Supply & Demand
Daily balancing
To maintain the safe operation of the transmission and distribution system, the gas that is put into it by shippers must consistently balance the gas used by consumers every day, after allowing for exports and changes in the amount of stored gas. Although each shipper has an incentive to try to balance its inputs against its own customers consumption, it does this on the basis of imperfect information and it is not, therefore, feasible for its supply and demand to be in balance at all times.
The Uniform Network Code makes National Grid responsible for maintaining the physical balance of the National Transmission System. As part of that process, Northern Gas Networks has responsibility for maintaining the physical balance in the North and Yorkshire. If the shippers' combined supply and demand is out of equilibrium, National Grid must restore the balance. Usually National Grid achieves this through adjustments in storage.
The role of storage in providing flexibility
Access to gas storage is one means of obtaining the flexibility needed to manage fluctuations in gas supply and demand levels. The demand fluctuations that need to be managed include those associated with normal seasonal and daily variations and those generated by more extreme conditions. The main use of storage is to ensure that sufficient supply is available to meet demand on high demand days. The contribution that each type of storage facility makes is constrained by its capacity and duration.
Through users' ability to vary daily injection and withdrawal, storage is able to assist in daily balancing.
Storage has three main traditional uses: supply and demand matching, providing operating safety margins and supporting the transmission system.
Supply and demand matching
Storage facilities, along with other sources of gas flexibility, are used both to meet requirements on particular days, and to facilitate daily and within-day demand/supply balancing. Gas production facilities, such as those in the North Sea, are designed to adjust their output rates by varying amounts to accommodate variations in the contractual offtake nominated by shippers, usually in response to changes in demand. It would often, however, be uneconomic to provide sufficient production capacity to meet the highest levels of winter demand and then to operate it in the summer at a low level of utilization that reflected demand at that time. Storage helps suppliers, shippers and producers to match supplies to demand more economically throughout the year. Storage can also be used to help correct imbalances caused elsewhere in the supply sector, for example as a result of assets being unavailable owing to maintenance or breakdowns. Demand fluctuations are particularly pronounced in relation to domestic customers. Their peak demand is usually close to 2.5 times average domestic demand. By contrast, peak demand from large firm Industrial and Commercial customers is typically only 1.3 times their average demand. Given this, a gas supplier's demand for flexible supplies is likely to be heavily influenced by the size of its domestic customer base.
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