The role of gas in power generation – presentation by David Cox, managing director of the Gas Forum, on 29 April 2013 at the UK Power Generation Conference, which examined the impact of current policy and regulatory changes on the energy investment landscape. www.gasforum.co.uk

1. Role of Gas in Power Generation
David Cox
Managing Director
29 April 2013

2. The Gas Forum
Advocate for gas and voice of the UK gas industry:
• Represents the views of gas shippers, suppliers and other
wholesale participants active in the UK market
• Offers strategic advice to the UK and European government
and regulatory bodies on key issues such as gas liquidity and
security of supply
• Responds to government / regulatory consultations on behalf
of the UK gas industry
• Seeks to influence current and future energy policy and
regulation via proactive lobbing
• Administers the Industrial and Commercial Code of Practice

3. Current situation
• Number of gas plant closed or mothballed e.g. Teeside,
Keadby, Shotton, Barry etc…
• Current economics do not support CCGT plant – poor
spark/spread
• At this time it is not clear when/if plant will return as
there is insufficient confidence in the forward curves
• Does continued shutting/mothballing of gas plant bolster
support for coal, conversion to biomass?
• Is there a degree of ‘politicking’ as CCGTs push for
greater rewards under EMR?

4. Power market – 2015 onwards
• LCPD out plant all shut – around 12GW
• Will know which IED plant is in or out – another @20GW
• Assume some conversions to biomass in progress - ?GW
• First capacity mechanism auction happens in 2014
• Progress on nuclear – how much and by when?
• Delivery of 2020 renewable goals – total wind capacity?
• Role of gas as ‘transitional’ fuel to a low carbon economy
• Current outlook very uncertain for gas – carbon price
support (CPS), EMR, IED, transmission charges, cash-out
review, EU ETS, etc.

5. Capacity Assessments
De-rated margins and capacity changes
Source: Ofgem- capacity statement Oct 12
Source: DECC/Ofgem- Dec 12

6. Why EMR?
• DECC assert we need EMR as no new build coming on stream
• TEC register full of new build – mainly gas and wind
• Some very big nuclear plants – around 9.9GW
• Government identify problems as:
– Peak prices not high enough – confusion over Balancing
Mechanism
– Managing peaks uncertain – means no real forward curve
– Policy uncertain
– Investment climate is not condusive
– Liquidity makes forward sales difficult
• Can all agree with some of these issues but answers more
difficult!

7. Capacity mechanism – supporting gas
• Obligation on central body (NG) to maintain a capacity margin
• NG advise Ofgem on Capacity Assessment – published on
5/10/12 – suggested capacity needed
• Descending clock auction for capacity (really energy delivered
not capacity) to meet the set margin
• Margin can be set under current Energy Bill
• DECC original EMR doc noted volume of 5GW (10%) to 2030
needed to maintain margin
• Expected first year of delivery is 2018/19 – so auction 2014

8. Gas Demand – NG Scenarios
Massive variations for both total
demand and generation gas demand –
which, if any, is correct?

9. Future issues
• Gas generation will need to be highly flexible in future with
lower load factors – DECC estimates between 15-43%
• Can the NTS support increased flexibility?
– Impacts on linepack
– Access to offshore/imported flexibility
– Volume of gas storage
• Need for more STOR plant to support local power needs?
– Is there sufficient flexibility within the DNs to support
growth in this area?
• Will capacity mechanism obligations compel generators to
secure firm supplies/capacity?

10. For more information
• Email: david.cox@gasforum.co.uk
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