Britain could reach electricity capacity by 2015

A new report released by Ofgem, reveals that unless alternative electricity supplies are found to meet increasing demand, the UK could find itself facing blackouts by 2015.

Under the Energy Act (2011), Ofgem is obligated to provide the Secretary of State with a report assessing different electricity capacity margins (and the risk to security of supply associated with each alternative), for every year starting in 2012.

The ‘Electricity Capacity Assessment 2012’, the first of its kind, estimates ‘a set of plausible electricity capacity margins’ that could be delivered by the market over the next four years and the ‘associated risks’ to security of supply.

The report reveals that ‘de-rated capacity margins’ will decrease ‘significantly’ from the current ‘historically high’ levels and electricity customers will see disconnections ‘appreciably increase from near zero levels’.

Specifically, the report finds that spare generation capacity on the current system could fall from 14 per cent to four per cent by 2015/16 and will see Britain rely more heavily on imported gas, pushing electricity prices higher.

According to Ofgem, these issues will be a direct result of the ‘significant reduction’ in electricity supplies from coal and oil plants that are due to close under European environmental legislation, and inadequate alternative infrastructure to provide the electricity levels required.

‘As identified in our 2009 Project Discovery analysis, the impacts of replacing older coal and oil power stations under EU environmental legislation together with changes to the generation mix over the next decade pose new challenges to security of supply’, reads the report.

coal power

The EU's Large Combustion Plant Directive (LCPD) restricts the level of emissions combustion plants built after 1987 may legally produce. Plants built before this date are not legally obligated to restrict their emission levels, but are restricted to 20,000 'running hours' between 2007 and 2015, by which time all LCPD plants must close.

According to the report, even power stations that have ‘opted out’ of the LCPD are using up their running hours faster than expected and most LCPD ‘opted out’ plants will ‘come off the system well before the 2015 deadline’.

Ofgem’s Chief Executive, Alistair Buchanan, said: “The unprecedented challenges facing Britain’s energy industry, identified in Ofgem’s Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain. Ofgem is working with government on its plans to reform the electricity market to tackle these issues.

Alistair Buchanan“Ofgem is playing its part by helping Britain to attract nearly £30 billion of network investment thorough its RIIO [Revenue = Incentives + Innovation + Outputs] price controls… [and] is also seeking sweeping reforms to the retail market to ensure a simpler, clearer and fairer energy market for consumers.

“This is vital as if consumers are going to be expected to pay for this investment, it is only right that they see a complete change in the way suppliers treat them. Encouragingly we are increasingly seeing evidence that suppliers have got the message and we will be publishing our next reforms proposals shortly”, Buchanan added.

Responding to Ofgem's report, Charlotte Morton, Chief Executive of ADBA, said: “Faced with the prospect of spare generation capacity falling 10 per cent in three years and unprecedented increases in electricity prices, the government needs to invest strategically in alternative energy sources.

Charlotte Morton“AD can be scaled up fast and cheaply and with the right support could generate 40 TWh of biogas, equivalent to 10 per cent of the UK’s domestic gas demand, at the same time as boosting economic growth and creating 35,000 jobs. 

“The government’s plans for Electricity Market Reform (EMR) and the Energy Bill must address the issues of coherent support for financial incentives in line with the benefits of low carbon generation not just security and supply. It is important to ensure that future generation capacity not only meets our energy requirements but that the carbon footprint of electricity is reduced as well.”

Ed DaveyEdward Davey, Secretary of State for Energy and Climate Change, said: “I am grateful to Ofgem for providing to government their first annual Electricity Capacity Assessment. It provides a comprehensive analysis of the security outlook and government will consider carefully the implications. We will respond formally before the end of the year.

“Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives. That is why the government is reforming the electricity market to deliver secure, clean and affordable electricity.”

Davey has been under mounting pressure in recent weeks to provide the electricity industry with a clear power decarbonisation target by 2030 in the upcoming Energy Bill.