Electricity bills set to rise by £30 a year and power rationed amid shortage fears, MPs warn
By Paul Homewood
h/t Philip Bratby
From the Telegraph:
Electricity bills could go up by £30 each year by 2020 and power "rationed" due to “mismanagement" of the UK’s electricity networks and the increasing cost of emergency supplies, MPs have warned.
The British Infrastructure Group, led by former Conservative minister Grant Shapps, warned lights could go out across the country next winter because there is not enough spare capacity in the system to cope with higher demand.
There is just 0.1 per cent spare electricity in the current system, a dangerously small amount of headroom in case of emergencies over the winter months, the report warned.
It cost the National Grid 800 times more than the standard price to buy additional power to cope with potential shortages in 2015. In total the company will spend £122.4 million on emergency power this winter and costs are expected to rise in 2016/17.
Electricity bills could increase Credit: Reuters
A failure to plan for the long term and Government demands to close coal-fired power stations to ease the impact on the environment have put the network under pressure, the MPs found.
As a result, National Grid is forced to pay a premium to keep power stations which do not operate most of the time in a state of readiness in case of shortages, costing millions of pounds in emergency payments.
The grid expects to switch to a new scheme for coping with extra demand in 2018/19, but this will cost £1.1 billion by 2020 forcing bills up by £30 a year, the report warned.
Hospitals and factories are also being asked to switch to back up diesel generators to ease pressure on the grid at peak times, leading to concerns about pollution.
Daniel Mahoney, head of economic research at the Centre for Policy Studies, said: “Mismanagement of energy policy – both from the European Union and the UK Government – has left the UK with desperately narrow capacity margins.”
“In her first major campaign speech, Theresa May made a welcome declaration that she wanted to see an energy policy that promotes the reliability of supply and lower costs for users. This report re-emphasises the need for this commitment to be delivered.”
The group of cross-party MPs also warned that customers could see their electricity rationed in order to cut usage across the country when supply is in demand.
It is not clear if families would be compensated for this loss of power.
A spokesperson for the Department for Business, Energy and Industrial Strategy said: "Keeping the lights on is non-negotiable for this government. We currently have a surplus margin of 6.6 per cent, which is even higher than last year."
The report concluded: "Currently, the British electricity network is going backwards. Capacity margins are so tight that National Grid’s emergency power deals have become the norm.
"Consumers, both domestic and business, having once reaped the benefits of tumbling prices after the 1990s market reforms, are now resigned to paying ever-higher electricity bills.
"Some households may even face the prospect of power being rationed and returning to a three day week. Some businesses already have. This is surely a failure of any nationally- directed power strategy. "
The headline £30 claim actually woefully understates the real figure, as it only takes account of the cost of standby capacity.
As we already know from the OBR figures, environmental levies, which will largely impact on electricity bills, will increase by £8.4bn between now and 2020/21.
But more interesting are the worries expressed by the MPs about the security of supply.