Winter supply margin tightest in a decade as power plants close

National Grid has predicted a de-rated electricity capacity margin of 5.1 per cent for the coming winter, the tightest since a 4 per cent margin in winter 2005/6, following a recent spate of power station closures.

In its 2015 winter review and consultation the system operator said that despite this, it expects winter 2015/16 to be “manageable”.

“It is clear that electricity margins for that coldest, darkest half hour of winter are currently tighter than they have been, due to power stations closures,” said National Grid director of market operation Cordi O’Hara. “As system operator, we feel we’ve taken a sensible precaution again this winter to buy some extra services. Together with the tools we already use to balance the network these additional services will significantly increase the energy reserve available this winter.”

National Grid has bought nearly 2.6GW additional balancing services for the coming winter, including 2.4GW of supplemental balancing reserve from generators and an additional 200MW of demand-side balancing reserve from major energy users willing to reduce their energy consumption at peak demand times. The results of Grid’s second winter capacity tender round show Centrica and SSE secured the largest contracts to help the system operator secure 2.5GW of additional reserve capacity to provide extra backup electricity.

Last year, RWE announced it would close UK’s last remaining oil-fired power plant, Littlebrook, in March 2015. In May, SSE said it will shut the remaining 1GW of capacity at its Ferrybridge coal-fired power plant by the end of March next year, and last month, Eon said it will close its 900MW Killingholme gas-fired power station, following a review.

For winter 2014/15, National Grid increased the de-rated capacity margin from 4.1 per cent to 6.1 per cent by finalising contracts with three power stations to provide additional reserve under supplemental balancing reserve which, together with the demand-side balancing reserve the TSO had already contracted, provided an additional 1.1GW of de-rated capacity.

In its 2014 electricity capacity assessment report, Ofgem said margins are “expected to fall” over the next two winters as older power stations close, before “improving in the later years of our analysis”.

Last month, National Grid’s head of commercial operations Duncan Burt told Utility Week that the company is preparing to revolutionise how it maintains secure supply by relying on demand-side measures for “well over 50 per cent of the time” by 2030.

O’Hara told Utility Week that the industry is at “an inflection point” which will require the market to turn on its head. “For the most part generation has followed demand, but now demand is going to follow generation – and we need to ask how demand can be more intelligent,” she said.