S
pring has only just sprung yet National Grid, the owners and operators of the pipelines and wires that gets electricity and gas around the UK area already looking forward to next winter.
Winter 2015/16 has always been seen as the sternest test of the frail network infrastructure that supports the UK energy market and National Grid has wasted no time in opening its second tender to secure emergency generation capacity.
The latest 1GW tender follows 0.7GW tendered in late 2014
National Grid’s director of market operations Cordi O’Hara welcomed the news saying:
“We already know that the margin between supply and demand next winter could tighten further”
As usual it isn’t only generating capacity upon which National Grid are focusing, they also are increasingly bringing into use demand-side balancing reserve (DSBR) contracts where high usage customers can cut demand at peak times to alleviate pressures on the system.
All of this comes at some cost however.
Even though it was ultimately not needed the Supply balancing reserve (SBR) contracts for additional generation capacity cost £30m last winter, whilst large businesses on the DSBR scheme were paid a further £2m – even though they didn’t need to act on their commitment at any point.
National Grid’s Project Leader for New Balancing Services Peter Bingham explained:
“They [the DSBR businesses] were there just in case we needed them, had some of these factors not gone in our favour.”
This coming winter however, the capacity constraint, the gap between demand and generation, will be even slimmer than 2014/15 with a margin of just 2% believed to be available – a level that can be wiped out in a single overnight cold snap – leading to blackouts.
O’Hara, explained:
“Although we did not need to use the additional reserve we secured for the winter just gone, contracting additional capacity was a sensible insurance policy to take out, given that margins had tightened.
“We want demand-side providers and power station operators to come forward and ensure a competitive tender. We’re particularly keen to see large energy users come forward to join this voluntary scheme.”
Whilst Bingham added:
“The return of generation as expected, good levels of generator reliability, consistent continental imports, high levels of renewable output and generally milder weather conditions meant we didn’t have to use the two products we procured”
But the market can’t afford to be complacent and even this expensive ‘insurance’ option is a necessary evil in the ever rising costs of networks weighing heavily on electricity invoices.
It might have been a mild winter over 2014/15 but that didn’t stop finances biting from the costs of keeping our creaking network afloat.