Cold weather like that seen in early 2010 could see factories paid to shut down at peak times as the UK struggles to keep the lights on, a new report revealed today.
National Grid has warned that a cold snap combined with the series of recent power station closures could put so much strain on the network that it has to turn to "last resort" contingencies such as the factory shutdowns and firing up unused power plants.
Even after considering these fallback plans, there remains a one-in-31 risk of needing emergency measures including voltage reduction "brown outs" – effectively dimming the lights – according to National Grid's winter outlook report, unveiled at an Ofgem seminar in central London today.
This risk is the same as last year, but has only been kept down because of the contingency arrangements that enable National Grid to ask industrial customers to reduce demand during peak periods and to ensure extra reserve capacity, which together are expected to cost customers an additional £1 on household bills.
Rachel Fletcher, senior partner for market at regulator Ofgem, said it was a "very small price to pay for ensuring the security of supply that we all expect from the British energy system". But she admitted that "no system is 100 per cent reliable".
The report revealed that the capacity margin this winter, which reflects the gap between total electricity generating capacity and peak demand, was expected to be 4.1 per cent, the narrowest since 2006/7.
This could narrow to 2.8 per cent in the event of bad weather of the kind seen once every 20 years, and last experienced in February and March 2010, which would see National Grid unable to meet its "basic reserve requirement" of spare capacity needed to run the system and forced to adopt the contingency arrangements it has put in place.
Similar contingency measures are already being pencilled in for 2015/16.
Dr Colin Brown, director of engineering at the Institution of Mechanical Engineers, said: “While we’re unlikely to see blackouts this winter, the drop in the amount of spare electricity capacity illustrated in National Grid’s new report is a wake-up call that shows how vital it is that we invest in new energy infrastructure.
“Government must stop playing politics with our energy system and the environment and make clear exactly how it is going to ensure that the country’s future needs are affordably met.
“It is only with this clarity that energy companies will have the confidence to invest in the infrastructure needed to keep the nation warm, lit, moving and working. Without it we risk a spiral downwards where we achieve our energy balance by closing down our industries.”
National Grid earlier this year signed deals with 431 industrial sites which will be paid to shut down at peak hours if necessary and it has now taken the "sensible precaution" of finalising contracts with power stations at Littlebrook in Kent, Rye House in Hertfordshire and Peterhead in Scotland to provide reserve capacity.
The energy picture has worsened since the summer when contingency measures were first set out meaning that the amount of reserve capacity it was putting in place was greater than had earlier been planned.
It came after fires that have resulted in the permanent shutdown of Ironbridge in Shropshire and the temporary closure of Ferrybridge in West Yorkshire. Another power station, at Barking, is also to close, while a planned return to service for four EDF nuclear reactors at Heysham in Morecambe, Lancashire, and at Hartlepool, will see them come back at only 75 per cent capacity.
A fire put half of operations out of action at Didcot B power station in Oxfordshire – which has capacity to supply a million homes – last week, but the affected part of the site is expected to return to around 50 per cent service this week.
Cordi O'Hara, National Grid's director of market operation, said: "The electricity margin has decreased compared to recent years, but the outlook remains manageable and well within the reliability standard set by government. As system operator, we have taken the sensible precaution to secure additional tools to bolster our response to tighter margins."
On gas, the National Grid's report said supplies were well ahead of expected peak demand but warned that in the "extreme scenario" of cold winter conditions and Russia cutting off supplies due to tensions over Ukraine, the UK may have to arrange factory shutdowns as well and rely on expensive imports from markets further afield such as Asia and South America.
Dan Lewis, energy policy adviser at the Institute of Directors, said: "Britain's energy crisis is like a slow-motion train crash. If energy policy was as good at building power stations as it has been at closing them, we would not be facing the risk of targeted blackouts this winter. Paying businesses to cut their power use at peak times to keep the lights on is no way to run a modern economy."