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Emergency electricity measures ‘never used once’ but still cost £180m

Tuesday, March 14, 2017 13:17
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UK taxpayers paid a high price to ensure the government didn’t get egg on its face over its agenda-driven electricity generation policies, as Utility Week reports.

The supplemental balancing reserve (SBR) cost a total of £180 million over the three years it was in operation but was “never once used”, a new report by the Energy and Climate Intelligence Unit has found. 

The think tank raised concerns that “fearmongering” about the “overblown” risk of blackouts led ministers to purchase an expensive insurance policy that was not needed. It has urged them not to spend “billions” more to bolster the UK’s capacity margin.

“The clear message from this report is that paying to boost spare capacity in Britain’s electricity system can be very expensive, and potentially unnecessary,” said Energy and Climate Intelligence Unit (ECIU) energy analyst Jonathan Marshall.

“The drop in the number of calls by the grid for extra power last winter also suggests that, in an era of smarter technology, balancing supply and demand is becoming easier and cheaper. This begs the question of whether calls to increase our capacity margins in the UK, for example by a new ‘dash for gas’, are sensible, given that doing so comes with a price tag in the billions of pounds.”

The SBR was introduced in 2013 as a stop gap measure to provide backup capacity until the introduction of the capacity market. Under the mechanism, mothballed power stations which may otherwise have closed entirely were paid to remain on standby outside of the wholesale energy market to ensure there were no blackouts.   

The report found that National Grid spent £23.5 million (£15.57/kW) on the SBR in the first year of its operation, £23.1 million (£12.95/kW) in the second year, and £122 million (£34.21/kW) in the third.

Not only was the mechanism “ultimately unused” but warnings to the wholesale market over potential capacity shortfalls also become “less frequent” during the period.

A notice of inadequate system margin (NISM) – now electricity margin notice (EMN) – was issued by National Grid on just three occasions over the last four years. Not a single EMN was issued during the recent winter.

The report said a decade ago they were common, but “now, they are not”. This was despite a “gradual decline” in the UK’s capacity margin in recent years, which fell from 16 per cent in 2011 to just 6.6 per cent in 2016. “The absence of problems relating to a declining capacity margin shows that a narrowing gap between supply and demand is not an issue,” the report said.

Continued here.


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