Britannia Radio

THE TIMES   2.10.08
Wholesale price of electricity surges amid fear of supply shortfall

Robin Pagnamenta, Energy and Environment Editor

Over the winter, as we contemplate the wreckage of our economy and 
wonder where the money is going to come from to support our daily 
needs, we can at least take comfort in an imaginative EU initiative 
to save on electricity bills - power cuts.

According to The Times, that prospect has moved a little bit closer, 
with the report that wholesale electricity prices surged higher 
yesterday "amid mounting fears that the UK could face a supply 
shortfall next month."

Wholesale electricity prices surged higher yesterday amid mounting 
fears that the UK could face a supply shortfall next month.

The forward price of electricity for November hit highs of £133 per 
megawatt hour, up more than £10 since Friday, when the same contract 
was trading at about £122.75.

The price of power has risen sharply since National Grid published 
figures last week predicting an unusually thin margin between 
electricity supply and demand. For the week starting November 10, 
National Grid gave warning that the margin of spare capacity could be 
as slim as 0.8 gigawatts - the equivalent of one mid-sized coal-fired 
power station or the electricity consumed by a city the size of 
Nottingham.

"The market is very close to its safety limit," Andrew Horstead, of 
the energy consultancy Utilyx, said. In an average week in March, the 
margin of spare capacity is more than 12 times higher - about 10GW - 
rising to more than 16GW in July or August.

National Grid denied that there was a risk of domestic consumers 
facing blackouts next month, asserting that there was a built-in 
cushion of capacity below the stated safety margin. However, Mr 
Horstead said that the unexpected loss of a plant because of a 
technical glitch could expose industrial customers to the threat of 
temporary power cuts.

National Grid could also be forced to call on emergency power 
supplies, such as pumped-storage hydroelectric schemes that are kept 
primed for moments of emergency demand.

As you might expect, the National Grid is denying any risk of 
domestic consumers facing blackouts next month, asserting that there 
is "a built-in cushion of capacity below the stated safety margin."

However, this organisation has a history of making reassuring noises 
even when the system goes belly-up.

The warning has compounded fears about the growing instability of the 
UK power network. Last month National Grid was forced to issue three 
coded requests for power suppliers to bring on extra capacity because 
of unexpected power shortages - the same number that was issued 
during the whole of last year. The notifications of insufficient 
system margin, or NISMs, were issued on September 4, 14 and 17.

In May two relatively minor technical glitches within two minutes of 
each other triggered the most serious disruption to Britain's energy 
supply network in more than 20 years, producing blackouts that 
affected hundreds of thousands of homes.

Peter Atherton, a Citigroup utilities analyst, said that the squeeze 
next month had arisen because a large number of ageing UK power 
stations were out of service for maintenance - a growing trend in the 
industry.
Three older nuclear plants operated by British Energy at Hartlepool, 
Dungeness, in Kent, and Heysham, in Lancashire, are undergoing 
repairs and are not scheduled to return to full service until the end 
of the year.

European rules restricting the use of some of Britain's biggest coal-
fired power stations are an additional factor. Seven of the UK's 
older, more heavily polluting coal plants are set to close by 2015 
because they do not meet tough new emissions standards under the 
European Union's Large Combustion Plant Directive. That will amount 
to the loss of nearly 12GW of generating capacity of a total of about 
80GW. Peak demand averages about 62GW.

But no! They are not an additional factor. They are the factor. We 
are talking about the Large Combustion Plants Directive here, which 
is already restricting the output of seven major plants. By 2015, 
they will close because it is too expensive to meet the requirements 
of the directive, knocking out a vital 12 GW of generating capacity.

But in the here and now, the directive limits the output of each 
plant to 2,000 hours a year (out of a theoretical 8760 hours) 
effectively taking out three-quarters of this capacity.

Strict limits govern the number of hours these plants can operate 
before then. The rules have increased instability in the network by 
reducing the margin of spare capacity and the ability of the National 
Grid to respond rapidly in times of crisis.

Of course, we might just get away with it but, if we do, it will be 
no thanks to the EU. There again, the Met Office is forecasting a 
mild winter, which probably means we'll see snow on the ground by 
Christmas. However, studying the household bills by candle light is 
soooo romantic.

Thank heavens we are members of the European Union.