Utility Week

UTILITY Week 7th November 2014

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28 | 7th - 13th November 2014 | UtILItY WeeK Markets & Trading This week Major energy users say gas storage is vital Lack of quick-response facilities leaves the UK at a major competitive disadvantage, says industry A coalition of major energy users has called on the government to urgently address the "major competitive disadvantage" caused by the UK's lack of quick- response gas storage facilities. In a letter to energy secretary Ed Davey, seen by Utility Week, groups representing energy- intensive business warned that "damaging short-term energy price spikes" could affect the UK's industrial productivity. The UK is increasingly dependent on gas imports and therefore vulnerable to volatility in the gas market, which could have a damaging impact on the economic competi- tiveness of energy-intensive users, says the letter. Representatives from business groups including the Major Energy Users' Council and the Energy and Utilities Alliance called on the government to reconsider its deci- sion to reject a "fast-cycle" gas storage facility planned for the Lancashire area by US company Halite Energy. Unlike long and medium-range storage facilities such as Rough, which largely inject and withdraw gas on a seasonal basis, the Preesall fast-cycle storage project could deliver gas to the grid at short-notice to guard against temporary but damaging market price spikes. Halite Energy's plans involve storing up to 900 mil- lion cubic metres of gas in 19 salt caverns under Preesall. The £600 million gas storage facility was initially rejected by government but is now being reconsidered aer the rejection was overturned in the High Court. A final government decision is expected imminently, according to the letter. JA eLectrIcItY Peterhead tested for winter supply role SSE has said it will complete a "test run" of its Peterhead gas- fired power plant before it exits the UK power market to stand in reserve as part of National Grid's security of supply measures for this winter. The 780MW plant has secured a one-year contract with National Grid that lets the trans- mission system operator call on the plant if the UK's 4.1 per cent derated capacity margin for this winter shrinks to dangerous lev- els in periods of high demand. To ensure the rarely used plant is capable of ramping up to avoid a supply shortfall, SSE opted to schedule a one-off test. "The plant will generate throughout the day, gradually increasing its output until the evening peak period when it will generate at 740MW for just over two hours," said the company. The test run is permitted by National Grid but is arranged at the discretion of the operator. Scottish Power's Ryehouse gas-fired power plant, which also signed a supplemental balancing reserve contract with National Grid, is in regular use so the generator may not feel that a test is necessary. The third plant to sign a con- tract with National Grid is RWE's Littlebrook plant, which "rarely runs" but has generated power over peak periods several times in the past two months. A spokeswoman for RWE told Utility Week that the plant has proven over recent weeks that it is ready to meet its con- tractual obligations. eLectrIcItY GDF Suez signs PPA with local windfarm GDF Suez Energy UK has agreed a power purchase agreement (PPA) with the community- owned Beinn Ghrideag wind- farm on the Isle of Lewis in the Outer Hebrides. Under the terms of the deal, the first that GDF Suez has secured with a community- owned project, the business energy supplier will buy 100 per cent of the power generated by the 9MW windfarm. The £15 million project secured £11 million from Santander with the remainder put forward by the Renewable Energy Investment Fund and the Big Lottery Fund. Revenue from generation will be reinvested in the community, GDF Suez said. "Locally owned energy plants like this are playing an increas- ingly important role in fulfilling the UK's renewable energy com- mitment. We're excited about supporting our first community renewable energy project," said GDF Suez Energy UK head of local portfolio management Paul Roberts. The heat is on: price spikes damage industry Tricks of the trade Jillian Ambrose "Strong price moves have returned in November" Popular stereotype would have it that the British are obsessed with the weather. But the British population as a whole has nothing on the UK's gas market traders, who throughout the winter months will be analysing every fluctua- tion in degrees Celsius as if their bonuses depend on it. Each forecast revision, and deviation from the seasonal norm, will be scrutinised against the impact it will have on gas demand across the UK For the rest of the month, temperatures are expected to be in line with seasonal norms. But the market needn't worry about a boring stretch of low demand and ample stor- age levels. Bloomberg reports that from December through to February, weather will turn con- siderably colder than last year. Hardly what I'd call great news, but while mild weather may be welcomed by most it does make for a rather dull start to the winter trading season. – which of course helps set the market price. Just a few weeks ago, when asked why pricing levels on the gas market have continued to slip, one trader told Utility Week: "The leaves are still on the trees." Such Confucian-esque comment on the direction of trade makes sense when you consider the historically mild autumn temperatures seen so far this year, and the low gas heating demand as a result. So the market will have welcomed the chilly first week of November as market activ- ity and strong price moves returned.

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