Ofgem report warns of power blackouts within two years

by Search Gate staff. Published Thu 27 Jun 2013 12:21
Ofgem gives stark warning about UK's power supply

Energy regulator Ofgem has warned that the risk of power shortages is likely to happen faster than previously expected.

In its second report into electricity capacity published today, the regulator warns that the risk to electricity supplies is now projected to increase from the current near-zero levels within the next two years.

Ofgem also highlights the uncertainty around supply and demand for electricity. National Grid's projections on power demand vary greatly depending on assumptions on economic activity and energy efficiency. There is also uncertainty over the timing and scale of plant closures and mothballing.

According to the today's report, electricity margins could tighten in 2015-2017 to between around 2 and 5 per cent depending on demand. This means that the probability of a supply disruption increases from 1 in 47 years now to around 1 in 12 years for 2015/16 or lower.

If the projected decline in demand does not materialise margins could fall to 2 per cent.

Ofgem, DECC and National Grid have been working together to explore options that would provide consumers with additional safeguards against the increased risk to mid-decade security of supply.

All three organisations agree that it is prudent to consider the case for additional tools to help National Grid balance the electricity network during the middle of this decade when capacity margins could be tight.

These measures would give National Grid the option to buy extra demand-side response and reserve generation to balance the electricity network. Preventive action taken now will help protect consumer supplies.

Andrew Wright, Ofgem's Chief Executive, said: "Ofgem's latest report on electricity security of supply highlights the need for reform to encourage investment in generation. This is why Ofgem welcomes DECC's commitment to introduce a capacity market that will provide a longer term solution to this problem at a time when Britain's energy industry is facing an unprecedented challenge to secure supplies.

"Ofgem's analysis indicates a faster than anticipated tightening of electricity margins toward the middle of this decade. Ofgem, together with DECC and National Grid, think it is prudent to consider giving National Grid additional tools now to procure electricity supplies to protect consumers as the margin between available supply and demand tightens in the mid-decade."

Ofgem's Project Discovery report in 2009, which fed into DECC's review of the electricity market, first identified the issue of tightening capacity margins in the mid-decade.

It found that Britain's energy industry faces an unprecedented challenge to secure supplies to consumers due to the global financial crisis, tough environmental targets, increasing gas import dependency and the closure of ageing power stations.

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