Scottish power generating giants set to cash in from UK winter black-out prevention payments

Electricity pylons CommonsBy DARA BUTTERFIELD

The two Scotland-based UK power giants will be paid £millions in ‘power crunch’ premiums to bring moth-balled and off-line generating capacity back onstream this winter as National Grid confirmed that current supply over demand has dropped to a seven year UK-low.

Perth-based Scottish & Southern Energy (SSE) and Scottish Power will be paid by the U.K.’s grid operator to keep three power plants open this winter in case reserve supplies of electricity are needed.

The UK will for the first time pay to keep 2,025 megawatts of capacity in reserve to meet peak winter demand, National Grid  confirmed in its Winter Outlook report.

Along with RWE’s Littlebrook station, SSE’s Peterhead and Scottish Power’s Rye House power stations will be contracted to be available from 6.00 am to 8.00 pm on weekdays from 1 November 2014 through to 28 February 2015, the grid operator said.

Contracts are being arranged for a 570-megawatt unit at RWE’s oil-fired Littlebrook plant, 780 megawatts of capacity from SSE’s gas-fed Peterhead station and 675 megawatts from gas-fired Rye House.

The UK average cold-spell margin, the buffer of extra capacity available to meet peak demand, will drop this winter to 4.1%, or 2.3 gigawatts, National Grid said. That compares with 5% last year and is less than 6.7% that was projected for this winter in June.

As previously reported in Scottish Energy News (all reports are searchable via the on-site search engine) half of the French-owned British nuclear nuclear reactors have been shut since August for unplanned maintenance works, while a unit at RWE’s Didcot B station halted last week after a fire.

“Margins may be tight this winter following plant closures, particularly if we experience interconnector exports to Europe or low wind,” a spokesman for the England-based National Grid said. “This is due to planned generator closures, breakdowns and new plant not coming online as quickly to replace them.”

Making these payments – in case the wind ‘don’t blow the wind turbines’ – will cost UK households another £50 million on power bills but is a price worth paying, according to  British energy minister Matthew Hancock who said:

“We are absolutely clear we are taking the measures necessary in order to have secure energy supplies this winter”.

Angela Knight, Chief Executive, Energy UK – the trade association which represents electricity suppliers – said: “National Grid’s analysis shows the margin between supply and demand for electricity has become much narrower in recent years, but still within the safety zone the government has set.

“Power cuts during this winter are unlikely as generators have been spending large amounts of money on maintenance over the summer so they can meet demand when it gets cold. National Grid has also made sure that, during peak times, it can both draw on extra support from power stations and cut back the amount of electricity used by big industrial businesses.   “The UK must plan for the future so the country has the new generation capacity it needs while preventing other reliable generators from being mothballed. This requires all energy policies to be considered from the perspective of how they help provide reliable electricity generation at a price customers can afford. While the Capacity Market is welcome and will provide back-up when it is needed, it will not come in until 2018.

The UK has a one in 31 chance of blackouts this winter, unchanged from last year, according to the Office of Gas and Electricity Markets. “No system is 100% reliable,” Rachel Fletcher, senior partner for markets at Ofgem, said, “but we are very confident that National Grid has been given right tools to keep up the level of connection we have become used to.

“We are confident that National Grid has the right levers to keep the lights on and maintain a risk of customer disconnections which is better than the reliability standard set by government.

“However, given the tighter margins there can never be any room for complacency and National Grid and the industry must remain vigilant at all times.”

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