Don't panic - why even Ofgem are relaxed about blackout scare

Dave Timms

26 October 2012

For people who had just announced - according to the Daily Mail - that the UK faces 1970's style power blackouts in just three years' time, the team at UK energy regulator Ofgem were remarkably relaxed when I met them last week.

They had even prepared a nice presentation for us to take away. Why were they looking so calm?

According to Ofgem's Electricity Capacity Assessment many of Britain's remaining coal fired power stations must close thanks to a European directive to reduce emissions of dangerous air pollution such as sulphur dioxide and nitrogen oxides. Recently they have literally been burning through their remaining allotted generating hours more quickly, so will have to close earlier than expected. Added to that, once built, the low cost of renewable electricity is making gas fired power stations less profitable.

This means the UK's electricity capacity margin, that's how much more generating capacity we have above the peak national demand might drop from 14% to 4%. Peak is usually just after Coronation Street during the Winter months, when everyone turns the kettle on.

Cue: Aaaarrrrrrggghh the lights are going to go out!

Um actually that's unlikely.

Firstly because 14% is unusually high. With a 4% margin, in 2015/16 the reliability of our electricity system will still be better than the level that of France, Belgium and Ireland (all the countries the Ofgem team could get figures for) set for themselves.

Secondly because the National Grid has a number mitigating measures available. Ofgem itself says that "the most likely implications are small, occasional shortfalls which could be dealt with by National Grid through demand-side action, with little or no impact on customers."

And after 2016, Ofgem predict the situation will improve as more renewables come online. I won't hold my breath for the Daily Mail to declare that 'UK efforts to meet European green target cut the chance of blackouts'.

None of this is reason to be complacent. It doesn't mean there will be no power cuts in 2015 or 2016. But power cuts will be considerably more likely to happen because of faults, bad weather and the like, which of course climate change will bring more of.

If we want to give ourselves a greater safety margin there are a couple of things that jump out from the Ofgem report - both of which we have supported for some time.

The first is taking action to cut energy waste. Less demand for electricity means lower peaks, that are easier to meet. Secondly we can build more inter-connections so electricity can be moved between countries to where it's needed most. And there are other solutions that Ofgem didn't look at - such as much greater use of schemes to shift demand for electricity from peak periods to slack ones.

All of this needs to be done anyway if we are to reach the much higher levels of renewable electricity by 2030 that we need to tackle climate change. So the Ofgem report should lead the Department of Energy and Climate Change to beef up the forthcoming Energy Bill and ensure they happen.

Unfortunately a different reaction is possible - perhaps even likely - panic at the headlines and giving the green light to a new expensive dash for gas.

I know which way George Osborne would rather go, but what about Ed Davey? With only a few weeks until the Energy Bill is published we'll soon find out.