The scale of Britain’s energy supply crunch was laid bare on Wednesday as an unexpected outage of power plants sent wholesale electricity prices soaring and prompted the grid operator to call for the first time ever for industry to reduce power.
National Grid urged a group of heavy users, including businesses, factories and hospitals, to switch to back-up power or to reduce demand to meet the sudden lack of supply. Consumers responded by taking 40 megawatts of demand off the grid — partly by switching to back-up generators.
Traders watched in amazement as prices surged, with the grid paying £2,500 per MWh to one operator, Severn Power, as it bought in emergency supplies; the usual going rate is around £60.
“This has been an extreme day,” said Phil Hewitt, a director at Enappsys, which monitors wholesale electricity data. “We haven’t seen prices spike like this for a long time.”
The measures highlighted the tightness of the margin between supply and demand in the UK, where old power plants have in the past decade been taken off the grid but not replaced quickly with alternatives. Coal-fired plants are being closed at a rapid pace, ahead of a 2023 deadline for compliance with new EU rules on air quality.
The emergency measures included a warning that the grid was 500MW short of the amount it needs to maintain a safe cushion. That amount of electricity would be enough on average to power 400,000 homes. This is the first time the grid operator has issued a warning of such a shortage since 2012, and only the second since 2009. It was particularly unusual because it was given with only a few hours’ notice and on a relatively mild autumn day.
National Grid announced last month that at peak times this winter, it expects the margin of spare capacity over demand to be as low as 1.2 per cent — or 5 per cent after emergency measures are taken — the lowest in a decade.
Britain has come close to running out of electricity in the past, but National Grid said it had never asked industry to power down in such a way to help meet demand.
One energy supply executive said: “This just highlights what we have been saying for years about the UK not having enough supply. What would have happened if this had happened on a cold day in the middle of winter?”
The problem has been caused in part because electricity prices are too low to provide incentives to suppliers to build new capacity which can be used at short notice, such as gas.
Ministers have responded by giving subsidies to companies to build extra reserve power over the next 15 years, but the Financial Times revealed on Tuesday that much of this is set to go to highly polluting diesel power.
It took over four hours for National Grid to secure enough electricity to keep the country running, and by 5pm it announced the resumption of normal operations.
National Grid said on Wednesday evening: “The issuing of an [emergency notice] does not mean we were at risk of blackouts. It means that we needed the safety cushion of power in reserve to be higher.”
Tom Edwards, an analyst at Cornwall Energy, said: “National Grid is prepared for this eventuality, but the problem is that it will be the consumer who pays for it in the end.”
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