Weekend press round-up: ESO asks standby coal plants to fire up

In our latest weekend press round-up National Grid Electricity System Operator has instructed two emergency-use coal generators to start warming up as the network faces its first big test of the energy crisis, while UK power prices have hit record levels as an icy cold snap and a fall in supplies of electricity generated by wind power have combined to push up wholesale costs.

National Grid asks standby coal plants to fire up as cold grips UK

The UK electricity grid operator has instructed two emergency-use coal generators to start warming up as the network faces its first big test of the energy crisis, with demand across the country soaring as temperatures dip below zero.

The National Grid Electricity System Operator said on Monday morning that it had asked the “contingency” plants to prepare for operation “to give the public confidence” in energy supplies, adding that people should continue to “use energy as normal”.

The two Drax coal-fired generation units, which the government requested to be on standby this winter, may not be needed to supply power to the grid as soon as Monday, the operator said, but “they will be available to the ESO if required”.

It is the first time any of the standby coal units have been asked to warm up since the Department for Business, Energy and Industrial Strategy this summer asked to delay their closure until after winter to help reinforce the grid’s resilience.

The UK is normally a big importer of electricity from France, but maintenance issues with the French nuclear sector have hit supplies this year, though plants are slowly returning to service. Those cuts have compounded an energy crisis triggered by Russia’s reduction of gas supplies to Europe in retaliation for western support of Ukraine.

The standby coal units are operating under so-called winter contingency contracts, so they cannot be bid on in the open market but can be asked to come online by the grid operator to relieve tight supplies.

The UK grid operator has not triggered additional steps to balance supplies with demand, such as asking other generators to signal if they have additional capacity. That suggests warming up the coal-fired standby units is a precautionary measure rather than a sign of an imminent risk of blackouts.

The plants could contribute to sending exports to France, where analysts expect energy supplies to also be tight on Monday. National Grid ESO said it would help supply neighbouring grids when possible this winter.

The two units are operated by Drax in North Yorkshire, home to the country’s largest power station. The company has converted much of the site to run on biomass and was due to shut its coal units this autumn before the government’s intervention.

The two coal-fired units are each capable of generating about 570 megawatts each, adding more than 1.1 gigawatts to the grid if utilised.

A notice from the ESO said the plants would be ready for dispatch for the grid if called upon from about lunchtime.

Financial Times

UK power prices hit record high amid cold snap and lack of wind power

UK power prices have hit record levels as an icy cold snap and a fall in supplies of electricity generated by wind power have combined to push up wholesale costs.

The day-ahead price for power for delivery on Monday reached a record £675 a megawatt-hour on the Epex Spot SE exchange. The price for power at 5-6pm, typically around the time of peak power demand each day, passed an all-time high of £2,586 a megawatt-hour.

Prices are surging as the weather forces Britons to increase their heating use, pushing up demand for energy, despite high bills.

Snow and ice have caused disruption as the cold weather looks set to continue into this week, with snow forecast for parts of east and south-east England, as well as Scotland.

The cold snap, which is expected to last for at least a week, comes as wind speeds reduced sharply, hitting power suppliers.

Live data from the National Grid’s Electricity System Operator showed that wind power was providing just 3% of Great Britain’s electricity generation on Sunday. Gas-fired power stations provided 59%, while nuclear power and electricity imports both accounted for about 15%.

The increase in power prices come amid jitters over energy supplies this winter. National Grid warned in October that a combination of factors such as a cold spell and a shortage of gas in Europe related to the war in Ukraine could lead to power cuts in the UK.

The anticipated surge in power demand on Monday evening will coincide with a planned use of the National Grid’s demand flexibility service between 5pm and 7pm. The scheme pays businesses and households to cut their consumption at peak times to reduce the strain on the grid.

The Guardian

Bulb sale to Octopus risks breaching EU state aid rules, Centrica warns

The government’s sale of nationalised energy supplier Bulb may be in breach of EU state aid rules in Northern Ireland, Centrica has said, risking one of the UK’s first significant showdowns with the bloc since Brexit.

Companies challenging the sale to Octopus Energy have focused on the government’s alleged provision of state funds to smooth the sales process, which they warned may lead to a test of the so-called Northern Ireland protocol, given Bulb’s operations in the region.

The sale of Bulb, which received the biggest state bailout since the financial crisis, has become increasingly contentious as rival energy suppliers led by British Gas owner Centrica have moved to block the sale in court.

The companies claim the deal, which would create one of the largest retail energy suppliers in the UK, could distort competition in the UK energy market and cost taxpayers and households more than if a transparent sales process had been followed.

In court documents filed last week Centrica cited “serious public interest issues” regarding the deal including “the UK’s compliance with its international obligations under the UK/EU Trade and Cooperation Agreement” and the “Ireland/Northern Ireland protocol”.

“This is one of the most politically sensitive subsidy cases to have emerged since Brexit and the Northern Ireland aspect of the claim compounds that,” said Ben Rayment, competition expert at Monckton Chambers. “It’s interesting to see the Northern Ireland/EU dimension being used tactically to exert more pressure.”

The question of whether an unlawful subsidy has been granted under post-Brexit UK legislation will be decided in the domestic courts but if EU state aid rules also applied, the bloc’s approval would be needed, said Rayment.

While the EU has not intervened in the case, legal experts and academics said the chance of the European Commission doing so was growing.

“In a time where national measures to support energy companies are causing so many concerns in the EU, this is going to be a case closely monitored in Brussels as well,” said Andrea Biondi, director of the Centre of European Law at King’s College London.

In its post-Brexit deal with the EU, the UK agreed to introduce domestic rules that regulate subsidies that have, or could have, an effect on trade with the EU.

Under the separate Northern Ireland protocol to the Withdrawal Agreement, EU state aid rules could also continue to apply if a UK subsidy affects trade in goods or wholesale electricity between Northern Ireland and the continental bloc.

Centrica has alleged in court documents that the EU regime applies in addition to the domestic rules as Octopus owns a company that manufactures heat pumps in Northern Ireland, and the subsidy to Octopus could affect rival suppliers that trade with the EU.

The government has not revealed the terms of the deal but the three companies challenging the sale believe Octopus may be receiving about £1bn from taxpayers to cover the cost of buying power for Bulb’s 1.5mn customers. The transfer of Bulb’s customers is due on December 20, but a hearing to review the process is expected in February.

Financial Times

UK oil and gas licensing faces legal challenge from environment groups

Environmental group Greenpeace has started legal proceedings against the UK government in a bid to the stop the award of more than 100 new licences to explore for oil and gas in the North Sea.

The campaign group said it had applied to the High Court for a judicial review of the decision in October to approve a new oil and gas licensing round, the first for nearly three years.

Two further climate groups, Friends of the Earth and Uplift, have written to the business secretary Grant Shapps warning him that they believe the approval of the licensing process was “unlawful”, and calling for him to reverse the decision, taken by his predecessor Jacob Rees-Mogg.

The UK, like many other countries, is looking to increase its energy independence in the wake of Russia’s full-scale invasion of Ukraine and Moscow’s weaponisation of its vast gas reserves. It argued as part of that strategy it would need to exploit the “full potential of our North Sea assets” at the time it approved the latest licensing round.

The British government has faced strong criticism over its commitment to its 2050 net zero emissions target in the wake of that decision, which intensified last week when it approved the first coal mine in Britain for 30 years.

Greenpeace said on Monday that the issue of new oil and gas licences would “torpedo any hopes of keeping global temperature rises to 1.5C” — the main goal of the 2015 Paris climate accord.

“These licences are a complete disaster,” said Philip Evans, oil and gas campaigner for Greenpeace UK, alleging that the government had “failed in its legal duty to properly assess their climate impact”.

Licensing rounds are designed to enable oil and gas companies to explore for hydrocarbons but this latest process also includes permits for gas discoveries that are yet to be exploited and could be brought into production in as little as 12 to 18 months from the time of award.

The North Sea Transition Authority, the regulator in charge of oil and gas, is intending to fast-track certain gas licences and expects to issue the first permits from the second quarter of next year.

The government said in a statement: “While we cannot comment on ongoing legal proceedings, it’s vital we continue to maintain our energy security, by boosting our homegrown energy supply and strengthening our domestic resilience.”

Financial Times

Ofgem ‘extremely concerned’ as 194 vulnerable people left without gas as temperatures dip

Energy regulator Ofgem has said it is “extremely concerned” after almost 200 vulnerable people have been left without gas amid the freezing cold temperatures.

Residents in the Stannington area of Sheffield have been without gas heating and cooking appliances for more than a week after a water main burst last Friday, forcing huge amounts of water into the gas network.

Despite temperatures dipping below zero, on Saturday morning 340 people had been without gas supply for a week, in what Ofgem called an “extremely difficult situation”.

The energy regulator said: “We are in constant and close contact with Cadent, Northern Powergrid and Yorkshire Water to ensure that all consumers’ needs are being met, particularly those who may be vulnerable.

“While we are grateful to engineers from Cadent and all of the other organisations who are working around the clock to restore supplies as soon as possible, we are extremely concerned that 194 consumers on the Priority Services Register remain off gas, along with hundreds of other homes.

“We have received assurances from Cadent that each of these customers is being cared for and made comfortable while they wait for their supply to be restored.

“While the vast majority of customers should be back on supply over the weekend, it is possible that there will continue to be smaller scale, shorter duration disruptions to supplies as Cadent engineers fully remove all of the water from the gas pipes.”

It comes as Cadent confirmed all homes that have been without gas will automatically get £130 compensation per day, while commercial properties will receive £210 per day.

Separately, Yorkshire Water confirmed it will handle compensation claims for water damage and additional costs incurred.

Since last weekend more than 200 engineers from distribution company Cadent had been working to restore gas to almost 2,000 homes which lost their supply.

The Mirror

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.