Tighening electricity supplies could spell blackouts for UK, warns regulator

Posted at October 9, 2012 » By : » Categories : News » Comments Off on Tighening electricity supplies could spell blackouts for UK, warns regulator

The UK energy regulator Ofgem has warned that tightening electricity supplies over the next few years could spell blackouts for the country.

The regulator’s forecast of electricity generation margins over the next four years show a fall from a 14% margin in 2012/13 to just 4% in 2015/16.

EU environmental legislation is forcing the closure of ageing and highly polluting coal-fired power stations, some earlier than expected, which brings with it a risk of a shortfall in supply in 2015/16.

Ofgem highlighted the combined difficulties of tougher environmental targets, the closure of existing power station and the global financial crisis in 2009 as having the potential to put the electricity supply at risk.

“The unprecedented challenges facing Britain’s energy industry, identified in Ofgem’s Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain,” warns chief executive Alistair Buchanan.

Further ahead, the report warns that Britain will face increasing exposure to fluctuating gas prices and supply as imports go up. Consumers are likely to face rising bills as well, the regulator cautions.

Leaving the currently electricity market unchanged to deal with these issues is not an options, says Ofgem. The regulator says that the government’s Energy Bill will be vital to reform the market and tackle the issues head on.

“Ofgem is also seeking sweeping reforms to the retail market to ensure a simpler, clearer and fairer energy market for consumers. This is vital as if consumers are going to be expected to pay for this investment, it is only right that they see a complete change in the way suppliers treat them,” adds Buchanan.

Energy Secretary Ed Davey has welcomed Ofgem’s analysis and says the government will consider the implications carefully before responding before the end of the year.

However, a spokesperson for the Department of Energy and Climate Change (DECC) said the lower capacity margins predicted for 2015/16 do not imply a significant risk.

“We’re never complacent about energy security but believe this is adequate,” said a statement. “But we would like to see slightly larger margins and this is why we’re acting to bring more investment forward.”

DECC points out that there are some 15 GW of consented gas plants for England and Wales, like the 880 MW gas-fired power plant in Manchester announced last week.

Commenting on Ofgem’s report, Tony Cocker, chief executive of E.ON UK commented:
“We have been saying for some time that we need to see clarity on the government’s electricity market reform proposals and this report from Ofgem clearly shows that the capacity market must be introduced at the earliest opportunity.”

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Related stories:
Investment in UK nuclear revival plan looking uncertain (3-Oct)
New gas-fired power station in Manchester could be one of many (1-Oct)
UK coal generation up 60% but renewables taking off (1-Oct)
Climate Change Committee condemns UK government’s ‘dash for gas’ (14-Sept)

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