REACTIVE POWER MARKET

REACTIVE MARKET REPORT

TWENTY SEVENTH TENDER ROUND FOR

OBLIGATORY AND ENHANCED REACTIVE
POWER SERVICES

FOR REACTIVE MARKET AGREEMENTS

EFFECTIVE 1 APRIL 2011

11th MAY 2011

Network Operations
National Grid
National Grid House
Warwick Technology Park
Gallows Hill
Warwick
CV34 6DA
Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Executive Summary
th
27 Tender Round
th
This report describes the 27 Tender Round evaluation process for Reactive Power
st
Market Agreements for service commencement on 1 April 2011. This report would
normally include the prices and reactive capability data of the successful tenders,
however, as there were no successful tenders no such data is available. The report also
st
includes metered Mvarh utilisation from all eligible service providers for the period 1
October 2010 to 31st March 2011. Estimates of the reactive contribution of the GB
Transmission System for the same period are also included.

National Grid evaluated all the tenders received against both economic purchase and
technical performance criteria in accordance with the agreed terms of the market
mechanism.

The main points are as follows:

• Tenders were received from 4 BM Units representing 2 power stations from 1

Generating Company of which all 4 were in respect of the Grid Code
Obligatory Reactive Power Service

• Tenders were offered for a duration of 24 months

• National Grid has rejected all of the 4 tenders evaluated

• There are no BM Units on Market Agreements for the period 1 April 2011 to
th
30 September 2011.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Contents

1. Introduction...................................................................................................... 4
2. Tender Process ............................................................................................... 5
3. Tenders Submitted .......................................................................................... 6
4. Tender Assessment ........................................................................................ 6
5. Tender Observations ....................................................................................... 7
6. Assessment Results ........................................................................................ 8
7 Comparisons with previous Tender Rounds.................................................. 10
8. Generating Unit Reactive MVArh Utilisation .................................................. 12
9. Estimates of the reactive contribution of the GB Transmission System for
October 2010 to March 2011......................................................................... 15
10. Exceptional Reactive Power Requirements................................................... 17
Appendices .............................................................................................................. 18
Appendix 1 - Comparisons with previous Tender Rounds .........................................19
Appendix 2 - BM Units’ contractual position at 1st April 2011 ....................................21
Appendix 3 - Reactive Market Agreement status at 1 April 2011 .............................24
Appendix 4 - Successful tender details for contracts commencing 1 April 2011....25
Appendix 5 - Tender Assessment Procedure ..............................................................26
Appendix 6 - Geographic Distribution between DPM and Market Contracts ..........30
Appendix 7 - Contact Information...................................................................................32

Note: Monthly utilisation volume data, split by BM Unit, has been removed from this
report but is available on the National Grid Industry Information website at the following
address:-

http://www.nationalgrid.com/uk/Electricity/Balancing/services/ReactivePower/Reactive_
Utilisation/

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

1. Introduction

1.1 This market report provides information on the results from the assessment
process carried out for Reactive Power Tender Round 27 (for contracts that
commenced 1 April 2011). This includes details on the contractual position for
the provision of Reactive Power Services to the GB Transmission System as at 1
April 2011.

1.2 National Grid manages the voltage of the GB supergrid system to meet
Transmission Licence requirements for secure and stable power transmission
and to ensure quality of supply to customers. Voltages are largely determined by
the flows of Reactive Power on the system. National Grid ensures that Reactive
Power is provided on a local basis to meet the constantly varying needs of the
system and that there is sufficient Reactive Power reserves available to meet
contingencies.

1.3 Generating Units provide Reactive Power Capability, and are capable of varying
their Reactive Power output as a requirement of the Grid Code. The power
system itself has inherent Reactive Power gains and losses, which vary in
accordance with changes in real power flows and voltage. National Grid installs
reactive compensation plant in parts of the system where there is insufficient
generator reactive capability to meet licence requirements, and where voltages
cannot be regulated effectively or economically by other means.

1.4 Dynamic reserves of Reactive Power are essential for system operation.
National Grid values capability based Reactive Power Market Agreements as
this payment mechanism helps to ensure that the availability of post-fault
Reactive Power reserves is maintained.

1.5 Tender Round 27 was undertaken to secure such capability based Reactive
st
Power Market Agreements from 1 April 2011. The service definitions,
requirements and contract terms may be found in Schedule 3 to the Connection
& Use of System Code (CUSC), the Grid Code and the ITT (Invitation to Tender)
Documentation. These can be accessed via National Grid’s industry website at:
http://www.nationalgrid.com/uk/Electricity/Balancing/services/ReactivePower/mar
kettender/

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

2. Tender Process

st
2.1 On 21 January 2011, National Grid Electricity Transmission plc held the Market
Day for the Reactive Power Tender Round 27. This enabled any potential
provider that fulfilled the qualification criteria specified in Schedule 3 of the
CUSC to tender for a Reactive Power Market Agreement.

2.2 Tenderers could elect to choose the term of tenders from a minimum period of
12 months and thereafter in 6-month increments (12, 18, 24, 30, 36 months,
etc.).

2.3 Tenderers who submitted tenders for periods greater than 12 months were also
able to include indexation criteria on the tendered prices to be applied to any
period(s) beyond the first 12 months.

2.4 Tenderers could tender for either the Obligatory Reactive Power Service (ORPS)
and/or the Enhanced Reactive Power Service (ERPS), as defined in Schedule 3
of the CUSC.

2.5 Potential tenderers comprised the following:

• Generators required to provide the minimum Grid Code ORPS and already in
receipt of the Default Payment Mechanism, who wished to tender for
alternative payment terms for the ORPS.

• Generators that had a reactive capability in excess of the minimum Grid

Code ORPS, known as the "Grid Code plus Enhanced Reactive Power
Service" (Grid Code ERPS).

• Any other eligible Service Provider able to offer other plant or apparatus that
could generate or absorb Reactive Power, known as ERPS. The only
requirement was that these Service Providers had to fulfil the market
qualification criteria and have been capable of making their capability
available for use by National Grid.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

3. Tenders Submitted

3.1 A total of 4 discrete tender submissions were received, representing 1

generating company and 2 power stations. 4 tenders were for BM Units offering
the Grid Code ORPS service; and no tenders were received for the Grid Code
ERPS service. All tenders offered contract duration of 24 months.

3.2 Tenders were received from directly connected power stations. No tenders were
received from non-BM providers.

3.3 All of the tenders received sought reactive capability based payments and
utilisation payments.

3.4 All tenders that were evaluated were compliant with the submission criteria
specified in Schedule 3 of the CUSC.

4. Tender Assessment

4.1 Tender assessment was carried out in accordance with the evaluation criteria
specified in Appendix 5 of Schedule 3 of the CUSC. Details of this are more fully
described in Appendix 5 of this report.

4.2 This assessment included input from the Reactive Power Capability Index
updated from that shown in Appendix A of the Invitation to Tender & Guidance
Notes for Completion of Tenders that was included in the ITT Documentation.
The purpose of this index is to provide an indication of the Reactive Power
requirement in each of the zones defined. These requirements are based on the
historic need for Reactive Power in the zones and any planned changes to the
GB Transmission System (or the generation and demand connected to it) that
are likely to affect the zonal reactive requirement.

4.3 Tenders were assessed via a process, which considered the following:

• Economics (i.e. cost of market compared with default),

• The intrinsic capability value of the tendered reactive service (against the
alternative of National Grid reactive assets);
• A number of other criteria, for example how competitive the utilisation price
was, and what incentive the Generator was placing on itself to maintain the
reactive capability.

Please refer to Appendix 5 in Schedule 3 of the CUSC for full details on the
qualification and evaluation criteria.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

5. Tender Observations

5.1 In this tender round, the number of tender submissions has shrunk from the
previous tender round of 16 to only 4.
5.2 The 4 tender submissions were return tenderers from the last tender round,
TR26, and from the same generating company, with their Mvar capability
banding unchanged.
st
5.3 All tenders are for the ORPS starting from 1 April 2011, for a two year period,
with prices indexed to RPI.
5.4 Different BM Units placed different value across the payment structure of
Available Capability, Synchronised Capability and Utilisation.
5.5 All tenders continued to seek non-zero Available Capability fees and
Synchronised fees. There were significant price variations on different capability
bandings within Availability and Synchronised fees.
5.6 Compared to last tender round, TR26, all tenders reduced their Availability and
Synchronised fees.
5.7 In general, and especially for typical ORPS providers, Synchronised capability is
more useful to National Grid than Available capability, but the valuation of the
two differs, depending on the total time for which the BM Unit is synchronised
and when this occurs. National Grid places higher value on tenders with high
synchronised capability prices compared with Available Capability prices if the
plant tends to run less frequently but at times of high system need. Conversely,
National Grid places a lower value on tenders with relatively high Synchronised
Capability prices if the plant is expected to run for a large part of the assessment
period, as this is more likely to include significant periods when the capability is
not essential to secure the transmission system.
5.8 This tender round, as with previous ones, has taken into account National Grid’s
views on expected utilisation of generating units in the energy market. The likely
running under emissions trading and other market changes has been
continuously factored in.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

6. Assessment Results

6.1 Of the 4 tenders evaluated, National Grid offered Reactive Market Agreements
to none (an acceptance rate of 0%).

6.2 Each tender was scored against the specified assessment criteria and Figure 1
below shows the attractiveness of tenders from the assessment outcome. The
tenders at the rejected side of Figure 1 were assessed with a negative score
indicating they should not be offered a Market Agreement. None of the tenders
were assessed with a positive score indicating they should be offered Market
Agreements.The tenders occurring at either end of these measures would be
considered very “attractive” or “unattractive”. Those considered unattractive
could, for example, have sought capability payments significantly above
expectations of default payments and National Grid’s value of capability.

Attractiveness of Tender Round 27 Submissions

5

4
Number of Tenders

0
Reject Accept

Figure 1

6.3 A complete list of all generator BM Units as at 1 April 2011 obliged under the
Grid Code to be capable of providing the ORPS is given in Appendix 2. This list
includes a record of which BM Units are on Reactive Power Market Agreements
and which are on the Default Payment Mechanism (DPM).

6.4 Appendix 3 provides a list of BM Units on Market Agreements applicable as at 1

April 2011 showing when the agreements will terminate.

6.5 Appendix 6 shows the geographic distribution of BM Units on market and default
agreements.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

6.6 Details of the successful tenders that proceeded to contract commencing 1 April
2011 are listed in Appendix 4.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

7 Comparisons with previous Tender Rounds

7.1 Figure 2 below shows the percentage participation of eligible BM Units for all
Tender Rounds since the commencement of the Reactive Power Market.
Tender Round 27 follows a recent trend of decreasing numbers of participants
within the reactive market.

100%
% Participation from Eligible BM Units

80%

60%

Declined to tender

Unsuccessful tenders
40%

Successful tenders

20%

0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Tender round
Figure 2 (Source: Appendix 1)

7.2 Figure 3 shows the acceptance rate for all Tender Rounds since the
commencement of the Reactive Power Market.

100% Acceptance rate of participants

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Tender round

Figure 3 (Source: Appendix 1)

7.3 On 1st April 2011 there are no BM Units on Reactive Power Market Agreements.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

7.4 Figure 5 shows the percentage of total available lagging capability that has been
contracted via Reactive Power Market Agreements since the commencement of
the Reactive Power Market.

% Lagging Capability from BM Unit on Market Agreements

80

70

60

50
%

40

30

20

10

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2 21 2 2 2 25 2 27

Tender round
Figure 5 (Source: Appendix 1)

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

8. Generating Unit Reactive MVArh Utilisation

8.1 This section summarises a six-month breakdown of metered BM Unit Reactive

st st
Power utilisation over the period 1 October 2010 to 31 March 2011.

8.2 Table 1 shows the MVArh utilisation volumes (Lead plus Lag) for all eligible BM
Units on a monthly basis.

Utilisation Volume (MVArh)

Month Default Payment Market Total = Market

Mechanism Agreements Agreements +
DPM
Oct-10 1,747,756 0 1,747,756
Nov-10 1,677,404 0 1,677,404
Dec-10 1,700,797 0 1,700,797
Jan-11 1,637,319 0 1,637,319
Feb-11 1,523,406 0 1,523,406
Mar-11 1,796,505 0 1,796,505
Total 10,083,187 0 10,083,187

Table 1 – Summary of Generator Reactive Utilisation Oct 10 – Mar 11

8.3 Table 2, on the next page, shows six-monthly utilisation totals since 1996, sorted
by the Seven Year Statement defined regions – North, Midlands and South up
to March 2005 and from April 2005 onwards – Scotland, North, Midlands and
South.

8.4 The volumes set out in Table 2 refer to all BM Units eligible for a Reactive
Utilisation Payment (default plus market). MVArh lag and MVArh lead are
calculated according to the aggregation methodology described within Appendix
2 in Schedule 3 of the CUSC and also within the companion document
“Methodology Document for the Aggregation of Reactive Power Metering” by
which reactive utilisation payments are made.

8.5 The general reduction trend seen over the last ten years is attributable to more
distributed generation and lower power flows across the system which have
resulted in a reduction in reactive losses on the supergrid and hence the reactive
utilisation required from generation. Referring to Table 2, it should be noted,
however, that this overall reduction is the product of a continual fall in lag TVArh
and general rise in lead TVArh which has intensified over the last three years.

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 Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Table 2 – Generator Reactive Utilisation (TVArh) by region

NORTH MIDLANDS SOUTH TOTAL

lead lag lead Lag Lead lag Lead lag Lead + lag

Apr96 – Sep96 2.86 9.79 0.37 1.94 1.49 2.29 4.72 14.02 18.74

Oct96 – Mar97 2.72 12.71 0.36 3.07 1.74 2.72 4.82 18.50 23.32

Apr97 – Sep97 2.89 8.65 0.41 1.60 1.87 1.77 5.17 12.02 17.19

Oct97 – Mar98 2.78 10.67 0.31 3.07 1.54 2.01 4.63 15.75 20.38

Apr98 – Sep98 1.96 7.68 0.44 2.02 1.85 1.51 4.25 11.20 15.45

Oct98 – Mar99 1.71 9.54 0.36 2.07 1.65 1.66 3.76 13.48 17.24

Apr99 – Sep99 1.77 7.25 0.37 1.52 1.27 1.40 3.40 10.20 13.60

Oct99 – Mar00 1.98 10.45 0.27 2.13 1.35 2.19 3.60 14.77 18.37

Apr00 – Sep00 1.44 6.31 0.48 1.69 1.59 1.32 3.51 9.32 12.83

Oct00 – Mar01 1.52 7.40 0.40 2.72 1.48 1.73 3.40 11.85 15.25

Apr01 – Sep01 1.80 4.59 0.50 1.76 1.94 1.18 4.24 7.53 11.77

Oct01 – Mar02 1.70 5.79 0.58 3.07 1.50 1.78 3.79 10.65 14.44

Apr02 – Sep02 1.59 4.70 0.52 0.95 1.76 1.20 3.87 6.85 10.72

Oct02 – Mar03 1.71 5.73 0.47 2.51 1.53 1.78 3.71 10.02 13.73

Apr03 – Sep03 1.40 3.96 0.56 1.59 1.92 1.36 3.88 6.91 10.79

Oct03 – Mar04 2.28 5.48 0.34 1.89 1.69 2.29 4.31 9.66 13.97

Apr04 – Sep04 2.26 3.97 0.85 1.08 2.16 1.29 5.27 6.34 11.61

Oct04 – Mar05 1.89 5.26 0.66 1.84 1.85 1.99 4.40 9.09 13.49

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 Reactive Power 27th Tender Round Market Report – 11th MAY 2011

SCOTLAND NORTH MIDLANDS SOUTH TOTAL

lead lag Lead lag lead Lag lead lag Lead lag Lead
+ lag
Apr05 –
1.32 0.39 2.07 3.28 0.83 1.04 2.07 1.03 6.29 5.74 12.03
Sep05
Oct05 –
1.06 0.80 2.10 4.56 0.76 1.91 1.88 1.48 5.80 8.75 14.55
Mar06
Apr06 –
1.09 0.56 2.29 3.00 0.74 0.67 1.79 0.87 5.91 5.09 11.00
Sep06

Oct06 – 0.74 0.96 2.49 4.27 0.57 1.17 1.79 1.18 5.59 7.58 13.17
Mar07
Apr 07 –
1.04 0.31 2.30 2.63 0.64 0.69 1.63 0.74 5.61 4.39 10.00
Sep 07
Oct 07 –
1.17 0.53 2.28 3.98 0.64 0.74 1.49 1.08 5.58 6.33 11.90
Mar 08
Apr 08 –
1.27 0.31 1.84 2.15 0.59 0.44 1.24 0.61 4.95 3.50 8.45
Sep 08
Oct 08 –
1.63 0.55 1.85 1.89 0.60 0.64 1.18 0.79 5.26 3.86 9.12
Mar 09
Apr 09 –
1.91 0.25 2.66 1.36 0.86 0.44 1.53 0.54 6.96 2.60 9.56
Sep 09
Oct 09 –
1.98 0.31 2.62 1.99 0.53 0.70 1.54 0.78 6.67 3.78 10.45
Mar 10
Apr 10 –
1.88 0.23 3.55 1.10 0.53 0.38 1.67 0.50 7.63 2.18 9.82
Sep 10
Oct-10 –
1.69 0.28 3.23 1.32 0.76 0.41 1.79 0.61 7.47 2.61 10.08
Mar-11

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

9. Estimates of the reactive contribution of the GB Transmission System

for October 2010 to March 2011

9.1 National Grid is required by Schedule 3 of the CUSC to ‘use all reasonable
endeavours' to provide estimates of the Reactive Power absorption and
generation in MVArh by the GB Transmission System for the six-month period
th
ending 30 March 2011.

9.2 This has been approached in two stages:

• The net Reactive Power utilisation (TVArh) of the GB Transmission System

has been derived from the difference between the reactive output of
generating units and the Net Reactive Demand at Grid Supply Points (GSPs).
This is shown in Table 3 where the accuracy of the data is consistent with the
underlying meter readings. The generation figures are a national monthly
summation of the Settlements figures available on the National Grid Industry
Information website at the following address: http://www.nationalgrid.com/
uk/Electricity/Balancing/services/ReactivePower/ReactiveUtilisation/. At this
stage, the data in Table 3, on the next page, may be subject to amendment
via accruals or any outstanding disputes.

• The net TVArh described above has been broken down by Transmission
System component and is also shown in Table 3. It should be noted that this
information is based on estimates and operational records only. The ‘net
reactive demand at GSP’ figures have been derived from operational
records. The figures shown are net, i.e. lagging demand minus leading
demand, and in the case of the figures in Table 3 they show lagging demand
in each month. These figures represent the net effect of the consumer
demand plus the LV losses minus the LV gain.

9.3 The simple reactive balance found in Table 3 can be described by the equation:

|Generation Net TVArh| = |Net Reactive Demand at GSPs TVArh| - |Net System
TVArh|

From Table 3 it can be seen that the TVArh contribution from generation is small
compared with the other components of the equation.

9.4 The more detailed breakdown found in Table 3 can be described by the following
equation:

Generation Net TVArh = Net Reactive Demand at GSPs - HV network shunt

gain (BV2) + HV network series loss (I2X) + SGT series loss (I2Xt) - Shunt
capacitor gain - net SVC output + Shunt reactor loss.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Table 3 - Net System Effect October 2010 to March 2011

6 month
Component (TVArh) Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11
total

MSC 3.04 3.02 3.45 3.33 2.86 2.98 18.68

Shunt Reactor -4.34 -4.01 -4.37 -4.40 -3.91 -4.35 -25.38

SVC generation 0.08 0.09 0.12 0.09 0.07 0.08 0.53

SVC absorption -0.20 -0.16 -0.16 -0.20 -0.19 -0.23 -1.14

HV network shunt gain 10.05 9.99 10.55 10.35 9.03 9.97 59.94

HV network series losses -2.14 -1.90 -2.24 -2.33 -2.19 -2.35 -13.15

SGT series losses -2.91 -1.61 -2.06 -1.89 -1.60 -1.70 -11.77

Net System Utilisation 3.58 5.42 5.29 4.96 4.07 4.39 27.71

Generation Lead -1.01 -1.00 -0.97 -0.91 -0.85 -1.04 -5.78

Generation Lag 0.42 0.45 0.49 0.46 0.39 0.39 2.60

Net Demand at GSPs -2.40 -2.86 -2.73 -2.69 -2.34 -2.18 -15.20

9.5 The above values are all on an entirely GB basis, and thus include the
contributions from English, Welsh and Scottish transmission systems, including
all the 132kV and lower voltages.

9.6 Points to note when considering Table 3 include:

• HV gain varies due to circuit switching, outages and system operating voltage
• HV losses are driven by active power flows across the system
• Supergrid transformer series reactive losses are predominantly driven by
local distribution company demand
• Switching of MSCs (Mechanically Switched Capacitors), SVCs (Static Var
Compensators) and shunt reactors is determined by operational security
requirements.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

10. Exceptional Reactive Power Requirements

10.1 Paragraph 5 in Schedule 3 of the CUSC (Statutory and Regulatory Obligations)

enables National Grid to contract outside of the Reactive Power Market tender
process in specific circumstances for the provision of Enhanced Reactive Power
Services. National Grid is required to publish details of circumstances
st
surrounding this in the proceeding six-month period. During the period 1
st
October 2010 to 31 March 2011 National Grid did not require any service
contracts for the provision of enhanced voltage support.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Appendices

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 Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Appendix 1 - Comparisons with previous Tender Rounds

Tender Tender BM No. of ORPS ORPS 12 >12 Successful Successful % total MVAr
Gensets Gensets signing lagging capability
Round Round Units BM/Non BM + month months Offered Market Market with Market
Start date able to Unit tenders ERPS duration duration Agreements Agreements Agreements
tender Received
1 1 Apr 1998 154 85 76 9 85 0 41 41 ~30%
2 1 Oct 1998 113 10 10 0 9 1 5 5 ~36%
3 1 Apr 1999 150 102 102 0 102 0 75 57 ~40%
4 1 Oct 1999 99 20 20 0 14 6 5 5 ~40%
5 1 Apr 2000 151 99 98 1 97 2 98 89 ~65%
6 1 Oct 2000 58 15 15 0 15 0 9 9 ~70%
7 1 Apr 2001 145 104 104 0 104 0 43 43 ~50%
8 1 Oct 2001 111 39 39 0 39 0 17 15 ~57%
9 1 Apr 2002 138 76 76 0 68 8 32 32 ~35%
10 1 Oct 2002 123 52 52 0 48 4 29 27 ~45%
11 1 Apr 2003 125 59 59 0 57 2 31 30 ~46%
12 1 Oct 2003 121 56 56 0 49 7 32 23 ~43%
13 1 Apr 2004 126 46 46 0 41 5 32 32 ~48%
14 1 Oct 2004 118 39 38 1 38 1 33 21 ~46%

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 Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Tender Tender BM No. of ORPS ORPS 12 >12 Successful Successful % total MVAr
Gensets Gensets signing lagging capability
Round Round Units BM/Non BM + month months Offered Market Market with Market
Start date able to Unit tenders ERPS duration duration Agreements Agreements Agreements
tender Received
15 1 Apr 2005 153 58 58 0 57 1 29 25 ~35%
16 1 Oct 2005 151 37 36 1 33 4 25 13 ~28%
17 1 Apr 2006 164 22 22 0 22 0 14 12 ~20%
18 1 Oct 2006 164 21 20 1 21 0 7 6 ~17%
19 1 Apr 2007 172 20 20 0 20 0 10 10 ~14%
20 1 Oct 2007 170 30 30 0 30 0 17 15 ~18%
21 1 Apr 2008 165 20 20 0 20 0 7 4 ~14%
22 1 Oct 2008 176 20 20 0 20 0 8 3 ~6%
23 1 Apr 2009 177 23 23 0 23 0 0 0 ~2%
24 1 Oct 2009 180 22 22 0 22 0 0 0 0%
25 1 Apr 2010 181 18 18 0 18 0 0 0 0%
26 1 Oct 2010 209 16 16 0 12 4 0 0 0%
27 1 Apr 2011 219 4 4 0 0 4 0 0 0%
NB: Tender Round 1-14 inclusive incorporates England and Wales BM Units ONLY. Tender Round 15 onwards comprise
of GB BM units.

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

Appendix 2 - BM Units’ contractual position at 1st April 2011

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Reactive Power 27th Tender Round Market Report – 11th MAY 2011

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Reactive Power 27th Tender Round Market Report – 11th May 2011

Appendix 3 - Reactive Market Agreement status at 1 April 2011

Contracts Continuing on 1 April 2011

Company BM Unit ID Contract Expiry Date
1 None None N/A

New Contracts Commencing on 1 April 2011

Company BM Unit ID Contract Expiry Date
1 None None N/A

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Reactive Power 27th Tender Round Market Report – 11th May 2011

Appendix 4 - Successful tender details for contracts commencing 1 April 2011

Note: There were no successful tenderers

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Reactive Power 27th Tender Round Market Report – 11th May 2011

Appendix 5 - Tender Assessment Procedure

A5 Introduction

A5.1 National Grid assessed Reactive Power Tender Round 27 in a manner

consistent with the processes applied to all previous Tender Rounds, as detailed
in Schedule 3 of the CUSC. Analytical processing was conducted in six-month
time periods (Summer – from 1 April to 30 September and Winter – from 1
October to 31 March) in order to consider any interaction with the overlap of
contracts secured during the previous Reactive Power Market Tender Rounds
and also to take into account the effects of the implementation of CUSC
Modification CAP045.

A5.2 National Grid has divided the process of assessing tenders into several stages,
which were addressed as follows:

• Tender Receipt and Registration: The tenders were opened, in the presence
of a separate witness and all tender data submitted was entered into TARDIS
(Transmission Ancillary Reactive Database Information System).

• Tender Data validation: All TARDIS entries were then separately checked
back to the original tender sheets. Compliance checks within TARDIS
showed that all the tenders submitted were compliant.

• Reactive Power Service Assessment: The tenders were assessed against

forecast, taking into account the many interacting factors associated with
each tender acceptance decision, as described in Appendix 6 in Schedule 3
of the CUSC. This involved, inter-alia, evaluation against projections of
expenditure and availability of service against historical and forecast Mvar
and Mvarh data to produce central views of the money payable under the
DPM (Default Payment Mechanism) or a Market Agreement (described
below). The overall assessment was supported by an examination of a
number of credible sensitivities around the central assessment.

A5.3 Core Analytical Processing

• Tender assessment takes place in the context of uncertainties and

interactions affecting reactive payments and transmission requirements. To
initiate the assessment of the overall value of each tender, it is considered
necessary to construct a central view of future payments so that the relative
impact of the factors influencing the economic evaluation of tenders can be
fully addressed.

For each BM Unit tendered, the processing was as follows:

• Forecast Mvarh generated, in each band by reactive Mvar breakpoints,

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Reactive Power 27th Tender Round Market Report – 11th May 2011

based on historical trends and forecast load factors. The historical

observations covered the period April 2005 to December 2010 and came
from the Ancillary Services records against which Reactive Power utilisation
is currently being paid.

• The alternative DPM utilisation payment was forecast as the forecast Mvarh
multiplied by the forecast utilisation prices. These utilisation prices were
£2.68/Mvarh for summer 2011 and £2.84/Mvarh for winter 2011. The
utilisation prices were derived from the calculation defined in the CUSC
Schedule 3, using a forecast of indices. Utilisation prices and the associated
forecasted indices were communicated to all potential service providers and
published before Market Day. Default prices for second year service were
also forecasted in the assessment, based on forecast RPI and power prices.
These were used to compare with the RPI indexed tendered prices.

• The market agreement capability payment was forecast as tendered price

multiplied by tendered capability, allowing for break-points, multiplied by
forecast hours for both available and synchronised capability.

• The market agreement utilisation payment was forecast as tendered prices

multiplied by the same forecast Mvarh as those used in the alternative DPM
payment forecast, respecting the tendered break-point bands of Mvarh
utilisation.

• The core comparison of default versus market agreement is based on the

forecast payments detailed above. However, Reactive Power assessment is
by no means as simple as taking the cheapest option. A full understanding of
the factors influencing Reactive Power requirements on the GB Transmission
System must be taken into account to provide a complete economic
assessment of tender value.

A5.4 Assessment Sensitivities

• The Reactive Power market tender evaluation process is subjective in nature,

based as it is on forecast assumptions. It has therefore been important to
establish a framework within which this subjectivity could be exercised in a
consistent fashion across all tenders.

• The principal role of tender assessment is to quantify and evaluate

consistently the many factors that should be considered. These factors are
referred to in 3.3(e)(ii) of Schedule 3 of the CUSC. National Grid assessment
has developed and implemented a process enabling these factors and
associated uncertainties to be methodically considered.

• In the light of CAP045, the variability in the DPM price will affect the balance
between market and default payments. The robustness of the core contract
decisions was considered against a range of Default prices from the central
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Reactive Power 27th Tender Round Market Report – 11th May 2011

forecast Default prices used. A range of +/-10% on Default prices was

considered alongside historic trends.

• National Grid recognised that availability and maximum Mvarh from a BMU is
affected by outage plans and unforeseen break downs. A central Mvarh
forecast from each BMU was first developed considering given outage plan
and historic reliability. The robustness of the central contract decisions was
then tested against a range of variation on planned outage and estimated
breakdown rate.

Specific questions were asked of each tender, examples of which follow:

- Would a Market Agreement (central case assessment) give a reduction in

payments?

- Would a Market Agreement reflect the effectiveness at providing voltage

support at that location?

- Would a Market Agreement be robust against expected individual

variations in utilisation due to any of the following:
♦ A new station opening nearby
♦ An existing nearby station closing
♦ A change in local Reactive Power demand
♦ A change to the transmission system (including planned
outages)

- Would a Market Agreement enhance the incentive on the Generator to

maintain its Grid Code capability?

- How would a Market Agreement affect operational despatch?

- To what extent might a Market Agreement potentially offset National Grid

investment?

- Would a Market Agreement for ORPS enable a desired contract for

ERPS?

• All other criteria in CUSC Schedule 3, paragraph 3, are covered by this

methodology.

• In all cases, National Grid continued to consider interaction with forecast

transmission constraints. In all cases, there were insignificant interactions
with the constraints identified.

• In all cases, National Grid considered possible interaction with National Grid
planned investments. The commissioning of new National Grid transmission

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Reactive Power 27th Tender Round Market Report – 11th May 2011

equipment, which includes some reactive compensation equipment,

influenced National Grid's view of forecast MvArh. All of the commissioning
equipment is required for compliance with Transmission Licence Standards,
and re-phasing of planned National Grid investments within a 12-month
contract period is not a practical option.

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Reactive Power 27 Tender Round Market Report – 11 May 2011

Appendix 6 - Geographic Distribution between DPM and Market Contracts

Marine Energy
Test Centre APPENDIX 6
Burgar
Hill
Spurness (Fig. 1 of 2)

KEY
Flotta
400kV, 275kV

SUBSTATIONS
Dounreay Causeymire
Hill of Lieurary

GENERATION WITH DEFAULT

Cassley
Houstary
CONTRACTS
Gordonbush
Lairg
Strathbrora
THE SHETLAND ISLANDS
Shin
Grudie Bridge Mossford
Beinn Tharsiun

Bendealt

Luichart Novar
Orrin
Deanie Meallt an
Turic

Edinbane Culligran Kilmorack Cairn Uish Boyndie

Aigas
Insch Peterhead
Fasnakyle Inverurie
Livishie Glens of
Glen Morrison Paul's Hill
Foundland
Stoneywood

Ceannacroc Fort Augustus

FoyersFarr
Millenium

Quoich Invergarry

Fort William
Errochty
Tullo
Rannoch

Tummel Bridge Clunie

Cashlie Lochay
Cruachan Baldovie

Ardkinglas
Finlarig
Beinn Ghlas

Inverliever
Clachan St. Fillans
SCOTTISH HYDRO-ELECTRIC
Drumderg

TRANSMISSION
Eredine Nant
Sloy Braes of
Doune
Westfield
Cruach
Mhor
Shanks &
Fife Power
LongannetCockenzie
McEwan

Crystal Torness
Grangemouth Rig

Hunterston Dun Law

Roughside Hill
Haupland Stonebyres
Muir Bonnington
Emly Bank
Roche Site 1
Beinn an Tuirc Hagshawhill
Tangy
Deucherin SP TRANSMISSION LTD.

Harehill Black Law

Gallowrigg

Girvan Distillery
Kendoon Carsfad Dalswinton NGET
Glenlee Earlstoun

Auchencrosh

Artfield
Fell

Tongland

GENERATION (SCOTLAND) ELIGIBLE FOR REACTIVE POWER PAYMENTS

AS AT 1st APRIL 2011
SHOWING THE SPLIT BETWEEN DEFAULT AND MARKET CONTRACTS

ISSUE N 04-05-11 41/177171 C Collins Bartholomew Ltd 1999

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Reactive Power 27 Tender Round Market Report – 11 May 2011

APPENDIX 6
(Fig. 2 of 2)

KEY
400kV, 275kV
SUBSTATIONS
GENERATION WITH DEFAULT
CONTRACTS

Lynemouth
NGET

Hartlepool

Teesside
Fellside

Roosecote

Heysham 1&2

Ferrybridge Salt End

Killingholme
Killingholme PG
Drax
Eggborough South Humber Bank 1&2
Keadby
Wylfa Brigg Immingham
West Burton
Fiddlers Ferry
Cottam
Rocksavage CDCL
Dinorwig Shotton
Deeside
Connahs Staythorpe
Ffestiniog Derwent Spalding
Quay
Kings Lynn
Rugeley Ratcliffe
Sutton Bridge

Great Yarmouth
Ironbridge Peterborough

Sizewell
Corby Little Barford
Bramford

Rye House
Enfield
Brimsdown
Baglan UskmouthOldbury on Severn Barking Power
Tilbury Coryton
Bay Taylors Lane Medway Power
Aberthaw Seabank
Didcot 'A'&'B'
'B' Barry
Kingsnorth Grain
Hinkley Point 'B'
Littlebrook
Damhead Creek Sellindge
Marchwood
Shoreham E de F
Dungeness

Langage
Fawley
Cowes

Indian Queens

GENERATION (ENGLAND AND WALES) ELIGIBLE FOR REACTIVE POWER PAYMENTS

AS AT 1st APRIL 2011
SHOWING THE SPLIT BETWEEN DEFAULT AND MARKET CONTRACTS

ISSUE N 04-05-11 41/177183 C Collins Bartholomew Ltd 1999

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Reactive Power 27 Tender Round Market Report – 11 May 2011

Appendix 7 - Contact Information

A7.1 Further report information, comments suggestions and enquiries can be directed
to:

Lisa Kettle
Network Operations (B2)
National Grid
National Grid House
Warwick Technology Park
Gallows Hill
Warwick
CV34 6DA

On telephone number: 01926 654308

Email: lisa.x.kettle@uk.ngrid.com

A7.2 For any other information please visit the National Grid website on the following
address:

http://www.nationalgrid.com/uk/Electricity/Balancing/services/ReactivePower/
markettender/

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