Monday 26 October 2015

Guest Blog: npower’s Wayne Mitchell on Winter supply margins

How real is the threat of ‘blackout Britain’?

It’s that time of year when the media love to report on the prospect of the UK being plunged into darkness, as our energy supply struggles to cope with winter demand.

On Friday, even the Financial Times reported an urgent ‘top-level’ meeting being called at Downing Street to discuss the UK’s growing energy supply crunch.

Yet earlier last week, a report commissioned by the Energy and Climate Intelligence Unit (ECIU) found that “headlines warning that the ‘lights will go out’… have not reflected reality”.

500 warnings – only one example

Despite almost 500 blackout warnings appearing in British newspapers over the past decade, the ECIU report cited only one known example of a UK power cut related to problems with generation.

Of course, whether realistic or not, blackout coverage concerns consumers. And as more power stations start to come to the end of their lifespan, how real is the threat for this and forthcoming winters?

I’m a great believer in going to the source for the information. So handily, National Grid also published its Winter Outlook report last week.

Margins tight but manageable

According to National Grid’s Director Cordi O’Hara, “electricity margins will continue to be tight but manageable throughout the winter period” with a capacity margin of 5.1%.

That’s one per cent more than the same time last year, and I don’t recall us having any blackouts then either.

Looking at the breakdown of the 70GW-plus of generation capacity that National Grid is estimating will be available:

Gas is set to provide 26.9GW
Coal 17.8GW
Wind 11.9GW
Nuclear 9GW
Interconnectors 3.8GW
Pumped storage 2.7GW
Balancing reserve 2.4GW
Biomass 1.4GW
Hydro 1.1GW

Balancing reserve in the line-up

What’s interesting, comparing these figures to last year, is the appearance of 2.4GW of balancing reserve in the official capacity line-up.

This comprises two new schemes introduced by National Grid last year – Supplemental Balancing Reserve (SBR), which invites power stations that are due to be mothballed to remain on standby, and Demand Side Balancing Reserve (DSBR), which asks large energy users to reduce demand at peak times. These schemes secured 1.1GW of capacity for winter 2014/15.

This year, that figure has more than doubled. But the expected leap in energy user participation hasn’t materialised. In fact, it’s dropped considerably. Compared to last year’s 319MW of DSBR capacity, only 130MW has been secured this year.

DSR benefits set to spread

Of course, reducing demand is far better for the environment than keeping power stations on standby in case they’re needed. But DSBR is still a new mechanism, so as more consumers wake up to the benefits of demand-side response, it’s likely to grow.

Many businesses already load manage during winter Triad periods to reduce their annual network transmission costs – which can be as much as £46,237 per MW. (See last week’s blog for more on this, plus news of our Triad Warning Service and free Triad Costs Calculator.)

Increased energy flow from the Continent

The other interesting difference in this winter’s plans is that National Grid estimates we’ll import 1.8GW of energy from the Continent – and export just 0.75GW to Ireland – leaving a net import figure of 1.1GW.

Last year, that figure was zero (0.75GW imported versus 0.75GW exported), so that represents a big jump.

Balancing supply with interconnectors is likely to become more widespread as our level of renewable generation grows. But National Grid’s increased estimate for this winter is based on ongoing lower energy prices on the Continent, so making it more attractive to import power in to the UK.

Margins tighter for 2016/17

Certainly, I would expect to see this import figure jump again for winter 2016/17, when margins are expected to be tighter due to more coal-fired power stations closing. But we’ll also probably see an increase in capacity from balancing reserve too – and maybe even some new schemes, so watch this space.

If you’re interested in the real stories behind the headlines, I suggest you visit us at Energy Live on 5 November in London. My colleagues will be presenting a series of seminars on hot topics of interest to business consumers – from a review of the impact of EMR policies to why taking a solutions approach is better for reducing energy bills.