National Grid escapes use of UK’s priciest winter power

National Grid escaped having to resort to use of the UK’s most expensive power plant last winter, despite the market experiencing some of the tightest supply margins in the past seven years, National Grid has told the energy secretary.

The operator’s executive director John Pettigrew wrote to Ed Davey last week to formally review the steps National Grid took to maintain the UK’s supply. He said the margins faced by the market were “tighter, but secure”, meaning the operator did not need to use the priciest power available in the market, or its supplemental balancing reserve (SBR).

Power plants were kept in reserve to ramp up in case the market was unable to bring forward the output needed. But National Grid said even at the tightest margins the system was able to cope without resorting to the market’s least economic option or its emergency measures.

“Despite the milder weather, supply margins were such that the final unit offered in the electricity market for reserve was put on stand-by on four occasions,” Pettigrew said.

The final unit, or plant deemed most expensive, varies according to which are made available to National Grid by generators on a given day, and the operator is not able to name the plants specifically because of the commercially sensitive nature of the market.

But they are typically the older, least efficient of the UK’s fleet, UK power market participants told Utility Week. The Littlebrook oil-fired power plant was frequently one of the generation fleet’s more expensive options before its closure, but one of the units at the Dinorwig hydro plant is also usually offered to the market at a high price.

The most expensive option might have been used on 21 January this year when temperatures at the time of peak demand were forecast at just 3.1 degrees and wind power was low at just 500MW. At the same time the UK had 2GW of capacity offline in planned outages and 5GW off the system due to breakdowns, while power imports were hit by a 500MW interconnector outage.

The plant was put on standby, National Grid said, but ultimately wasn’t used because demand fell 1GW short of predictions as large energy users opted to manage their demand to avoid costly triad payments which are levelled against users at the three highest demand periods of each winter season.

Even if the demand had not reduced National Grid could have opted for the last plant left on the market and its reserve bench of supplemental balancing reserve (SBR) plants, Pettigrew said.

National Grid paid the SBR power stations more than £30 million to be on standby this winter through its ‘new balancing measures’, with the vast majority of payouts made to fossil fuel generators whose capacity was never used.

The so-called ‘capability fees’ for the power plants owned by SSE, Scottish Power and RWE totalled £23.5 million and were paid to ensure that the plant remain on standby to be ramped up by National Grid in the event of a supply emergency.

In addition, the plants were paid £6 million in total to perform monthly reliability tests over the winter, as part of their supplemental balancing reserve (SBR) contracts, to make sure they would be able to generate as needed.