National Grid to pay UK generators up to £3,000 per megawatt hour to ensure the lights stay on this winter

National GridNational Grid has confirmed that the retirement of ageing coal-fired stations and a reliance on intermittent wind energy have left Britain’s system more vulnerable to supply shocks than at any time for at least a decade.

It warned that the margin of spare capacity this winter would be 5.1%, compared with 6.1% a year ago.

National Grid set out measures to protect supplies, which may lead to higher bills. They include temporarily cutting power to factories and paying mothballed power stations to be ready at short notice.

Without these measures, the margin would be 1.2%.

Power companies will be paid up to £3,000 per megawatt hour during shortfalls. The wholesale price is about £40 per megawatt hour.

If National Grid is concerned about a shortage, it will issue an alert to power producers. Stations that can supply extra power will be paid the “triad price” as a reward.

Until this year, the triad price was capped at £300. Ofgem has raised it to provide an incentive for generators to maintain extra capacity. National Grid said measures would add 50p to average bills, but this did not include the triad prices.

 

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