Five-Year Forecast Of TNUoS Tariffs For 2018/19 to 2022/23 November 2017 NGET: Forecast TNUoS tariffs for 2018/19 June 2017 1 Five-Year Forecast of TNUoS Tariffs for 2018/19 to 2022/23 This information paper provides National Grid’s Five-Year Forecast of Transmission Network Use of System (TNUoS) tariffs for 2018/19 to 2022/23. November 2017 November 2017 Contents Executive Summary 6 Charging methodology and approach for the five-year forecast 9 Modelling approach 9 Changes to the methodology (modifications approved since the last five-year forecast) 9 Key changes to input data 10 RIIO-T2 impact on TNUoS tariffs and revenue assumptions 10 Demand tariffs 12 Gross Half-Hourly demand tariffs 12 Embedded Export Tariff (EET) 14 NHH demand tariffs 15 Generation tariffs 17 Generation wider tariffs 17 Changes to tariffs over the five-year period 20 Changes to generation tariffs from 2018/19 to 2022/23 25 Annual Load Factors 26 Small generators discount 26 2018/19 26 Future years 26 Onshore local tariffs for generation 27 Onshore local substation tariffs 27 Onshore local circuit tariffs 27 Offshore local tariffs for generation 31 Offshore local generation tariffs 31 Allowed revenues 32 Onshore Transmission Owners 33 Offshore Transmission Owners 33 Pre-vesting and pre-BETTA connection revenues 34 Generation / Demand (G/D) Split 34 Exchange Rate 34 Generation Output 34 Error Margin 34 Further data used in the tariff forecasts 36 Generation Volumes 36 Demand volumes 36 Transport Model demand (Week 24 data) 36 NGET: Five-year forecast of TNUoS tariffs for 2018/19 to 2022/23 – November 2017 3 Chargeable demand 37 Adjustments for interconnectors 38 Circuits 38 RPI 39 Generation and demand residuals 40 Guide to TNUoS charging 42 Generation charging principles 42 Demand charging principles 46 HH gross demand tariffs 46 Embedded Export Tariffs 46 NHH demand tariffs 47 Tools and Supporting Information 48 Appendices 49 Appendix A: Changes and possible changes to the charging methodology affecting future TNUoS forecasts 50 Notes on specific methodology changes 52 CMP264 and CMP265 – Potential for a Judicial Review 52 CMP251 – Pending Ofgem decision, may impact 2018/19 tariffs 52 CMP261 – Rejected by Ofgem 53 Appendix B: Demand locational tariffs 54 Appendix C: Annual Load Factors 57 ALFs 57 Appendix D: National Grid Revenue Forecast 64 Appendix E: Contracted generation TEC 65 Appendix F: Historic & future chargeable demand data 75 Appendix G: Generation zones map 79 Appendix H: Demand zones map 80 80 NGET: Five-year forecast of TNUoS tariffs for 2018/19 to 2022/23 – November 2017 4 Contact Us If you have any comments or questions on the contents or format of this report, please don’t hesitate to get in touch with us. Team Email & Phone [email protected] 01926 654633 Disclaimer This report is published without prejudice and whilst every effort has been made to ensure the accuracy of the information, it is subject to several estimations and forecasts and may not bear relation to either the indicative or actual tariffs National Grid will publish at later dates. NGET: Five-year forecast of TNUoS tariffs for 2018/19 to 2022/23 – November 2017 5 Executive Summary This document contains our five- Modification CMP251 is awaiting an year forecast of the Transmission Authority decision, expected in Network Use of System (TNUoS) December, and may impact tariffs tariffs for the years 2018/19 to for 2018/19. No changes have been 2022/23. TNUoS charges are paid made to the methodology arising by transmission connected from this modification proposal. generators and suppliers for use of the GB Transmission Further modifications may affect networks. tariffs in future years and details of other modifications can be found in The publication of the forecast Appendix A and on the National has been brought forward to Grid website2. provide insight in to the effect of the multiple modifications to the The general approach taken in this charging methodologies taking forecast is to use the latest view of effect from 1 April 2018. all the data that is available, and where needed assume that users Methodology and approach act in an economically rational way. The charging methodology used in this report is defined in Section 14 of The last two years of this forecast, the CUSC as approved for 1 April 2021/22 and 2022/23, will be in the 2018. Since our last five-year new RIIO-T2 price control period for forecast modifications onshore transmission owners. There CMP264/2651, CMP268, CMP282 are various elements of the charging and CMP283 have been approved methodology that are due to be and are implemented in this report. revised at the start of each price control, based on data from the new Modification CMP261 was rejected price control. Our assumptions in by the Authority. No changes have this forecast are listed in the report. been made to the existing methodology for calculating the G/D Demand tariffs split in this report. Demand tariffs increase each year over the five-year forecast period. 1 Ofgem has been served w ith a claim for judicial review This is due to a slightly declining concerning its decision to approve WACM4 of CUSC modifications CMP264/265. As stated on their charging base for HH and NHH w ebsite: “Ofgem’s decision to approve WACM4 of tariffs, and increasing proportion of CUSC modifications CMP264 and CMP265 stands unless quashed by the court”. total revenue being recovered https://www.ofgem.gov.uk/publications-and- updates/embedded-benefits-impact-assessment- and-decision-industry-proposals-cmp264-and- 2 cmp265-change-electricity-transmission-charging- https://www.nationalgrid.com/uk/electricity/codes/con arrangements-embedded-generators nection-and-use-system-code NGET: Five-year forecast of TNUoS tariffs for 2018/19 to 2022/23 – November 2017 6 through demand tariffs, due to the Generation tariffs cap on generation tariffs. In 2018/19 Generation tariffs have been set to the average gross HH demand tariff recover a diminishing amount of is £45.81/kW rising to £62.34/kW in revenue over the five-year period to 2022/23. The average NHH demand ensure average annual generation tariff increases from 6.16p/kWh to tariffs remain below the €2.5/MWh 8.63p/kWh. limit set by European Commission Regulation (EU) No 838/2010 by We forecast that system gross peak following the current charging will fall from 52.5GW in 2018/19 to methodology. This is due both to the 49.8GW in 2022/23. In the same decreasing forecast of transmission period, we expect HH demand to fall connected generation output (in from 19.8GW to 18.6GW, and NHH TWh), and an increase in the demand to fall from 24.2TWh to generation charging base from 22.2TWh. 73.1GW in 2018/19 to 94.1GW in 2022/23. The generation residual We have also assumed that there is decreases from -£2.33 in 2018/19 to no significant shift in volumes -£7.28 in 2022/23. The average between those demand customers generation tariff falls from £5.74/kW charged on a half-hourly basis and in 2018/19 to £4.34/kW in 2022/23. those charged on a non-half-hourly basis. Total revenues to be recovered Total Transmission Owner (TO) The Embedded Export Tariff allowed revenue to be recovered changes significantly in the next from TNUoS charges is forecast to three years, as the value of the be £2,968.4m in 2019/20, rising to phased residual is reduced from £3,478.4m in 2022/23. £29.36/kW in 2018/19, to £14.65/kW in 2019/20 and zero in subsequent This covers allowed revenue for the years. We forecast the volumes of onshore Transmission Owners generation receiving the Embedded (National Grid, Scottish Power Export Tariff to be broadly flat Transmission, Scottish Hydro around 6GW from 2019/20 onward. Electricity Transmission), the Thus, the total value paid out Offshore Transmission Owners, the through the Embedded Export Tariff Interconnector Cap & Floor regime, reduces from £165m in 2018/19, to and some smaller schemes. £16m in 2020/21 and is then broadly flat. Our assumptions about revenue in the RIIO-T2 price control period are detailed in the report. NGET: Five-year forecast of TNUoS tariffs for 2018/19 to 2022/23 – November 2017 7 Drivers of changes to the five- in December 2017, followed by Final year forecast tariffs in January 2018. These tariffs Changes to these forecast tariffs will reflect the latest methodology of over the five-year period have the CUSC at the time. predominantly been influenced by: During 2018, we will produce CMP282 changes the way that quarterly updates of 2019/20 demand at exporting network TNUoS tariffs. Our next five-year nodes is calculated, particularly forecast is expected to be published reducing demand tariffs in zone in Summer 2018. The timetable for 1. publications for 2019/20 tariffs will Revenue to be recovered be published in early 2018. increases by £800m over the five-years, which increases the Feedback amount to be collected from This is the first five-year forecast in demand. our new report format, which has A steady decrease in forecasted been redesigned to be easier to generation output reduces navigate and read for all interested generation tariffs due to parties. We welcome feedback on €2.50/MWh limit on generation any aspect of this document and the tariffs. tariff setting processes. Do let us There are increases in know if you have any further generation volumes particularly suggestions as to how we can better in Scotland, including new work with you to improve the tariff circuits and generation on the forecasting process.