Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

National Grid Confirms Energy Security

System operator National Grid has confirmed that the chances of blackouts during the coming winter have fallen. The company said that it expected the UK to have a capacity margin of 6.6% this winter, which is an improvement on its projection of 5.5% made earlier in the summer.

Higher supplies

The capacity margin provides a measure of the level by which the available electricity generation is expected to exceed the level of demand from consumers.

The margin therefore serves as a level of insurance against unexpected losses of power or surges in demand.

National Grid’s Winter Outlook report, issued on 14 October, explained that a major factor in the improvement of its forecast was the availability of the 2GW Eggborough coal-fired plant.

Eggborough had been due to shut down ahead of this winter. However, having secured a contract to provide services to National Grid, it is to stay partially operational until March 2017.

The forecast has also been improved by the expected reduction in the power to be exported to Ireland. This is owing to a new outage on the East West interconnector, which links the British and Irish markets and usually exports to the latter.

A total of 73.7GW of capacity is anticipated to be available over the winter, with a de-rated (forecast to be available) generation capacity – on which National Grid bases its analysis – of 55GW.

Meanwhile, demand on the national transmission system is expected to peak at 52.7GW.

National Grid noted that, although the last few winters had been mild, it was not complacent. It said the electricity margin would be “tight but manageable this winter”, based on its updated analysis.

Contingency measures

The company further highlighted the “additional actions” it had taken to improve the outlook. For example, the margin includes the 3.5GW of contingency balancing reserve services that have been procured. Specifically, power stations will be kept in reserve that would otherwise have been closed or mothballed.

It is expected that these services will cost £120mn, with this cost increasing further if the services are used.

Cost concern

Ahead of the winter, National Grid has already had to warn the market about a potential system stress event.

On 31 October it issued its first ever “capacity market notice”, meaning that it was expecting the gap between the supply and demand of electricity to drop below 500MW.

National Grid’s notice indicated that capacity on the system would, from 4.30pm, be only 220MW above the sum of the forecast demand and an operating margin.

The tightening of supplies saw a spike in power prices. The Eggborough plant, for example, sold power to the grid for £2,500/MWh.

The notice was later cancelled on the day at 7.00pm. But a second notice followed on 7 October, and it is widely expected that more will be issued during the winter ahead.

Gas secure

Meanwhile, National Grid has also assured that sufficient gas will be available to meet demand this winter, because demand will be lower than it has been in recent years.

This change is largely driven by the expectation that Ireland will require less gas from Britain, as the Corrib gas field to the west of Ireland is now operating at full capacity. Less gas is also expected to flow to continental Europe this year.

But these reductions are likely to be “partially offset” by the demand for gas in electricity generation. This is projected to increase as gas-fired power stations form a rising share of the GB generation mix.

A range of sources will meet Britain’s gas needs over the winter.

Gas will flow from the Netherlands via the BBL interconnector, though likely at a lower level than in past few years owing to the tighter production restrictions that are now in place.

Restrictions also remain in place at the UK’s Rough gas storage facility. Around 1.3bcm of gas is in storage at the facility, compared with 2.8bcm at the beginning of last winter.

Demand response

Reacting to the report, Nick Shenken, energy partner at law firm Pinsent Masons, highlighted the important role that businesses could play in helping secure supplies.

Shenken said: “While the figures paint a positive picture, we must not be complacent and ignore measures such as demand-side response that could play a major role in safeguarding our future energy supply.

“Incentivising consumers and businesses to power down at peak times is unlikely to be a silver bullet, but there is little doubt it can play a major role in alleviating pressure on the grid and safeguarding supply during the winter months.”

Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit, added: “The increased cushion between supply and demand in this year’s Winter Outlook shows that power cuts are exceedingly unlikely.”

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