Ofgem, the gas and electricity regulator, has just published a report on Electricity Security of Supply which it dryly sub-titles: “A commentary on National Grid’s Future Energy Scenarios for the next three winters”.
A commentary, perhaps, but also a substantial indictment. One of the basic responsibilities of government is to keep the lights on and the wheels of commerce turning. Nobody reading this report will be encouraged to believe that such outcomes are guaranteed.
Not that the current government deserves any particular blame. This is a long-term problem that has its roots in electricity privatisation; at which point the responsibility for investment passed to private companies which generally found it more profitable to keep old plant running than replace it in good time.
Public policy focused on promoting renewables while failing to take account of the pressing fact that ageing nuclear power stations and environmentally unacceptable coal generators were dropping out of the system.
It should have been about ensuring new base-load capacity that has been neglected over the past decade, to our increasing cost and risk.
That is the danger of relying so heavily on a market-based approach to something as important as power supply. The market, left to its own devices, is quite capable of putting things off to another day, especially when the signals from government are so inconsistent.
In the last analysis, nobody is interested in blaming generators or regulators. Keeping the lights on is a job for government.
And while trying to get through the next few years on a wing, a prayer and substantial additional costs to consumers, then the lesson must surely be that this is too important to be left to the market.
Government must ensure investment in the necessary capacity, rather than plead for it.
The relatively good news is that the supply and demand balance is, according to the National Grid report, likely to be even tighter in the winter of 2016-17 than in the one that lies immediately ahead.
But the margins of error are now so slim that an unexpectedly severe winter and/or outages at a few of our major power stations could easily tip the balance.
There is nothing mysterious about the problem. Old plant is closing down because it has become uneconomic and replacements are not coming on-stream quickly enough.
We need only look at Scotland, until recently a substantial net exporter of electricity, to confirm the trend – Cockenzie gone, Longannet going, Hunterston B and Torness increasingly prone to outages.
And what do we have in their place? Wind turbines – lots of them and there were perfectly valid arguments in favour of increasing the role of renewables. Unfortunately, security of supply is not one of these arguments, particularly if we get a cold winter and resultant high demand.
National Grid’s scenarios, the report observes, “assumes that there is no relationship between wind availability and demand”. Indeed, it may be worse than that: “There is a widespread belief that the wind stops blowing when there is a severe cold spell, resulting in lower wind availability at times of high demand for electricity”. That’s not much help in a crisis.
According to the report, there should be at least a 5% margin of electricity supply over demand during the coming winter. This has been achieved only through National Grid “procuring” an additional 2.5 gigawatts under emergency powers, to be called on if necessary. This translates into reviving mothballed plants and paying big industries to close down at peak demand times.
Even then, it really all comes down to the weather. Have you, for example, heard of that winter classic . . . the Scandinavian “blocking high” when everything can go quiet and very cold for weeks on end?
Headline projections are based on average winter conditions. National Grid adds its own get-out clause in slightly mysterious language: “We have also considered broader sensitivities such as a colder than average winter, outside our central view. These are less likely but still possible and appropriate to consider when assessing the security of supply outlook”.
Nobody would disagree with that. In the old days, when electricity was run as a public service rather than as a profit generator for private companies, the system was based on assuming “a colder than average winter”.
That is why we had over-supply. Now, in order to make the figures add up, “a colder than average winter” falls outside the “central view” of those entrusted with keeping the lights on.
Until Britain gets round to building some new generating capacity, we are increasingly dependent on imports via the interconnectors which link us with Continental Europe. That’s fine, so long as they have electricity to sell to us. But the report helpfully confirms that this too comes at a price.
It states: “Prices in GB have historically been higher than in the Netherlands and France, incentivising exports to GB. The price differential has broadly increased in recent years. The Netherlands has a domestic generation surplus and is connected to other well-supplied markets (ie Norway and Germany)”.
Even this reassurance comes with a health warning about our other main source of imports: “The outlook for France is more uncertain as margins are expected to tighten. Exports to GB are still likely unless cold temperatures coincide with tight margins in GB . . . It is therefore plausible that GB may not receive any imports from France if both markets were to face simultaneously tight margins (ie due to a cold weather front over north-western Europe”.
So that is what the once-great British power industry has come down to. Strip away the verbiage and official policy rests on hoping and praying that there will not be “a cold weather front over north-western Europe” and if there is, then all bets are off.
Best to keep an eye on the long-range weather forecasts and don’t throw out the paraffin lamps. Come to think of it, can one buy them anymore?
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