UK Faces Power Cut Risk in Winter: Report
The UK is at much greater risk of power blackouts than National Grid has forecast in its Winter Outlook, according to analysis by Hartree Solutions, a trading company, published on October 22.
Hartree says market prices show that electricity imports from continental Europe to meet demand should not be taken for granted, with market spreads at times implying a 99.7% risk of blackouts.
While historic flows show that the UK typically imports during the winter, market prices point to a much tighter scenario with the UK likely to be exporting for many of the high demand periods creating a lower margin and thus a greater risk of supply problems as a result. “This makes it difficult to see why National Grid is so confidently expecting imports this year without considering the market’s expectation for much of this year,” it said.
Hartree Solutions partner Adam Lewis said that while the price difference could tilt back in favour of flows to the UK, that might not happen: He told NGW: "It very much depends on the issues in France. If you look at France to date, the market has been very worried about the ability to meet demand this winter due to the nuclear outages. While that looks less of an issue today than it did a month ago there is the possibility both the UK and France are attempting to secure the same MW as the last resort to supply. In that instance you are probably in the nuances of one capacity mechanism versus another."
National Grid says the margins on the electricity system are lower than last winter but forecasts are well within the national Reliability Standard, meaning “sufficient generation and interconnector imports to meet demand throughout winter 2020/21”. This assumption is based on GB baseload forward prices being higher than those in France, Belgium and the Netherlands and therefore providing net imports via the interconnectors of 3GW, according to its base case scenario.
Yet analysis by Hartree Solutions shows that although the UK baseload price for January has recently ticked over into a small premium against the equivalent French price, the majority of the peak hours are still indicating interconnector exports.
But since the end of February, the market has been pricing in France at a premium to the UK this January. Indeed, for parts of the summer, market prices were pointing to Belgian prices also being above the UK for that peak winter demand month.
This loss of 3 GW cuts the margin to 1.8GW, including the start-up of a second interconnector to France, IFA2, that’s due to come online in November which would potentially increase the flow of exports.
Rather than the comfortable picture that National Grid looks to be painting, the market’s most extreme forecast Interconnector flows would see the UK’s margin shrink to -1.95GW giving a 99.7% likelihood of a blackout using National Grid’s Loss of Load Probability calculation.
National Grid, which also operates the high-pressure gas transmission system, published mid-month its analysis of gas supply and demand for the winter. It found again that there would be enough to meet the one-in-twenty winter specified in its licence obligation, despite the unknowns of Covid-19 and Brexit.