75 ~170 ~300

Network scale X2.3 X4.0

Network scale vs

2010 levels

* After diversity average

peak demand

+ ~3.5kW demand for a heat pump

= ~9kW potential total demand

Now to 2020: EVs and heat pumps

less significant than generation build

Change under Gone Green (GW)

10

20

30

40

� Properties insulated for efficiency

� ‘Hot-spots’ of demand will emerge

� Evening peak impact mid-decade

~1–4GWpeak demand

Heat pumps

~1,200,000in homes

11

(30)

(20)

(10)

0

10

Generation Demand

Gas Nuclear Coal

Hydro Interconnector Wind

Biomass Marine Gas

Oil Electric cars* Heat pumps*

~1–5GWpeak demand

Electric vehicles

~1,700,000on the road

� 13A plug-in home charge dominant

� ‘Hot-spots’ of demand will emerge

� Evening peak impact mid-decade

� Time of use tariffs & smart metering enable peak

management by 2020

� Time of use tariffs & smart metering enable peak

management by 2020

* Electric vehicle and heat pump at mid-range peak demand.

Are the 2020 targets achievable?

2020 Transmission connected renewable generation (GW)

Contracted

Currently connected

Gone Green target

12Data source: National Grid TNQCU – November 2011; National Grid 2011 SYS. Connected renewable generation excludes pumped storage.

0 5 10 15 20 25 30 35 40 45

127 projects at an average

of 306MW each

2020 renewables target is challenging, but achievable

78 average projects required

(a 60% conversion rate)

A line of sight to achievingthe 2020 renewables target


Contracted

Currently connected

Gone Green target


0 5 10 15 20 25 30 35 40 45

Under

construction

Awaiting

consentsConsents

approvedScoping

2020 renewables target is challenging, but achievable

A line of sight to achievingthe 2020 renewables target


Contracted

Currently connected

Gone Green targetTidal Wave


0 5 10 15 20 25 30 35 40 45Biomass

Securing offshore wind, particularly round 3, is critical

Onshore

windWoodchip Offshore

wind

Plus significant new non-renewable generation connections

2020 Transmission connected non-renewable generation (GW)

Contracted

CCGT Nuclear

Other


0 5 10 15 20 25 30 35 40 45

Interconnector Clean coal

Cost implications

3,500

4,000

4,500

5,000

5,500

6,000

Me

an

un

dis

co

un

ted

re

al p

ou

nd

s

pe

r p

ers

on

pe

r ye

ar

DECC “do nothing” scenario

16

DECC calculator suggests a number of low carbon scenarios are broadly comparable with a “do nothing” scenario for total energy costs

3,000

3,500

Markal High energy

reduction /High

renewables

High

nuclear /Less

energy

efficiency

Higher CCS

/ more bio-energy

National

Grid (GoneGreen)

Friends of

the Earth

CPRE Mark

Brinkley

Atkins

Me

an

un

dis

co

un

ted

re

al p

ou

nd

s

DECC scenarios Stakeholder scenarios

Data source: DECC 2050 cost calculator: www.decc.gov.uk. Markal is DECC’s economic optimisation tool.

The transmission delivery challenge

existing electricity network

potential wind farm sites

potential nuclear sites

interconnectors

Norway

17

France

France

Netherlands

Belgium

Ireland

The UK energy landscape is changing

Offshore Development Information Statement (ODIS)

Ten Year Statement (TYS)

New sources of energy; different peak and annual demand profiles; greater geographical spread of supply sources; greater supply and demand variability

UK Future Energy Scenarios

18

Seven Year Statement (SYS)

� Electricity focus

� 7 year outlook

� Contracted

background based

Statement (ODIS)


� 20 year outlook

� Scenario based

Transmission Networks Quarterly Connections Update (TNQCU)


� Contracted

background based

� Gas focus

� 10 year outlook

� ‘Best view’ based

Operating the Electricity Networks in 2020 (GO2020)


� 8 year outlook

� Scenario based

� Energy focus

� 40 year outlook

� Scenario based

Appendix

Our scenarios: Gone Green

Gone Green is constructed such that the renewable energy and carbon emissions targets are always achieved. A ‘bottom-up’ approach is used starting with the finest level of detail practical.

2020 2030

Generation capacity (Tx / Total)* 101GW / 115GW 128GW / 147GW

Renewable generation capacity 36GW 64GW

Low carbon generation capacity** 48GW 94GW

Electric vehicles 1.8m (4TWh) 13.5m (40TWh)

Heat pumps (domestic households) 1.2m (6TWh) 8m (60TWh)

20* Total capacity includes transmission connected generation plus embedded generation** Low carbon generation capacity includes renewable generation capacity plus nuclear and CCS

Transmission connected generation (GW)

0

20

40

60

80

100

120

140

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Nuclear Coal Gas Offshore Wind

Onshore Wind Other Renew able Interconnector Other

Summary:

� AGR nuclear plant receives 5yr life extensions beyond the closure

dates in Slow Progression

� First new nuclear plant connects in 2019/20

� The majority of existing coal plant closes by 2023 due to a combination

of the IED and the age of the plant

� 4GW of coal with CCS connects post 2023 in addition to the

Government funded pilot project

� Existing gas-fired plant is assumed to close at around 25 years of age

� A total of 13GW of new conventional CCGT plant connects over the

period

� 7GW of new gas plant with CCS is included in the scenario from 2023

� The build up of wind generation reaches 26GW of wind capacity in

2020 (17GW offshore) and 47GW in 2030 (37GW offshore)

� Marine generation develops more quickly than in the Slow Progression

scenario reaching 4GW in 2030

Slow Progression is similar in concept to the forecasts of earlier years. Projections are prepared for electricity and gas demand on the transmission networks using econometric modelling at a sector level. Renewable energy and carbon emission targets are not met until after their deadlines.

Our scenarios: Slow Progression

2020 2030




Electric vehicles 0.7m (0.9TWh) 4.5m (12TWh)

Heat pumps (domestic households) 0.4m (0.8TWh) 0.4m (0.8TWh)



0

20

40

60

80

100

120

140

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030



Summary:

� AGR nuclear plant receives 5yr life extensions unless otherwise

announced

� First new nuclear plant connects in 2021/22, with a slower build up of

new nuclear capacity than in Gone Green or accelerated Growth

� The majority of existing coal plant closes by 2023 due to a combination

of the IED and the age of the plant

� No new coal plant is built apart from the government funded pilot

project with CCS coal plant assumed to prove uneconomic

� Existing gas-fired plant remains open for longer than in Gone Green

� A significant amount of new gas-fired generation is constructed

between 2015 and 2023 in order to maintain the required levels of

capacity. A total of 21GW of new conventional CCGT plant is included

in the scenario by 2030


� The build up of wind generation is lower in this scenario with 20GW of

wind capacity in 2020 (11GW offshore) and 32GW in 2030 (23GW

offshore)

� Marine generation is assumed to develop very slowly with larger scale

generation not connecting until around 2027

Accelerated Growth uses the same demand projections as Gone Green but assumes that offshore generation builds up far more quickly. There is no requirement for extra life extension for nuclear AGR plant as in Gone Green. Renewable energy and carbon emission targets are met early.

Our scenarios: Accelerated Growth

2020 2030




Electric vehicles 1.8m (4TWh) 13.5m (40TWh)

Heat pumps (domestic households) 1.2m (6TWh) 8m (60TWh)



0

20

40

60

80

100

120

140

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030



Summary:

� AGR nuclear plant receives 5yr life extensions unless otherwise

announced

� First new nuclear plant connects in 2019/2020

� Significant amount of new coal plant closes due to a combination of the

IED and the age of the plant

� 4GW of coal with CCS connects post 2023 in addition to the

Government funded pilot project

� Existing gas-fired plant remains open longer as a back-up for the

significant amount of wind capacity

� A total of 13GW of new conventional CCGT plant connects over the

period


� The build up of wind generation reaches 42GW of wind capacity in

2020 (33GW offshore) and 59GW in 2030 (49GW offshore)

� Marine generation develops at a slightly quicker rate than in the Gone

Green scenario albeit reaching around the same level in 2030

Where will our gas come from?

60%

80%

100%

Sources of gaschange significantly

Day to day variabilitycould increase

60%

80%

100%

23

0%

20%

40%

60%

2010/11 2020/21

UKCS Norway LNG

Continent Unconventional

0%

20%

40%

60%

Avg. Sep. 2010 Avg. Dec. 2010

UKCS Norway LNG

Continent Unconventional Storage

The regional transmission challenge

DENMARK

NORWAY

24

Nemo

BELGIUM,

FRANCE

THE NETHERLANDS,

GERMANY

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