Gas alert as demand and prices rise

Andy Hunt · Post by **Andy Hunt** » 26 Dec 2010, 20:33

So basically the point is that running out of storage would leave us exposed to the risk, whereas having storage insulates us from the risk.

And running out of storage would mean we would be completely at the mercy of whatever spot prices we would have to pay to make up the 45mcm/d shortfall.

Using storage now is like using batteries which have been charged with economy 7 electricity, and hoping that the grid will be available when they have run down (and when everyone else's have also run down).

Mean Mr Mustard · Post by **Mean Mr Mustard** » 26 Dec 2010, 20:41

I'd happily pay a few quid extra to ensure continuity of supply.

Post by **kenneal - lagger** » 27 Dec 2010, 01:41

johnhemming wrote:
mikepepler wrote:Anyway, this made me think - it's probably not profitable to import more gas and use storage less, even though this sets us up for problems further down the line. This is a shame, as there is clearly enough supply for 450mcm/day demand, but when the demand drops down below 400, its imports that we see fall, not storage withdrawals...
That is the point I have made. There is potential supply at quite a high level, but storage is used in preference. That is actually a market rules issue rather than a privatisation issue per se.

The challenge lies
a) When LRS is depleted taking out 45mcm/d of supply ... or
b) If something goes wrong. (eg Langeled last winter)

Storage should be more of a last resort than it is.

Should this not be the subject of legislation, John? Should there be limits on the use of the storage, levels at certain times? Requirements for the topping up of storage within certain time periods? Perhaps hefty penalty clauses on any stoppage of supply might be the way to go to encourage good reserves?

Post by **mikepepler** » 27 Dec 2010, 07:49

Andy Hunt wrote:So basically the point is that running out of storage would leave us exposed to the risk, whereas having storage insulates us from the risk.

And running out of storage would mean we would be completely at the mercy of whatever spot prices we would have to pay to make up the 45mcm/d shortfall.

Using storage now is like using batteries which have been charged with economy 7 electricity, and hoping that the grid will be available when they have run down (and when everyone else's have also run down).

That's a good analogy. What will make it worse is that it's often cold in Western Europe when it's cold here, so if our stores are empty, we have to compete with the other countries for gas. The next few days will be warmer - it'll be interesting to see if we stop taking gas from long range storage or not...

The other point is what happens if there's a technical problem somewhere - it ought to be compulsory to have some slack in the system, as there have been plenty of problems over the past few years, several of them during winter.

JohnB · Post by **JohnB** » 27 Dec 2010, 08:50

kenneal wrote:Should this not be the subject of legislation, John? Should there be limits on the use of the storage, levels at certain times? Requirements for the topping up of storage within certain time periods? Perhaps hefty penalty clauses on any stoppage of supply might be the way to go to encourage good reserves?

I know I'm not the John you're asking, but isn't it up to "the market" to take the decisions? If they get it wrong, customers will take their business elsewhere. If that doesn't work, the government will then engage in more empty stable door closing, and legislate to make sure it doesn't happen again.

Post by **kenneal - lagger** » 27 Dec 2010, 17:00

Markets don't always work for the benefit of the customer, they have to be steered that way, especially if you're thinking long term.

Mean Mr Mustard · Post by **Mean Mr Mustard** » 27 Dec 2010, 17:14

kenneal wrote:Markets don't always work for the benefit of the customer, they have to be steered that way, especially if you're thinking long term.

For which you'd be needing some regulators and officials. Too bad the quangos just got disbanded, eh.

Post by **kenneal - lagger** » 27 Dec 2010, 18:10

Mean Mr Mustard wrote:
kenneal wrote:Markets don't always work for the benefit of the customer, they have to be steered that way, especially if you're thinking long term.
For which you'd be needing some regulators and officials.

Oh! no they don't!!

cubes · Post by **cubes** » 27 Dec 2010, 18:26

For LRS, at what point will the maximum possible flow rate fall below the theoretical maximum? Surely it can't provide gas at full flow all the way to zero?

Post by **adam2** » 27 Dec 2010, 18:34

cubes wrote:For LRS, at what point will the maximum possible flow rate fall below the theoretical maximum? Surely it can't provide gas at full flow all the way to zero?

I suspect that the maximum flow rate is limited by the size of the pipes and valves and by the capacity of any required pumping plant.
I would therefore expect maximum flow rate until virtualy empty.

johnhemming · Post by **johnhemming** » 27 Dec 2010, 18:38

You can find the answer to whether it looses pressure sufficiently to reduce maximum flow by looking at the historic extractions. Obviously there would be a point at this would be true.

On the issue of the retention of storage then it is a question of regulation. The absence of a quango does not mean the absence of all regulation.

I did raise it in The House here: last week.

http://www.theyworkforyou.com/debates/? ... 20#g1231.0

cubes · Post by **cubes** » 27 Dec 2010, 20:44

Ah thanks, I hadn't realised that the reservoir pressure wasn't the main limiting factor here. So I expect that by the time the pressure drops enough for them to notice they'll already be wearing brown underwear.

Post by **mikepepler** » 27 Dec 2010, 21:37

Let's look at tonight as an example of what's happening, click here and select the 24-hour view: http://www.nationalgrid.com/uk/Gas/Data/efd/ezgraph.htm

For those reading too late, when the graphs have moved on, here's what they showed:
- Bacton interconnector supplying 10mcm/day, then drops to zero soon after 4am 27 Dec and stays there
- Langeled drops from 65 mcm/day down to 45 mcm/day (in steps) by 8pm 27 Dec.
- LNG: Grain NTS 1 at zero al day, Dragon only at 4-5 mcm/day, drops to zero at 5pm 27 Dec.

So that's the imports, what about the storage? Surprise surprise, output from Rough (long range storage) is a steady 45 mcm/day throughout the last 24 hours. So, at present it still seems it is deemed that it is better to empty the stores than import expensive gas....

Oh well, best stock up ready for Feb 2011...

Post by **clv101** » 27 Dec 2010, 21:44

Thanks for this Mike. It is a pretty clear that we are increasing risk of shortage late in the winter by the decisions being made today. I guess the people in charge would say that increasing the risk from vanishingly small to trivially small is worth the money being made today. Other's might say the risk of shortage is actually approaching 'likely'.

RenewableCandy · Post by **RenewableCandy** » 27 Dec 2010, 23:33

Money being made today is all very well, but will we ever get to see any of it??