National Grid ESO highlights impact of two nuclear plants closing, while Centrica considers retaining its stake in the UK’s nuclear fleet
By Rachel Millard 22 July 2021 • 4:52pm
Britain must prepare for low energy supplies this winter as two nuclear plants shut down and workers return to the office, the business behind the power network has warned.
Low wind speeds and surging demand in Europe may also squeeze the amount of electricity available as the months get colder, according to National Grid Electricity System Operator (ESO).
The Hunterston B and Dungeness B nuclear stations are both due to shut within months, taking away a stable energy source at a time when unpredictable wind and solar generation is an increasingly part of the country’s power mix.
There is also uncertainty over how much energy will come from remaining coal-fired power stations as they start to shut down.
National Grid ESO said: “While we remain confident there is sufficient supply to meet peak demand, we should prepare for some tight periods during the winter. We have a well-functioning market that responds to market signals and the ESO may need to use its tools to manage these periods.”
The power system is getting less predictable as it moves from relying on large, fossil-fuelled plants to more wind and solar power stations, as well as cables linking to the continent which can be used to import and export power.
Meanwhile, French company EDF announced last month that it would immediately shit down the Dungeness nuclear plant in Kent following a string of technical problems. It is also closing the Hunterston site in Scotland because of cracking in its graphite reactor core.
National Grid ESO has to constantly balance supply and demand. If a short-term crunch is looming, it alerts the market – effectively telling generators they will get a good price if they ramp up supply.
The ESO issued three such notices last year, the first since 2016. The wholesale price briefly hit £1,000 per megawatt hour in response to one notice in January.
The company is required to maintain a certain level of buffer supplies above expected demand. In modelling published on Thursday, ESO said it expected to meet this threshold throughout the winter, although there are risks if a string of problems came at once.
National Grid ESO said it was publishing the modelling after supplies were tighter than usual last winter. “We believe this will help to inform the electricity industry and support preparations for the winter ahead.”
Separately, the owner of British Gas is considering keeping its stake in the UK’s ageing fleet of nuclear power stations, insisting the move is driven by a need for low carbon power rather than an inability to find a buyer.
The chief executive of Centrica, Chris O’Shea, said he believed the portfolio “strategically fits very well with the future direction” of the company despite most stations being scheduled to close within the decade.
The FTSE 250 company revealed its thinking as it reported profits of £907m for the six months to June 30, up from a loss of £462m last year, helped by rising energy prices. The sale of its US business Direct Energy for $3.6bn (£2.3bn) has helped slash debts from £3bn to £93m.
The number of British Gas residential customers continues to fall, however, down 2pc or 114,000 to 9m, which the company blamed on a “fiercely competitive” market driven by price caps and cut-price rival offers.
Mr O’Shea took over last year following a 70pc slide in the share price under former boss Iain Conn. He has been trying to simplify the company with the sale of Direct Energy and re-writing workers’ contracts, triggering a lengthy battle with the GMB union and strikes.
“Although there is still a lot to achieve, our turnaround remains on track, our balance sheet has been significantly strengthened and the recent changes in colleague terms and conditions will enable us to better serve the needs of our customers,” he said on Thursday.
Shares fell 2.8pc to 49.3p.
Centrica bought the interest in the EDF-owned power stations in 2009 but has been trying to sell them for about three years as part of an effort to focus on its operations supplying domestic customers.
In February it paused the sale following “operational issues” such as graphite cracking and pipe corrosion at some of the sites and booked a £525m charge. The division made a half-year loss of £38m – wider than the £16m loss for the same period last year.
However, on Thursday Centrica said it was “reconsidering whether nuclear can play a role for Centrica in the future” given the national push on low carbon power.
Mr O’Shea added: “We are on a path as a country to net zero carbon emissions. Our share in our nuclear power business in the UK gives us a lot of zero carbon electricity – therefore strategically it fits very well with the future direction of Centrica, so we are very open to considering keeping this in our portfolio. Our customers want zero carbon electricity and that’s what nuclear provides, so we are very happy to keep that.”
The move comes as EDF is in negotiations with the Government over building a new nuclear power station, Sizewell C, to help replace the current fleet on top of Hinkley Point C. It will need external investment to fund the £20bn plant.
Centrica has also failed to find a buyer for Spirit Energy, its North Sea oil and gas division, but was continuing to seek one.
The GMB union announced this week that it had reached a deal with Centrica on new contract terms, and workers who were dismissed for failing to sign up to the contracts on offer before the deal was announced could re-apply for their jobs.
Centrica’s results come as several industries struggle to run their operations due a surge in workers being forced to self-isolate after being “pinged” by the NHS track and trace app.