Thursday, October 02, 2008

Another bit of light relief

Over the winter, as we contemplate the wreckage of our economy and wonder where the money is going to come from to support our daily needs, we can at least take comfort in an imaginative EU initiative to save on electricity bills – power cuts.

According to The Times, that prospect has moved a little bit closer, with the report that wholesale electricity prices surged higher yesterday "amid mounting fears that the UK could face a supply shortfall next month."

The forward price of electricity for November, we are told, hit highs of £133 per megawatt hour, up more than £10 since Friday, when the same contract was trading at about £122.75.

The price of power has risen sharply since National Grid published figures last week, predicting an unusually thin margin between electricity supply and demand.

Now, we are told, for the week starting 10 November, the National Grid is warning that the margin of spare capacity could be as slim as 0.8 gigawatts - the equivalent of one mid-sized coal-fired power station or the electricity consumed by a city the size of Nottingham.

The Times then cites Andrew Horstead, of the energy consultancy Utilyx, saying: "The market is very close to its safety limit … In an average week in March, the margin of spare capacity is more than 12 times higher - about 10 GW - rising to more than 16 GW in July or August."

As you might expect, the National Grid is denying any risk of domestic consumers facing blackouts next month, asserting that there is "a built-in cushion of capacity below the stated safety margin."

However, this organisation has a history of making reassuring noises even when the system goes belly-up.

Mr Horstead, on the other hand, is less reassuring. He reminds us that the unexpected loss of a plant because of a technical glitch (as happened in May when two major plants dropped out unexpectedly for precisely that reason) "could expose industrial customers to the threat of temporary power cuts". We will be very lucky if the disruption is confined to industry.

Peter Atherton, a Citigroup utilities analyst, is also cited. He says that the squeeze next month had arisen because a large number of ageing UK power stations were out of service for maintenance - a growing trend in the industry. Three older nuclear plants operated by British Energy at Hartlepool, Dungeness, in Kent, and Heysham, in Lancashire, are undergoing repairs and are not scheduled to return to full service until the end of the year.

Then we come to the punch line. "European rules restricting the use of some of Britain's biggest coal-fired power stations," says The Times, "are an additional factor."

But no! They are not an additional factor. They are the factor. We are talking about the Large Combustion Plants Directive here, which is already restricting the output of seven major plants. By 2015, they will close because it is too expensive to meet the requirements of the directive, knocking out a vital 12 GW of generating capacity.

But in the here and now, the directive limits the output of each plant to 2,000 hours a year (out of a theoretical 8760 hours) effectively taking out three-quarters of this capacity.

This, admits The Times has "increased instability in the network by reducing the margin of spare capacity and the ability of the National Grid to respond rapidly in times of crisis."

Of course, we might just get away with it but, if we do, it will be no thanks to the EU. There again, the Met Office is forecasting a mild winter, which probably means we'll see snow on the ground by Christmas. However, studying the household bills by candle light is soooo romantic.

Thank heavens we are members of the European Union.