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UK energy regulator rules old power plants can reopen if power shortages threaten

02 January 2014

Mothballed gas-fired power plants could be used as a last resort in the event of a power shortage, under new plans unveiled by UK energy regulator Ofgem. The National Grid will also be able to ask industry to cut back on energy use during peak times in winter.

In Ofgem’s 2013 Electricity Capacity Assessment, published in June, analysis showed that electricity margins could tighten in 2015-2016 to between around 2 and 5%, depending on the outlook for demand.

The regulator says it will therefor provide National Grid with the option of extra tools to help it balance the system against tighter electricity supplies from winter 2014/15.

Ofgem Chief Executive, Andrew Wright, said: “Our latest assessment on security of electricity supplies published this summer showed that electricity margins are set to tighten more quickly than previously expected in the middle of the decade. This is mainly because older coal power stations will close sooner.

“Britain has one of the most reliable power systems in the world, but with margins tightening there can be no room for industry complacency on security of supply. Therefore we have approved these new tools to act as an extra insurance policy that is available for National Grid to protect consumers’ power supplies.”

Ofgem’s decision gives National Grid the ability to agree contracts with power stations to provide extra reserve power to balance the system in peak demand periods. Mothballed gas-fired plant and other generators would compete for these contracts.*

National Grid will also be allowed to develop a new demand side product. It will be able to offer businesses a new opportunity to reduce their electricity use during times of high demand (between 4 and 8 pm on weekday evenings in the winter) in return for a payment. The amount they would receive would be determined through a tender run by National Grid next year.
Ofgem’s decision today means that National Grid can make preparations to be able to begin tendering for the services from Spring 2014, so that they could be delivered from winter 2014-2015 onwards.

National Grid’s revenue for these new tools will be regulated by Ofgem. Ofgem will only allow National Grid to pass on any costs provided they are incurred in an efficient and economic manner. National Grid would need to demonstrate this at every stage of the process, from deciding how much to procure, the procurement process itself, and decisions on if and when it uses the products. National Grid estimates that the impact of the services on consumer bills would be less than £1 per year for households. If National Grid does not need to procure these services, there would be no cost to consumers.

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