London — Britain faces tight electricity supplies this winter on rising demand and capacity constraints, National Grid said in a report on Thursday, though a top official said he was confident it will keep the lights on.
The annual winter outlook report comes amid record high energy prices in Britain which contributed to nine energy suppliers going bust last month, caused some industrial firms to curtail production and warnings over some food shortages this winter.
European wholesale gas and power prices have rocketed this year due to lower-than-usual gas stocks this summer, reduced supply from Russia, the onset of colder temperatures and infrastructure outages.
High UK wholesale gas prices have helped to lift wholesale power prices as gas plants account for around 40% of electricity generation in Britain.
However, in a separate winter gas outlook also published on Thursday, National Grid said Britain has enough gas supply capacity to meet demand, gas in storage and tools available to manage times of acute gas demand.
Britain’s National Grid is responsible for overseeing the country’s energy supply and ensuring supply and demand are evenly balanced. The Electricity System Operator (ESO) is a legally separate business within National Grid.
The ESO said its base case for de-rated margin, which is a measure of the amount of excess capacity expected above peak electricity demand, is currently 3.9 gigawatts (GW) for winter 2021/22, or 6.6 % of capacity, down from 4.8GW, or 8.3% last winter.
“We are confident that there will be enough capacity available to keep Britain’s lights on,” Fintan Slye, executive director of ESO, said in a statement with the Winter Outlook 2021/22 report.
TIGHT MARGINS
The latest forecast, however, is lower than a winter margin forecast of 4.3 GW made in July this year and also the lowest margin level since the winter of 2016/17.
Forward power prices in Britain are expected to be higher this winter than last year due to the surge in gas prices.
Any days of tight margins could see significant price spikes and would increase the cost of balancing the electricity system, the report said.
Since the ESO’s July forecast, a fire at the United Kingdom’s side of the France-Britain IFA1 electricity interconnector has cut available capacity through the link by half, or 1 GW, until March next year.
The other 1 GW capacity of the IFA1 link is currently offline due to planned maintenance and is scheduled to be back online by Oct. 23, with the returning capacity factored into National Grid’s forecasts.
At times of tight demand ESO sometimes issues electricity margin notices (EMNs) signalling to the market it would like more capacity to be made available.
“Margin notices are used as a normal operational tool to highlight when margins are looking tight ahead of real-time – they don’t indicate that demand will not be met,” the report said.
The ESO said it expects to issue a similar number of EMNs this winter as last year, when six were issued. In each instance last winter, the market reacted and the EMNs were later cancelled.
*Susanna Twidale & Nina Chestney; Editing: Emelia Sithole-Matarise – Reuters
