Consumers Face Higher Energy Bills As Risk Of Blackouts Triple

By Paul Homewood

 

http://www.telegraph.co.uk/finance/newsbysector/energy/10145803/Risk-of-UK-blackouts-has-tripled-in-a-year-Ofgem-warns.html

 

As I reported on Tuesday, OFGEM have warned of higher bills and the increased risk of blackouts in the next few years, with the margin of spare capacity effectively disappearing. From the Telegraph:-

 

 

The risk of future blackouts in Britain has tripled in the last year, the energy regulator has warned, with consumers facing higher bills as spare power capacity could fall below 2pc.

Ministers responded by unveiling plans for factories and large businesses to be paid to switch off their power during winter evenings to prevent households’ lights going out.

Energy secretary Ed Davey admitted: "Without timely action there would be risks to security of supply."

Ofgem said that the risk of blackouts in 2015-16 had tripled from the one-in-12 it estimated in October to just one-in-four, if Britain’s energy demand remains at current levels.

The spare capacity margin – the buffer between the electricity Britain’s power plants can produce and expected demand – could fall below 2pc, down from a 4pc estimate in October, as more power plants have closed.

"Our assessment suggests that the risks to electricity security of supply over the next six winters have increased since our last report in October 2012," the regulator said. "Small reductions in margins from current levels would result in a significant increase in the risks to security of supply."

Consumers were likely to face higher bills as a result. "Any tightening in margins could impact customers through an increase in wholesale prices," Ofgem warned.

Mr Davey admitted he had no idea how much bills would rise as a result of the tightening margins and the measures to prevent blackouts.

"If we didn’t do anything, if we allowed this supply crunch to happen, we would see spikes in power prices and that would be very damaging for the consumer. This intervention is meant to keep the lights on, which it will, but it’s also meant to protect consumers from those price spikes," he said.

"If we can prevent power prices peaking it will be a very good deal for the consumer. There may end up being a net cost, there may end up being a saving – it is very difficult to model.

"We believe this is the right thing – consumers do value energy security, they do want their lights on. It’s something that all our evidence shows that they are prepared to pay for."

The supply crunch is the result of Britain forcing old coal and oil plants to switch off in favour of new green wind farms and nuclear plants – but the new plants have not been built in time.

Over the past year the situation has deteriorated as power companies have announced that they will mothball more gas-fired power plants because they are currently not profitable to keep open.

Ofgem says that no new gas-fired power plants are expected until 2016 and it expects just 1GW – the equivalent of one gas-fired power station – to start generating before the end of the decade.

If Britain substantially reduced its energy demand, in line with new National Grid forecasts, then the risk of blackouts could remain close to Ofgem’s previous estimates at around one-in-12.

But Ofgem cast doubt on those forecasts, saying there was "uncertainty over projected reductions in demand".

National Grid’s revised estimates would require big improvements in energy efficiency through programmes such as the Green Deal, which ministers admitted today had seen just four households sign up.

One industry source described National Grid’s assumptions of energy efficiency improvements as "heroic".

Ofgem said: "The probability of a large shortfall requiring the controlled disconnection of customers increases from around 1 in 47 years now to 1 in 12 years in 2015/16. This increases significantly to around 1 in 4 years if the demand reductions [in National Grid’s revised forecast] fail to materialise."

It added: "Uncertainty around policy and future prices continues to limit investment in conventional generation and no new plant is expected before 2016."

In an attempt to prevent blackouts, ministers and Ofgem are consulting on handing National Grid new powers to pay factories to switch off and pay mothballed power plants to come back online.

Mr Davey also unveiled further details of subsidies for new wind farms and of a promised auction process to pay gas-fired power plants to be available when needed, in an attempt to try to encourage new power plants.

He denied there had been a "hiatus in investment over a long period", insisting it had only been over recent months that investment had stalled.

National Grid said one of the new proposals involved "seeking large consumers to reduce electricity use during times of high demand [between 4pm and 8pm on weekday evenings in the winter] in return for a payment".

Manufacturing group EEF said it could cost big industrial users millions of pounds to switch off and that for the largest energy consumers the process would take several days.

The other National Grid proposal would see the company "contracting with generators that would otherwise be closed or mothballed" to keep them available as back-up reserves.

 

People like Christopher Booker have been warning about this for years, and have been brushed aside. Now we are seeing the early results of the suicidal energy policies enacted in recent years.

And be under no illusion. This is just the start. If the government sticks to its CO2 targets, matters will become much, much worse.

You have been warned!!!