Clive Moffatt is an energy analyst and former chairman of the UK Energy Security Group
The UK is not immune from the risks of energy rationing this coming winter. An Energy Security Contingency Plan that deals with both the threat of supply shortage and rising energy costs has to be the number one priority for the new Prime Minister.
The UK imports little gas directly from Russia but we have less than 2 percent of total demand in storage. The colder months, we are heavily dependent on imports of LNG for heat (70 percent) and power (60 percent) and with Europe scrambling to secure its own supplies of LNG there is a serious risk that the UK will not get the gas it needs.
ENSURING SUPPLIES OF GAS
National Grid has no role in balancing demand and supply in real time. To protect the integrity of the network and underpin supply margins the following three measures would help:
- Secure public financing to allow Centrica to re-open the Rough storage facility. Centrica reckon 4 this will take four months. But it may take longer, and it has to be filled with gas from Norway. We currently have in the UK only 2 days of storage capacity compared with say 120 days in Hungary. Rough when full would give us an extra 10 days. That is not a lot, but it would be a start.
- Introduce a voluntary gas demand curtailment scheme with Grid as counterparty to run an auction offering an incentive option payment for a targeted level of industrial gas demand so that Grid know in advance of a Gas Deficit Warning (GDW) who they and the other Regional Gas Networks can turn off without the trauma of blanket shutdowns.
- Re-define notices of GDW and Gas Deficit Emergency (GDE) so that all industrial and commercial users are aware of what is involved and that they have more than 24 hours- notice of any involuntary curtailment .
KEEPING THE LIGHTS ON
Grid has responsibility in real time to forward match demand and supply of electricity. Measures to increase capacity margins need to made explicit:
- Adequate capacity payments to generators are in place to ensure that all workable coal and gas plant is able to come on stream at short notice when required.
- Ensure via District Network Operators (DNOs) that all the 40GW of small scale generation sitting outside the main transmission network is also primed to deliver. These small 15-30MW units are locally based and are fuelled by either diesel or gas.
- Ensure, as Grid has had to do in the past, that major power users have agreed payments to shut down for agreed periods at times of system stress.
SUPPORTING CONSUMERS
There is no sense in capping retail energy prices when you have no influence over the wholesale market.
Caps benefit larger, better resourced suppliers by making it quicker and easier for them to grow market share. Better to let the market compete while Ofgem apply stricter financial tests on potential suppliers to avoid a repeat of the £2bn consumers have so far had to pay to bail out suppliers.
There is nothing the Government can do hold down wholesale energy prices and the Ofgem cap will rise to around £4000 by next January.
Abolishing VAT and one-off blanket energy subsidies so far announced will not address the needs of those who most need help. Intervention in the energy market should not be used as a tool of welfare policy. To help those consumers in most need ,three measures would be useful:
- A highly targeted Fuel Poverty Payment linked to the current Universal Credit System but with criteria relevant to the current price of energy and targeted at those households which spend most of their income on energy.
- Ofgem should make it obligatory for energy suppliers to offer all households structured payment options – less now and more later. Grid’s suggested demand reduction scheme for domestic consumers via suppliers would be far too complicated and expensive.
- The Government should publish and promote an energy saving programme to all consumers indicating ways in which they can help reduce overall energy demand and save money.
This energy security contingency plan and related consumer support package would need careful costing but it could add £30bn to Government borrowing. Cancelling the rise in NI would not work because those most in need, such as pensioners or the low paid, do not pay NI.
Clive Moffatt is an energy analyst and former chairman of the UK Energy Security Group
The UK is not immune from the risks of energy rationing this coming winter. An Energy Security Contingency Plan that deals with both the threat of supply shortage and rising energy costs has to be the number one priority for the new Prime Minister.
The UK imports little gas directly from Russia but we have less than 2 percent of total demand in storage. The colder months, we are heavily dependent on imports of LNG for heat (70 percent) and power (60 percent) and with Europe scrambling to secure its own supplies of LNG there is a serious risk that the UK will not get the gas it needs.
ENSURING SUPPLIES OF GAS
National Grid has no role in balancing demand and supply in real time. To protect the integrity of the network and underpin supply margins the following three measures would help:
KEEPING THE LIGHTS ON
Grid has responsibility in real time to forward match demand and supply of electricity. Measures to increase capacity margins need to made explicit:
SUPPORTING CONSUMERS
There is no sense in capping retail energy prices when you have no influence over the wholesale market.
Caps benefit larger, better resourced suppliers by making it quicker and easier for them to grow market share. Better to let the market compete while Ofgem apply stricter financial tests on potential suppliers to avoid a repeat of the £2bn consumers have so far had to pay to bail out suppliers.
There is nothing the Government can do hold down wholesale energy prices and the Ofgem cap will rise to around £4000 by next January.
Abolishing VAT and one-off blanket energy subsidies so far announced will not address the needs of those who most need help. Intervention in the energy market should not be used as a tool of welfare policy. To help those consumers in most need ,three measures would be useful:
This energy security contingency plan and related consumer support package would need careful costing but it could add £30bn to Government borrowing. Cancelling the rise in NI would not work because those most in need, such as pensioners or the low paid, do not pay NI.