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UTILITY WEEK | 29TH APRIL - 5TH MAY 2016 | 23 Operations & Assets Market view T he energy white paper set out a frame- work for energy policy underpinned by three objectives: security of sup- ply, affordability and sustainability. Security of electricity supply has been defined by as "the ability of an electricity system to supply final customers with electricity". Capacity margin has commonly been used as an indi- cator of security of supply by the electricity industry and estimates the excess of avail- able supply capacity over peak demand. This assessment, based on the Winter Out- look Report (WOR) 2015/16, has estimated the capacity margin for every settlement period subject to uncertainty as a result of variable generation, random outages of power sta- tions and the effects of weather on demand. Negative capacity margins can be inter- preted as loss of load conditions represent- ing events of demand exceeding available supply. The likelihood of these events in win- ter 15/16 was evaluated to be low – the loss of load probability (LOLP) for the GB system was estimated at 0.014 per cent. The LOLP index can be expressed in time instead of percentage, known as the loss of load expectation (LOLE). The LOLE index indicates the expected number of hours for which a supply shortfall may occur, esti- mated to be around 1.23 hours per year. This compares with the 1.1 hours per year figure described in the WOR 2015/16. The relatively small value of the LOLE estimate suggests the GB system is supply secure. The transition to a low-carbon economy is transforming the way stakeholders think about, produce and use electricity. In par- ticular, the introduction of new generation (such as wind and solar) and electricity- intensive demand (such as from heat pumps) technologies, with fundamentally different characteristics from the incumbent technolo- gies, are likely to drive a dissimilar impact on the risk profile to security of supply. The associated risks need to be identified, assessed, prioritised and mitigated to enable effective risk management. The LOLE index offers a simple indica- tion of the expected likelihood of encounter- ing shortfalls and should not be considered as an absolute measure of risk to security of supply because it does not provide any infor- mation about severity, frequency or duration. Such information becomes important for a true characterisation of risk as the levels of disruption grow in the electricity system. The expected power not supplied (EPNS) and expected energy not supplied (EENS) indices are the expected power and energy that will not be supplied on occasions when demand exceeds available supply. These indices are used less than LOLE but are more appealing because they encompass the magnitude of the shortfalls, as well as their likelihood. The loss of load frequency (LOLF) and the loss of load duration (LOLD) indices identify the expected frequency of encountering sup- ply shortfalls and their expected duration. The indices have not been used in practice because of the need for additional data and increased complexity of the analysis. These values of the risk indices to secu- rity of supply may not be exactly equal to the expected values and therefore the risk indi- ces can only deliver a degree of comfort to stakeholders, which may not be warranted. For instance, the estimated value of LOLE may be less than a statutory reliability stand- ard, but this does not necessarily mean the system performs satisfactorily. The likelihood of no supply shortfalls over the winter period is considerably high. The chance of recording a number of supply short- fall events around the mean of the LOLF esti- mate of 0.82 occurrences per year is assessed to be about 28 per cent. The likelihood of the GB electricity system encountering three or more supply shortfall events during the win- ter season is said to be 4 per cent. The distribution of the risk indices may also prove useful in assessing the costs and benefits of security of supply to stakehold- ers. The information regarding magnitude, likelihood, frequency and duration of sup- ply shortfalls can be combined with the value that stakeholders are willing to place on security of supply, or alternatively the cost to stakeholders of supply interruptions. Analysis of the trade-off between the costs of providing extra supply capacity against the associated benefit of reduced supply inter- ruptions would provide the economically efficient level of supply capacity that would also ensure adequate security of supply. This would form the basis for the level of supply capacity required to be procured through the capacity market. Dr Manuel Castro, energy strategy consultant Profiling the risks to supply The risks associated with new generation and electricity-intensive demand technologies must be identified, assessed, prioritised and mitigated to best manage security of supply, says Dr Manuel Castro. SECURITY OF SUPPLY Max normal demand (including full Ireland export) 26 Oct 2015 2 Nov 2015 9 Nov 2015 16 Nov 2015 23 Nov 2015 30 Nov 2015 7 Dec 2015 14 Dec 2015 21 Dec 2015 28 Dec 2015 4 Jan 2016 11 Jan 2016 18 Jan 2016 25 Jan 2016 1 Feb 2016 8 Feb 2016 15 Feb 2016 22 Feb 2016 29 Feb 2016 7 Mar 2016 14 Mar 2016 21 Mar 2016 60 58 56 54 52 50 48 46 44 42 40 38 Source: National Grid GW FR reserve requirement Assumed generation (wind at EFC) with max IC imports from Europe + SBR & DSBR Assumed generation (wind at EFC) with base IC imports from Europe + SBR & DSBR Assumed generation (wind at EFC) with 500MW imports from Europe + SBR & DSBR ACS including short-term reserve requirement and full exports to Ireland