Ofgem sees higher blackout risk by 2015

LONDON (Reuters) - Britain's risk of electricity blackouts by 2015 is more serious than previously thought, regulator Ofgem warned on Thursday.

The country's spare electricity supply margin could fall as low as 2 percent in 2015/16, down from around 14 percent currently.

Last year Ofgem gave an estimate of 4 percent.

"Electricity supplies are set to tighten faster than previously expected in the middle of this decade," Ofgem said in a report, adding that the chance of supply disruptions would rise to one in 12 years in 2015/16 from one in 47 years now.

Britain has seen a vast number of power plants close and being mothballed due to emissions-reduction policies and the loss-making economics of gas-fired power plants.

Ofgem said it had lowered its estimate of the amount of conventional power capacity expected for 2015/16 by more than 2,000 megawatts due plant closures and delays in building new ones.

While it played down the actual likelihood of blackouts, saying the market managed the problem effectively, the regulator said its findings showed that urgent action is needed.

Britain's network operator National Grid and the government on Thursday outlined proposals to better manage electricity demand to balance the market at times of tight supply.

They include payments to energy users for reducing their demand when necessary.

At the same time, the government on Thursday published details of its proposed capacity market, a mechanism that will pay certain power plants to be on standby to produce additional electricity when supply is tight.

The government next year will hold the first auction for power plants to participate in the capacity market for delivery of electricity in 2018/19.

The costs of the capacity agreements will be borne by energy users, but the government said that lower wholesale prices and protection against costly blackouts will offset the payments.

RWE npower, one of Britain's biggest power producers, said it was concerned the capacity mechanism favoured certain power plants, such as gas-fired ones that can respond at short notice.

"Government's proposal for a capacity mechanism must pass the simple test of whether it keeps the lights on at the lowest cost to consumers," RWE npower chief executive Paul Massara said in a statement.

"A mechanism that treats all power plants in the same way will do that, but the current proposals do not suggest this non-discriminatory approach."

(Reporting by Karolin Schaps; editing by Jason Neely)

Source: http://news.yahoo.com/ofgem-warns-increased-blackout-risk-2015-16-104733980.html

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