National Grid Winter Outlook for 2018/19


The National Grid has predicted that the UK will have sufficient supply and generation for both electricity and gas throughout the winter – provided that there is no unexpected cold weather similar to the infamous Beast from the East.

We’ve got increased coal power generation available – not the best for green supporters, but sadly a necessity – to replace gas-for-power demand at points throughout the season. However, if natural gas prices fall this may change.

We’re also expecting lower demand for gas and electricity than we saw through Winter 17. In addition, Central European electricity prices are forecast to be lower, on average, than the UK’s which will lead to higher imports during peak demand.

Plus, Nemo, the new electricity interconnector between the UK and Belgium, has a scheduled operation start date for late January 2019. This will add a brand-new option for electricity imports for the UK.

So, that’s the full overview – now we’re going to break it down into electricity and gas.

Electricity Breakdown

As mentioned above, the forecast looks good for electricity this winter, with generation and interconnector imports expecting to meet demand and be comparable to previous years.

We do expect coal to replace gas-for-power generation at some points - even with the larger carbon tax – as it has become a more attractive power source for short periods in the winter, bringing down commodity costs. This year, the final step of BSC P305 is being implemented, moving our current PAR50 system to a PAR1, making short-term prices more volatile while the system adjusts but Ofgem’s assessments show that it should reduce waste by creating tighter margins in the long run.

Following this, we have new interconnectivity of European electricity which will bring down energy market prices and reduce costs on import prices for the UK. This will be especially useful during peak demand, as we’ll be able to import from European markets. However, this forecast isn’t certain as there are unplanned Belgian nuclear outages which are causing fluctuations in energy contracts.

Although renewables are hard to predict across winter, wind generation is expected to rise on average to 5.9 GW (up from 5.3GW from Winter 17). This, along with increased renewable capacity in recent years should help to reduce the demand for fossil fuel generation throughout this period.


Natural Gas Breakdown

Last year we started to see the impact of more efficient houses and boiler designed, combined with improved insulation techniques and materials, with reduced gas demand since 2017. This, combined with unattractive gas prices and increased renewable generation, has helped to ensure sufficient gas supply throughout the winter months. The use of coal-fired power generation should also bring down UK natural gas prices by reducing gas-for-power demand.

The National Grid are expecting maximum flows through UKCS and from Norway this winter, however as our long-term contracts have expired there is likely to be reduced flows between the IUK and Belgium. The BBL pipeline has integrated into Tile Transfer Facility (TTF), making shipments between TTF (Netherlands) and National Balancing Point (UK) cheaper and easier.

The UK’s LNG storage supply has had the smallest injections for the past two years – this has been due to highly competitive Asian markets and demand for LNG rising as fast as the supply can be met. If the UK’s natural gas prices and demand soars over the winter months, then it’s likely that LNG shipments will be required. However, the USA is a growing market for LNG, with increased trading with Mexico and South Korea with the new Sabine Pass terminal in Texas expecting to start producing by the end of year with the potential to flood the spot market with 13 bcm of product – six times the LNG storage capacity of the UK, or, enough LNG to power and heat the UK for an entire year!


Want information like this every month?

In addition to a run down of the previous month’s market report, we also provide a commentary of the industry with insights like those you’ve read above. You can get insights like this straight to your inbox for free, simply sign up to our monthly energy markets report.