UK government moves to ease energy supply fears
The UK government has moved to allay fears of a coming electricity supply crunch by unexpectedly bringing forward key reforms to the energy market.
An auction of contracts to supply electricity is to be brought forward a year, to next January, and will cover the supply of power in the winter of 2017 to 2018.
The recently announced closure of two power stations, along with the failure to bring forward new generating capacity and problems with uneconomic fossil fuel plants, has raised fears of a looming energy supply gap.
Amber Rudd, energy and climate change secretary, said on Tuesday: “Ensuring our families and businesses have secure energy supplies they can rely on is not negotiable and I’ll take no risks with this. I’m taking further action to tackle the legacy of under-investment and ensure our country’s long-term energy security.”
While this year’s mild winter has meant lower energy needs, by next winter and by 2018 – particularly if there is a cold snap – supply gaps may be more difficult to avoid.
In another attempt to stave off potential problems, the government also signalled its intention to get tough on electricity suppliers by promising stronger sanctions against companies that break their contracts to supply power. Ministers were angered by the closure of Fiddlers Ferry power station, as its owner SSE had agreed a contract to supply power from it.
The loss of generating capacity from coal-fired power stations has several causes, including the poor economics of running coal plants at present, compared with gas, and the government’s intention to phase out unabated coal by 2025, while cancelling a planned £1bn investment in carbon capture and storage technology.
Shortly after the Fiddlers Ferry announcement, the French company Engie said it would shut its Rugeley coal plant with the loss of 150 jobs.
While Ofgem, the energy regulator, and the Department of Energy and Climate Change have dismissed fears of blackouts to consumers, there are concerns about energy supply to businesses. National Grid has put in place measures to pay energy-intensive companies to manage their use in such a way, which could include shutting down capacity at key times, that would make more power available for domestic use if needed.
But Lisa Nandy, Labour’s shadow climate secretary said the move would prove costly for consumers. “This is a panicked response that will raise energy bills and deliver a windfall to some of the biggest energy companies. Tory Ministers now need to come clean over how much energy bills will rise next year to pay for the consequence of their failure to get new power stations built,” she said.
Rudd said that by awarding contracts for generating capacity a year earlier than expected, the government would “protect consumers and businesses from avoidable spikes in energy costs”.
Buying capacity earlier is also intended to encourage investment in new gas-fired power stations and electricity interconnectors with other countries, on which progress has been slow.
Other changes to the government’s market regulations, which only became fully operational last year, will include measures on diesel power generation, which has benefited by an unexpected extent from the new rules.
Fiona Harvey & Heather Stewart
This article first appeared on the Guardian
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