Electricity generation margins for the upcoming winter could be dangerously low

Low capacity margins could see winter electricity bills rise

The closure of multiple power plants will mean Britain's generation capacity for the next winter will drop to its lowest margin in ten years, possibly increasing consumer energy bills.

While the winter 2014/2015 saw the generation margin at comfortable 4.1 per cent excluding additional provisions, the winter of 2015/2016 could have only 1.2 per cent to spare.

Transmission network operator National Grid has paid power plant operators SSE and Centrica to put several of its mothballed power plants on standby and is also paying power-intensive manufacturers including Tata Steel to be ready to power down if needed.

The measures would allow National Grid to secure an extra 2.56GW of power, increasing the capacity margin to 5.1 per cent.

However, the measures will come at a cost of around £36m, which will add 50p to a typical household energy bill.

"It's clear that electricity margins for that coldest, darkest half hour of winter are currently tighter than they have been, due to power station closures,” said Cordi O'Hara, National Grid's director of market operation.

"As a 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."

Last year, additional provisions increased the generation margin to 6.1 per cent.

But mild windy weather, high levels of electricity imports from the continent and greater than expected levels of available power plants meant the capacity margin was ‘adequate’, and extra help to meet demand was not needed, National Grid said in a report.

Energy Minister Andrea Leadsom commented: "Our priority is to ensure that British families and business have access to secure affordable energy supplies that they can rely on.

"National Grid have confirmed that our plan to power the economy is working - and it means that the lights will stay on this winter as well as making sure our homes and businesses have the gas and electricity they need in the future."

National Grid has also released a series of four scenarios for how Britain's energy system could look in the future.

But only one of the four scenarios, one in which green ambition is not restrained by financial limitations and new technology is embraced by society, will see the UK meeting its targets to cut emissions and tackle climate change.

Under this 'gone green' scenario, LED lights will be the only viable light bulb option by 2030, renewable power output will be comparable to that of conventional power plants by 2026, and sales of air source heat pumps will top 300,000 a year by 2020.

But under a 'no progression' scenario focused on energy security at the least cost, no more than 130,000 cavity wall insulation installations will take place a year and gas output for electricity will rise by 15 per cent by 2036, while coal output will fall 89 per cent to be matched by solar.

In another scenario of slow economic growth where available money is spent on long term solutions to tackling emissions, offshore wind could double every five years up to 2026 and annual sales of hybrid electric vehicles could exceed 50,000 by 2019.

A final 'consumer power' scenario of relative wealth and innovation meeting consumer needs would see growing installation of gas combined heat and power units in commercial buildings, solar power capacity quadrupling by 2020 and small-scale generation such as household solar accounting for 40 per cent of capacity by 2036.

Roisin Quinn, National Grid's head of energy strategy and policy, said: "The energy industry is changing rapidly and at National Grid, we are right at the heart of that change.

"We haven't got a crystal ball, but our scenarios offer a glimpse into the future, using our unique insight into the trends shaping the energy landscape."


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