BBC: UK Need Not Fear Electricity Blackouts

The Grid Can Cope

This is the gist of an article dated 30th January 2017 by Roger Harrabin, BBC environment analyst, quoting the ex-National Grid boss, Steve Holliday.  The article is set out below, but beware, all is not as it may seem!  Our #comments follow at the end of the article.

The UK has enough energy capacity to meet demand – even on the coldest days when demand is highest, says Steve Holliday, the man who ran National Grid for a decade.

He said news stories raising fears about blackouts should stop.

His optimism is based on the government’s latest auction of capacity for power generation, which starts later today.

Firms will bid for subsidies to provide back-up power when needed.

The stand-by plants will run for a few days a year during extreme conditions.

Much of the back-up will be provided by old gas and coal plants that would otherwise be scrapped. Funded by the bill-payer, they will offer a sort of power insurance policy.

Mr Holliday told BBC News: “It’s time for the headline of Blackout Britain to end – it’s simply wrong. We’ve been talking about blackouts for 15 years every time it gets cold, but it’s a scare story.

“The lights haven’t gone out yet and thanks to the measures the government is putting in place this week they definitely won’t go out in future. The UK has one of the most stable supplies of electricity in Europe.”

Concern over price

The head of the Energy Intensive Users Group (EIUG), which represents companies that use a lot of energy, Jeremy Nicholson, has previously voiced fears about energy security but agrees the capacity auctions will secure supplies.

He told BBC News: “The power industry makes a lot of noise about tight generating margins but somehow manages to provide plenty of capacity when it’s needed.

“The capacity issue is sorted now – frankly it should have happened 5-10 years ago. Our bigger concern now is the possibility that when margins are tight, the price will shoot through the roof.”

A spokesman for Energy UK, the body that represents power generators, was also confident about security of supply, saying: “We fully support the Capacity Market and we believe it will keep the lights on in Great Britain.”

The capacity auctions were originally due to supply back-up from 2018, but the government brought the scheme forward to cover next winter.

Successful bidders in the auctions will receive a payment for keeping power stations available between November and February whether or not they are generating.

Flexible electricity

Coal, gas and nuclear stations can bid for the availability payment, along with demand reduction suppliers and interconnectors. National Grid juggles what’s needed and when.

The capacity auction is expected to cost £2-3bn a year.

A government spokesman said securing capacity to back up intermittent forms of energy like solar and wind might cost about £7 per year per household at first, shrinking to £2 over the long term. He said power shortages resulting in price spikes would be much more expensive.

Generating margins were forecast to be tight for this winter, but there has been no problem, despite a long cold windless spell during which wind energy has produced around 1% of electricity demand. The highest daily percentage of wind power was over 20%.

Mr Holliday, who was chief executive of National Grid until July 2016, forecasts that all future talk of blackouts will be made redundant by a revolution in flexible electricity, with customers using power when it is cheapest.

One current weapon at National Grid’s disposal is a contract for flexible supply with firms which don’t manufacture continuously.

The firms get compensated if they are asked to stop consuming power for a while during, say, a windless spell.

Stories in the media have reported this as risky for UK Plc. But the EIUG disagrees.

Mr Nicholson told BBC News: “Clearly firms can benefit from being incentivised to turn down their energy use if it doesn’t affect their production. Firms needing continuous production don’t turn off their power.”

Our Comments

The results of the capacity sale referred to above will be released soon but all is not as plain sailing as it might appear from a first read of the article.

Firstly take on board that there is now a recognition by the powers that be that there is an underlying problem with power supply at times of peak demand and that there will be a significant increase in costs for the end user – us! There is little that can be done about increased costs when there is an emergency situation – note the government have brought the Capacity Market plan forward by 18months which makes it virtually impossible to implement smoothly.

In January 2016, the Energy Managers Association, a body with substantial knowledge of the business of producing electricity was predicting an Energy Gap of some 56% at peak by 2025, in part due to the closure of more power stations and in part due to increasing demand.  Such a gap cannot possibly be covered by the Capacity Market as we understand it.

Secondly there are still major issues which this article touches on but provides no detail. The concept of flexible electricity – asking heavy usage end users, like industry, to not produce at times of peak demand and pay them to comply is not new. Ofgem have allowed this business practice to occur for the last two years but as of this year refused to allow the electricity generators to pass on such extra costs to the consumer as it was unjustifiable on a long term basis.

Further, the Government ran the first Capacity Market auction about 6 months ago and awarded contracts to some old coal stations that were due to be decommissioned. These power stations would have been sitting there on standby but had to be ready to produce in short order. Under the Capacity contract if they failed to produce power when requested they would be fined! Within a month of the contracts being awarded the owners of these coal power stations stepped forward and accepted the fines so they could close down the stations which were hit with ever increasing carbon taxes. Coal power stations are never going to make any money, even when being paid 3 times the current generating price, when they have high carbon taxes and any renewable or gas fired generator can undercut them.

Also, the statement that the Capacity Auction is expected to cost between £2 – 3 billion a year is complete guesswork.  No one can predict the weather, nor indeed the cost of production.  It could be many times this, with obvious consequences to the consumer.

So let’s see where this renewed optimism leads us. If you get under the skin of the article above one senses the desperation that lurks when a serious cold snap comes along. This issue is not just for this year as our country’s domestic gas generation from the North Sea is in terminal decline and this puts our most reliable electricity generation capability under long term pressure.

If the world were perfect for the UK, then we would be delighted to see that the above article is correct.  However there is a great deal of information and data in the public domain which casts substantial doubt on this! For example, UK Power Networks have sent a flier to thousands of homes aimed at offering extra support to the elderly or disabled if there is a power cut.  They know they are coming!  Since Mr Holliday’s comments were made, N Power has announced a substantial rise in their price of electricity.  Julian Ambrose in the Telegraph has suggested that the cost of providing power in winter will cost an extra £1 billion.  Who will pay for it?  Either the consumer or the tax payer or a combination of both!  This is why we supply and install generators to those who want their own insurance against power failure.

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