04202021

UK spare electricity margin to fall

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The risk of blackouts this winter has increased compared with a year ago according to National Grid.

It says the closure of some power stations would have left spare capacity on the system at just 1.2%, the worst for a decade.

It has secured extra supplies by paying tens of millions of pounds to have several plants on standby and by asking some industries to switch off power.

The move means overall spare capacity is now expected to be around 5%.

“It’s clear that electricity margins for that coldest, darkest half hour of winter are currently tighter than they have been, due to power stations closures”, says Cordi O’Hara, National Grid’s Director of Market Operations.

To ensure the lights stay on, for the second year running, National Grid will pay firms like Centrica and SSE to keep power plants in reserve.

It is also paying large energy users, such as Tata Steel, to switch off.

Extra

A total of 2.56GW of power has been secured which National Grid says will increase overall margins to 5.1%.

That is still lower that spare capacity available last winter after similar measures.

The move will cost £36m and will add 50 pence to the typical household energy bill.

“As system operator, we feel we’ve taken a sensible precaution again this winter to buy some extra services”, says Cordi O Hara.

“Together with the tools we already use to balance the network these additional services will significantly increase the energy reserve available this winter”

Challenge

Keeping the lights is getting more challenging.

EU regulations have forced older polluting power plants to close.

Low wholesale power prices have continued that trend making some plants uneconomic to keep open.

Around 2GW of power has come off the system since last year with the closure of plants including Barking Power Station, Ferrybridge and Littlebrook.

“The economics of generation are terrible” says Peter Atherton, a utilities analyst at Jefferies Investment Bank.

“Every gas fired plant is losing money. And new build is not delivering. Hence the underlying margins are getting worse”.

Staying on

The Government insists that the lights will stay on this winter.

“Our priority is to ensure that British families and business have access to secure affordable energy supplies that they can rely on”, said Energy Minister Andrea Leadsom.

“National Grid have confirmed that our plan to power the economy is working – and it means that the lights will stay on this winter as well as making sure our homes and businesses have the gas and electricity they need in the future.”

National Grid is now looking at whether it will need to secure more standby generation for the next two years.

It had been assumed that the spare capacity on the power network would hit a low in the coming winter 2015-16 and then increase in subsequent years.

But National Grid now says that owing to uncertainties, it is no longer clear that margins will recover in the winter of 2016-17.

National Grid will now consult on this and will publish final margin figures for the coming winter in the autumn.

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