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The UK electricity network operator is poised to activate its emergency winter plan after energy prices rose amid falling temperatures and growing concern over power supplies.
National Grid indicated it could announce on Monday afternoon that it was issuing a requirement for consumers to use its new demand flexibility service from Tuesday, which rewards businesses and households that shift their power usage away from times of peak demand.
Energy specialists are concerned that Britain’s power systems could be threatened by lower temperatures, which increase demand; still weather reducing wind power and the slow return of a series of French nuclear reactors, which have been out of action due to maintenance.
National Grid’s flexibility scheme has been used in trials but this would represent the first time it has been used to reduce genuine pressure on the grid. Hundreds of thousands of households will be eligible for the service, which formally launched this month after a trial with Octopus.
However, the service is limited to those with smart meters whose supplier has signed up. So far many of those who have signed up are business or small domestic providers, although the two largest UK suppliers, British Gas and E.ON, have come on board.
Gas and electricity prices soared on Monday morning after the Met Office issued yellow bad weather warnings over the weekend and some forecasters suggested cold temperatures over Russia could hit the UK next month, in an echo of the “beast from the east” snowstorms that hit the UK in 2018.
The price of gas for next-day delivery rose to 260p, up from 153p when markets closed on Friday night. UK wholesale power prices neared £400 a megawatt hour, up from about £150 MWh last week. The daily auction on the N2EX, the trading market place for power, showed prices for tomorrow hit £1066 a MWh, data from energy data specialist EnAppSys showed.
Live data from National Grid’s electricity system operator (ESO) showed 60% of Britain’s electricity generation was from gas-fired power plants, 11% from nuclear and 7% each from wind power and imports, typically from undersea cables from France and Norway.
Ministers were criticised for not including gas-fired generation in a windfall tax announced this month.
The sharp rise in prices comes amid heightened concerns over the security of Britain’s energy supplies since Russia’s invasion of Ukraine.
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National Grid warned in October that a combination of events, such as Russia cutting gas supplies to Europe and a cold snap, could lead to three-hour power cuts.
Ministers have tried to shore up energy supplies with a series of measures, including signing deals to keep coal-fired power plants on standby through the winter.
Russia’s weaponisation of gas supplies has triggered a dash for gas this year as European countries have rushed to fill up their storage facilities. Their positive progress in recent months, combined with mild weather in recent weeks, had increased confidence that Britain and European counterparts will meet its energy needs this winter.
Last week, National Grid issued a warning of an electricity shortage before immediately cancelling it. Industry sources said it was simply a market mechanism and electricity supplies from Europe met the increased demand.
Tony Jordan, a senior partner at the consultancy Auxilione, said consumers should not be concerned over the immediate threat of power outages. He added: “Spot prices are rising on the back of the cold weather. We have had a couple of months of warmer weather so it’s going to be a bit of a shock to the system [for companies] to see the price spike.
“But this is how the system works, it will convince people to cut back on their usage and balance out supply and demand. There will be some scaremongering but it looks like we should be fine.”
An Investec analyst, Martin Young, said National Grid had several options to tackle potential shortages. “The ESO has had a number of tools in its toolbox and has added extra ones this winter to address security of supply,” he said.
“Just because it is windless that is not a huge cause for concern. There has to be more than one thing happening for us to get to a point where there is a concern that there could be interruptions to people’s power supply.”
