The last few weeks have thrown a spotlight back onto the issue of energy security. The Beast from the East brought with it a spike in gas prices and heightened tensions with Russia have renewed concerns around the geopolitics of energy. The electricity system has been less affected by the recent cold weather – helped by healthy wind power output – but there have been lurking concerns as to the impact of Brexit. And, earlier this week, energy minister Claire Perry announced a review of the UK mechanism for securing electricity supplies, the Capacity Market.
So is there real cause for concern? Is energy policy up to the job of keeping lights on and gas burners burning?
The first thing to note is that this isn’t something managed on a wing and a prayer. Armies of analysts are employed tracking the energy market and predicting future scenarios.
Short-term price spikes are also not entirely a bad thing. The gas situation that arose on 1 March was in some ways the system proving itself. National Grid warned, as planned in these situations, that due to outages in various parts of the system, demand was expected to exceed supply. As a result, prices rose, drawing in more gas to the system. In fact, peak demand was still less than the maximum predicted over the winter period by National Grid back last June and 80% less than a worse case, one-in-twenty winter, scenario. No one had cuts enforced on them and only large consumers that buy gas on a day ahead basis would’ve felt the price rise.
Russia remains only a very minor part of the UK’s direct supply. If it cuts indirect supplies via Europe, it won’t just be our problem.
We could replace the much lamented Rough long-term storage. However it’s hard to imagine how that would be done without increasing overall costs for billpayers. Instead we seem to be moving towards a more diverse set of supplies including North Sea production, shipped LNG, interconnection to Europe and medium-term storage, and a reliance on shorter term responses.
That’s not to say there isn’t a reason to keep a close eye out. Although National Grid predicts that even a one-in-twenty winter can be comfortably accommodated, parallel outages in several sources are not impossible. The situation earlier this month could also have been worse if there had been no wind to produce electricity and gas was needed instead.
The challenge could be greater still once the majority of coal-powered electricity generation has gone off the grid to meet the government’s mandated 2025 phase out and older nuclear power plants start being retired at greater rates.
The electricity market is more challenging in the sense that demand has to be balanced with supply in real time. The acceptable hiatus in the system over each winter is considered to be three hours. That’s three hours in which non-market measures such as voltage reductions and requests to ramp up generation and finally some voluntary interruptions to supply, are applied. In reality the average interruption to market mechanisms since 2005 has been one hour a year and the projection in advance of this winter was 40 seconds.
As mentioned above, there are potential complicated ahead. Grid connections to other countries, battery storage and demand side response can all help but might not be enough. That’s where the Capacity Market comes it. It’s early days but a review – albeit announced for other reasons – should provide a chance to check it’s up to the job.