Former head of Ofgem warns of biggest crisis for 30 years due to lack of
generating capacity
By Alistair Osborne
Britain faces its biggest energy crisis for more than 30 years, with a
serious risk of blackouts in the run up to the next election, the
industry’s former regulator has said.
Alistair Buchanan, who stepped down in June after 10 years as chief
executive of Ofgem, said the closure of ageing power plants, uncertainties
over wind power, dwindling gas stocks and the failure to build new
generating capacity had left Britain extremely vulnerable to power cuts.
“I spent 10 years at Ofgem and was a power analyst for 20 years before that
and I haven’t seen anything like this in my lifetime,” said Mr Buchanan,
who has just taken up a new role as chairman of KPMG’s power and utilities
practice.
National Grid warned this week that the safety margin for UK power supply
this winter in an “average cold spell” had dwindled to 5pc – down from
around 17pc two years ago.
But Mr Buchanan said that, while National Grid may succeed in keeping the
lights on this winter, the “tight supply” situation was only likely to worsen.
He pointed out that RWE npower had now decided to shut down its 800MW power
plant on the Thames after the Government refused to back plans to convert
it to biomass, while an even bigger station – GDF Suez’s 1800MW facility on
Teeside – was being taken out of service.
These additional closures, on top of shutdowns of ageing coal-fired plants,
have reduced UK generating capacity by more than 7GW in the past 12 months,
Mr Buchanan calculated. Britain requires about 60GW of power on a cold
winter’s day.
Meantime, the southern end of Scottish & Southern Energy’s 220km power line
transmitting wind power from Beauly, near Inverness, to Denny, Stirling,
will not complete until 2016, further straining the network, Mr Buchanan said.
Failure to build new gas-fired plants and a historically low level of gas
in storage, has also left the UK vulnerable to shocks – a situation
exacerbated by other EU states playing by different market rules in times
of short supply, citing public supply obligations and refusing to pipe gas
to Britain.
Mr Buchanan said shortfalls could be made up by shipments of liquefied
natural gas but, as a mini-crisis last Easter showed, ships can arrive
late. Britain is also left competing for supply with the likes of Japan and
South Korea, which have traditionally paid a higher price.
Mr Buchanan said: “I haven’t seen dynamics like this in Britain before. It
doesn’t mean National Grid doesn’t have the toolbox to get us through this
winter but things are only going to get worse.”
He said National Grid could opt for small voltage reductions or, in a
crisis, pay factories and large users to cut demand. But next year, around
4GW more coal-fired capacity was going to come out of the system with the
closures of the Ferrybridge stations in Yorkshire and Ironbridge plants in
Shropshire.
“What is National Grid going to do next winter when another 4GW will have
been closed, especially with almost no-one building new plants,” Mr
Buchanan said.
While a new Carrington combined cycle gas turbine plant in Manchester could
be opened in 2017, there are fears in the industry that the threat by
Labour leader Ed Miliband to freeze electricity prices for 20 months will
deter investment across Britain.
“In the past we have had moments where supply did get tight,” Mr Buchanan
said. “The difference today is that we risk not moments but extended
periods of short supply.”
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