Long Term Development Statement 2018 Network Capacity2 Contents Foreword 3 LTDS annual cycle 4 The next 10 years 5 RIIO GD2 11 Innovation 12 Network strategy 13 <7bar distribution system 14 Third party connections 15 Regulation 16 More detail 17 Appendix 1 - Demand forecast tables 33 Appendix 2 - 2017 flows 41 Glossary 45 Appendix 3 - Links and contacts 48 Disclaimer 493 Foreword Our Long Term Development Statement (LTDS) is produced by our Network capacity team along with input from across our business. It is the product of a yearly cycle of data gathering, analysis and consultations with our stakeholders, which allows us to understand how our business may develop over the next 10 years and to a lesser extent beyond. This work informs our operational strategy as well as our investment and business decisions and in turn, allows our customers to identify and evaluate opportunities for entry and exit gas connections. Each year we update our demand forecasts with learning from the previous year. This ensures we are in the best position to deliver a reliable gas supply for our customers whatever challenges the future may hold. In late February/early March 2018, the ‘beast from the east’ weather event arrived and the UK gas industry experienced the highest demands we have seen for some years. Welcome to our Long Term Development Statement for 2018 The accuracy of our demand forecasts, together with the excellent work of colleagues across our entire business, meant we were able to keep the gas flowing without interruption for our 5.9m customers. This year, we have built on the changes we made in 2017 which resulted in an easier to read, more accessible publication. We are in a rapidly changing energy industry and want to ensure our LTDS remains a valuable decision-making tool for our stakeholders by tailoring the information we supply to meet our customers’ requirements. To do this we need your feedback, so we have introduced a very short survey available through our website. We hope you will spend a few minutes completing the survey. If for any reason you are unable to do so but would still like to have a voice in shaping our LTDS, please contact the team with your thoughts at: network.capacity@sgn.co.uk Paul Denniff Network and Safety Director 4 LTDS annual cycle February We provide pre-forecast information to National Grid Gas UK Transmission (NGG UKT) February / March We and NGG UKT meet to discuss pre-forecast data April We provide our initial forecasts to NGG UKT May NGG UKT supplies final forecast information to us June We meet NGG UKT to discuss final forecasts July NGG UKT provides calorific value (CV) October We publish our LTDS The research we carry out to inform our LTDS is completed by the end of May each year 45 The next 10 years By 2028 we expect to have seen a net reduction in annual gas demand of 8.79% and Peak day demand of 4% across our three local distribution zones (LDZs). Manufacturing Increases in output in 2016 continued throughout 2017 GDP We saw growth in 2017 as forecast, albeit slightly less than expected at around 1.8%. The forecast for 2018 is a continued level of growth at around 1.4% to 1.6% Inflation The forecast for 2018 is between 2.0% and 2.4%. The forecast for 2019 is a higher level of inflation of 2.2% compared to the forecast of 2.0% for 2017 56 The primary influences on these changes in demand are: • Improvements to energy efficiency of new and existing housing stock • Inflation and higher gas bills influencing domestic customer behaviour • Adjustments to energy tariffs resulting in the industrial sector managing energy usage more efficiently • GDP and manufacturing outputs as measures of economic growth and industrial commercial and industrial customers’ investment and business decisions • Government’s 2050 climate change targets Scotland Annual -0.87% (average) Peak -0.39% (average) South Annual -0.89% (average) Peak -0.44% (average) South East Annual -0.89% (average) Peak -0.49% (average) SGN Overall Annual -0.88% (average) Peak -0.40% (average) 67 Our customers Our customer numbers continue to grow year-on-year despite a reduction in Peak day and annual gas demand. We believe the UK’s gas networks are key to delivering the least cost, lowest impact future energy solution for our customers, while helping the UK to meet its 2050 carbon reduction targets. Our customers tell us they would like us to increase the amount of green gas in our networks and see us push ahead with innovative ways of delivering an affordable low carbon source of energy. We are increasingly doing more to inform our customers of the benefits of a low carbon gas network as well as explain the impact of the alternative options. Our customers’ views and opinions are already helping us positively shape our forecasts and business strategy. 2013 5.87m 2014 5.88m 2015 5.91m 2016 5.92m 2017 5.93m 2028 6.1m Our potential customer numbers at the current rate of increase 78 Embedded power We saw an extremely high number of requests for these connections during 2016/17 and we expected many more would progress to completion than actually did. This year we have seen reports which indicate this customer group is likely to grow faster than previously believed as a result of the hot weather and an increasing desire to cool our homes. These peak demand energy sources are seen as key to filling the gap when renewables are not available due to low wind levels and insufficient solar capacity. If the reports prove accurate this will impact on how we manage our networks. This is yet another example of the evolving challenges the industry faces when it comes to supplying this group of customers. We anticipate during 2018/19 and into 2020 an increasing number of requests for these connections progressing to completion. Because of this, we are looking at how we may better include this emerging customer base within our forecasts and network management strategy. Efficiency improvements We know modern boilers and intelligent control systems are having an impact on gas demand and our challenge is to understand what this will be. This is a complex issue due to how technology, comfort levels and gas prices come together to influence customer behaviour and at present there is a lack of data which we can use within our forecasts. You will be able to read more elsewhere in this publication on how we are working with our colleagues in the other three gas distribution companies as well as industry experts to better understand this area. Smart metering The eventual impact and benefits of smart metering is one of the many unknowns we have been monitoring to determine when there may be a sufficient change in customer behaviour and then data available to influence our forecasts. The roll-out of smart meters continues to be a popular topic for debate during our stakeholder events. Last October the Government re-affirmed its commitment to the technology with the release of the Smart Meters Bill. The target for completion remains the end of 2020 despite delays due to technological issues. Of note is the proliferation of home energy management systems, with enhanced functionality, which may result in customer interest being diverted away from smart metering as the preferred way of reducing bills. This year, as last year, we continue to monitor this emerging technology and await the data required to influence our forecasts. The factors we see influencing our forecasts in future are:9 Renewables There are a number of renewable technologies emerging which may ultimately influence our forecasts. • Air source heat pumps • Ground source heat pumps • Solar heat • Thermal stores 2017 saw an increase to the renewable heat incentive (RHI) tariffs for domestic air source heat pumps, ground source heat pumps, and biomass boilers and stoves. The current tariff changes suggest there is growing recognition for a need to support renewables, with the previous decline in support for biomass being reversed, air source heat pumps increasing significantly and minor increases for solar thermal and ground source heat pumps. The uptake for these technologies following the tariff changes will be monitored during the next planning period to see how they may impact our long-term thinking. Hydrogen The presence of hydrogen in our gas networks is not new as it made up to around 50% of the town gas we used up until the 1970s. As an industry, we are again looking to see how this now potentially green energy source may be used to the benefit of our customers. There are a number of challenges to overcome first but along with our colleagues throughout the UK gas industry, we are committed to exploring and overcoming these. We believe both blended and 100% hydrogen gas networks could be a key element of the energy mix which allows the UK to meet its 2050 carbon targets. Transport Along with our partners, we are promoting the use and benefits of natural gas and LNG as a renewable source of energy for transport. Electric vehicles are also projected to reach around one million by early 2020 with as many as nine million by 2030. The impact this may have on our gas networks is dependent upon several issues. These include customer choice, how electricity is generated and how Government policy influences change and innovation. Next >