The UK is scrambling to ensure its energy security for the coming winter after the National Grid revealed a spare capacity of just 1.2 per cent, the worst in a decade.
Power plant closures have contributed to the situation and the grid has reacted by paying £36m to keep several plants on standby, while paying some energy intensive companies to switch off power. This is the second year in succession that the grid has resorted to such tactics.
This improvisational manoeuvre means overall spare capacity is now expected to be about 5 per cent, with 2.56 GW secured in total.
"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", said Cordi O'Hara, National Grid's director of market operations told the BBC. "As system operator, we feel we've taken a sensible precaution again this winter to buy some extra services. Together with the tools we already use to balance the network these additional services will significantly increase the energy reserve available this winter."
A combination of EU regulations along with low wholesale power prices have made some plants uneconomic to keep open.
"The economics of (power) generation are terrible" said 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".
Wayne Mitchell, director of markets and innovation at npower Business Solutions, said: “Over three quarters (77 per cent) of businesses told us last year they were worried about security of supply. With the UK now facing an even tighter energy crunch, it’s right that National Grid use every tool at their disposal to ensure the lights stay on. Large energy users have a major role to play in this through demand side response, and particularly measures that incentivise them to switch off at peak times, for the right price.”
“Npower Business Solutions is already working with businesses across a wide range of sectors to ensure greater uptake of these incentives and help make their energy management as effective as possible."
Meanwhile Tim Emrich, the CEO of UK Power Reserve told Power Engineering International, "What is required is a network of small-scale power generation, demand management and STOR programmes."
"This method crowdsources the spare capacity – reducing demand so that capacity is freed up for more critical uses or contributing extra power to meet demand. Furthermore, these smaller-scale sites, distributed around the country, are inherently more flexible and can produce just as much or little power as needed. This makes it a more cost-effective and low-carbon option than bringing large power stations online to meet the shortfall.”