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A Positive Outlook For The Winter

Matthew Osborne, Principal Risk Manager at Inenco Group

National Grid has published its winter outlook for the coming months, giving an update on security of supply and forecast peak demand.

In the summer, margins were forecast to be 5.5%, the tightest since 2008. Since then, changes to interconnector flows and additional capacity from Eggborough power station has boosted supply for winter 16/17 and Grid now anticipates an improved margin of 6.6%: supply capacity is expected to be 55GW with peak demand forecast to be 52.7GW.

Grid has spent £122million on contingency plans to boost margins this winter: 3.5GW of contingency reserve, primarily from fossil fuel plants paid to be on standby. Despite Grid cancelling its Demand Side Balancing Reserve (DSBR), businesses will provide around 0.8GW of demand side response.

Despite concerns about Rough storage levels, gas supplies are also expected to be comfortable, supported by lower demand largely as Ireland becomes more self-sufficient through the Corrib gas field levels and relatively healthy European reserves.

What does it mean for businesses?

A reduced risk of outages and comfortable margins should mean security of supply is not a concern to businesses this winter. Whilst business energy users shouldn’t need to keep an eye on generation margins this winter, demand levels will still count.

The Triad season (November – February) will shortly be upon us and the three half hourly periods where demand is highest could have a big impact on next year’s energy bills.

The week commencing 12th December is when Grid forecasts the highest level of system demand, and generation margins are expected to be tightest during the week of the 9th January. However, Triads are becoming more difficult to predict – you can read more about Triads and how to avoid extra costs here.

Managing wholesale market costs this winter will also be particularly important, given the backdrop of increased volatility and recent bullish momentum largely as a result of Sterling weakness and continued French nuclear outages that continue to drive the market in the near term.

To stay on top of market prices this winter, watch our weekly Y? Reports, delivered by our award winning energy traders. To speak to an Inenco expert about your winter strategy, email or call 08451 46 36 26.