Will Britain really have blackouts and power rationing? Or not?
The risk of power blackouts could increase from one every 47 years now, to one every four years by the middle of this decade if government policies fail to bring down electricity demand, energy regulator Ofgem has warned.
The Times says ” Britain faces blackout” in a front page story. And according to the front page of today’s Daily Mail the National Grid has plans to “ration” electricity. But Ofgem says disruption to supplies is not ” imminent or likely“, and National Grid argues its proposals for coping with the problem have been misinterpreted by the media.
Tightening electricity supply
It’s not the first time Ofgem has issued a warning about tightening electricity supply margins. Old coal power stations are shutting down because of European Union regulations designed to limit pollution harmful to health.
With renewables and nuclear power yet to ramp up, the country is facing a short term supply squeeze. Yesterday’s report highlights what Ofgem calls a “faster than anticipated” tightening of electricity supply towards the middle of this decade.
The buffer zone of spare power plant that stands ready in case another part of the electricity system goes down is currently 14 per cent of total demand. But it could tighten to between two and five percent by the middle of the decade, according to Ofgem.
Ofgem models the number of hours per year where the nation’s electricity supply is expected to be lower than demand – which could lead to problems, but doesn’t necessarily mean blackouts, as there are other ways to deal with a mismatch.
Image - Screen Shot 2013-06-28 At 15.53.46 (note)
In Ofgem’s baseline ‘Reference Scenario’, the number of hours when demand outstrips supply increases from less than one hour per year now, to around three hours per year in 2015/16.
This might sound dramatic, but as Ofgem points out, it is well within the level of risk accepted by other European countries like France, Ireland and Belgium:
Image - Screen Shot 2013-06-28 At 15.53.09 (note)
It’s worth noting that there are some important assumptions in these projections. In the ‘Reference scenario’, for example, average electricity demand falls by 0.8 per cent each year, as a result of the economic downturn and the government’s energy efficiency measures.
If the government’s policies don’t work so well, and demand remains broadly flat over the next few years, then things don’t look so healthy. Under this higher demand scenario, Ofgem predicts nine hours per year in 2015/16 where electricity supply can’t keep up with demand – or, to put it another way:
“…the probability of a large shortfall requiring the controlled disconnection of customers increases from around 1 in 47 years now â?¦ to around 1 in 4 years if the demand reductions fail to materialise…”
Managing demand
To repeat what is an important point, demand falling below supply doesn’t necessarily mean that consumers suffer power cuts.
System operator the National Grid has issued a consultation suggesting how it can get round the problem. In its preferred option, businesses would be paid to not consume energy during certain periods – helping to balance demand.
The Daily Mail’s banner headline portrays this approach starkly:
Image - Screen Shot 2013-06-28 At 14.48.12 (note)
The Times says “Shops and factories will be paid to ration electricity…”.
But National Grid doesn’t agree with this interpretation because the scheme is voluntary. Businesses would be given the option to enter into a contract where they promise not to consume electricity when demand is unusually high. A spokesperson also argued that these occasions would be “a very rare occurrence” – suggesting it might mean a few hours once or twice a year.
So while you could describe the scheme as a form of rationing, you might equally call it flexibility, and crucially the scheme will be voluntary and aimed at commercial users, so perhaps you don’t need to panic just yet.
Managing supply
The second possible response to demand falling below supply is to fire up power plants that are currently mothballed.
National Grid says it would only take this option “as a last resort in lieu of taking emergency action to balance the system” because it’s more expensive.
A capacity market
In response to the report, the government has confirmed that from next year it will set up and run what is called a capacity market.
Generators participating in the market will bid to provide electricity. They will receive a steady payment for doing so, but in return they will be obliged to deliver electricity when demand is high, or face financial penalties.
But while the first market auctions will take place in 2014, the electricity paid for won’t be delivered until the winter of 2018/19, so this is a slightly longer-term solution.
Blackouts, or rationing?
Although the Daily Mail’s coverage invokes the spectre of “a return to Seventies-style power rationing”, the reality seems rather less sensational.
According to the projections in Ofgem’s report, the capacity squeeze should be relatively temporary, affecting the country for a few years before supply ramps up again.
Ofgem also says that the situation it highlights doesn’t mean customers will be disconnected or that there will be blackouts, if the solutions suggested by government and the National Grid are implemented.
But it also points out that any tightening of margins could effect consumers through an increase in wholesale prices – and the risk, however small, of any kind of power outage is so significant that the warnings are worth taking seriously.
So a closer read of the Ofgem report dispels some of the concerns captured in the headlines. But it’s worth sounding a note of caution. Even by the standards of UK energy politics, creating energy policy has been something of a fraught process recently. Ofgem’s warning seems to be that unless government gets it together to create and implement policy successfully, the country’s electricity supply could be in for a bumpy few years.