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UK Government hits panic button over energy security

Following the National Grid announcement that Britain faces an energy deficit next winter, the government have brought forward the capacity auction scheduled for January 2017.  The capacity auction process had been under review, with a public consultation not due to end until April 2016.

The announcement comes on the back of a raft of disruptive (and many would argue ill-conceived) changes introduced by the current government outlined in the Guardian:

“There’s the closure of power stations with contracts to generate energy. The failure to build new gas-fired plants. The extension of the life of existing nuclear power plants, and doubts over plans for two new reactors. The tumbling oil price which has triggered thousands of job losses. The damages inflicted on the renewable energy sector by abrupt policy reversals.”

Even if the capacity auctions are successful, the National Grid’s margins are still tight, with large industries having to take on the inconvenience of disrupted supply in order to keep the lights on for everyone else.   This so-called “demand-side response” involves disconnecting big energy users when demand spikes, then paying pre-agreed compensation for the inconvenience.  But EEF the manufacturing organisation says demand-side response must:

“not be in place of a credible strategy for delivering new plants and security of supply should be a top priority.”

Perhaps most worrying is that energy suppliers have form for entering into this kind of agreement but then failing to deliver.  As Emily Gosden, Energy Editor at the Telegraph notes:

“The capacity market is intended to encourage companies to keep old power plants running and to build new gas-fired power stations.  But the scheme has been branded a failure because some energy companies are reneging on their deals and will not build or keep open the power stations they promised, which ministers have admitted is ‘putting our security of supply unacceptably at risk’.”

There is a real and growing danger that British consumers and businesses will get the worst of all worlds – a combination of ever higher bills and ever more precarious energy security.

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