The energy regulator has issued a new and more alarming warning about the potential for blackouts, saying Britain’s spare capacity margin could dwindle to zero as early as next year. The prediction from Ofgem has forced the infrastructure operator, National Grid, to consult on another round of subsidies to encourage companies to keep power stations open, a move likely to raise household energy bills further. It could also leave Britain further dependent at times of peak demand on “diesel farms”, which have been condemned by environmentalists as carbon-intensive and expensive to run.
Ofgem predicted earlier this week that capacity margins could fall as low as 1.2% this winter, but admitted in a consultation document on Friday that the demand-supply cushion risks being wiped out completely in 18 months. “Our analysis shows that the Lole (loss of load expectations) could range between two and 15 hours per year for our central view of the risks (corresponding to margins between 0% and 4%),” the document says with regard to the 2016-17 winter period.
The power squeeze has been getting steadily worse as coal, nuclear and gas plants have been retired owing to age or environmental legislation. But paying power companies – many of which are from the big six energy firms that have been criticised for the scale of their retail profits – will be unpopular when some consumers are already struggling to pay their energy bills.
By offering a range of different subsidies, all paid for by the customer, the National Grid has secured 2.56 gigawatts of additional “balancing services” to ballast supplies this December, bolstering the capacity margin from 1.2% to 5.1%. But the financial aid schemes that encouraged companies to keep power stations on standby or customers to come offline are now at an end.
National Grid, whose role involves ensuring the lights stay on, has now said it wants to talk to power companies about what sort of new subsidy regime it needs to put in place to raise capacity margins in 18 months’ time.
Rachel Fletcher, senior partner for markets at Ofgem, said the decision to consult on extending ways to bring in new capacity services into the following winter was a prudent one. “However, given we are 18 months away from winter 2016/17, there is also plenty of opportunity for generators and other market participants to continue to make more supplies available.”
