Last updated: October 11, 2013 6:59 pm

National Grid plays down winter power fears

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Officials at National Grid insisted this week that they remained comfortable with the power transmission company’s ability to deliver electricity supplies over the winter, in spite of headlines pointing to the increased risk of 1970s-style blackouts.

Such headlines were prompted by the company’s own report on Monday that pointed to a narrowing gap between the UK’s generating capacity and likely patterns of peak winter demand. That margin – currently 5 per cent – is set to fall still further as power generators continue to close or mothball their coal and gas-fired plants through the remainder of the decade.

National Grid is sanctioned by the UK government to match the supply – minute by minute – of fluctuating demand across the country’s system of high-voltage power cables. However, it has no legal power to force power generators to supply electricity to the network, neither can it demand extra electricity when, for example, Britons switch on their kettles during an advertising break in Coronation Street.

“Generators don’t have an obligation to supply or produce energy,” says Chris Train, National Grid’s director of market operations.

However, Mr Train points to the complex web of contractual obligations that has emerged between the generators and the energy retailers – often the same “big six” utilities that dominate the market – as the glue that keeps Britain’s lights on and the wheels of industry turning.

In effect, power station operators such as EDF supply its own retail customers via the National Grid network as well as rival retailers such as Centrica’s British Gas and npower. Beyond this is a range of complex supply arrangements with large industrial users.

“No one is being forced to do anything – people are responding to signals within the market,” says Mr Train.

This week Richard Smith, National Grid’s head of energy strategy and policy, also played down immediate concerns of power shortages in the coming months: “We haven’t a crystal ball to know how the winter will play out, but we are confident the market can deliver.”

However, despite the general faith of its officials in the market, National Grid issued a further consultation paper on Friday looking at how best to tackle the longer-term pressures on the UK’s power supplies.

The gatekeeper of Britain’s power transmission system is seeking to develop further incentives for heavy industrial users of electricity to reduce their energy use when supplies are stretched. Mr Train identifies paper mills, steel works and chemical plants as those that can curtail use at short notice if financially rewarded in the form of reduced bills.

“Large customers do shift their load – it’s something they are used to and even if it’s not all that visible, it happens all the time,” adds Mr Train.

National Grid is also consulting on how best to extend the use of other back-up systems such as emergency diesel-powered generators commonly installed at hospitals, waterworks and other essential services. These generators, which often stand idle, can be put to common purpose as times when supplies are threatened.

If accepted by energy watchdog Ofgem, the proposals would see public sector organisations and private businesses, which maintain their own generators, competing to offer further capacity to the grid at times of stress. This, though, would be at a cost that would ultimately be passed back to consumers.

National Grid has 1 Gigawatt of emergency generation contracts in place that is not included in its analysis of reserve capacity for the coming winter. That compares with the UK’s predicted 60.5GW generation capacity this winter.

Peter Bingham, leading the development of these proposals at National Grid, said on Friday: “It’s prudent to have these additional tools available should electricity margins tighten mid-decade and to give us more flexible tools to balance the network in real time.”

In response to National Grid’s winter outlook, analysts at Macquarie concurred that existing generating margins remained adequate. The 5 per cent reserve margins, based on average cold spell forecasts “is tight but not blackout territory”, they say. “The UK system was at these reserve levels just five to seven years ago and there were no blackouts then.”

But with reserve margins threatening to fall as low as 2-4 per cent by 2016, costly measures to curb demand and garner emergency supply may yet have to be brokered by the National Grid – and ultimately financed by customers – to ensure the lights stay on.

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