Comment on National Grid Winter Outlook Report

National Grid today published their 2016/17 Winter Consultation, which suggests that electricity margins will be similar to the forecast for winter 2015/16.

Commenting, Dr Jonathan Marshall, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU) said: “The strong message to take from this report by National Grid is that, despite the ongoing closure of coal-fired power stations, the risk of blackouts this winter is similar to last year, when the system continued as normal.

“That risk will fall still lower after this winter with the advent of guaranteed available generation under the Capacity Market, and this will also reduce costs because capacity is being procured in a more predictable and strategic fashion.

“If there’s a missing piece in this jigsaw, it’s arguably the unexploited potential of demand side response, measures that enable customers to actively reduce electricity demand at peak times, thereby cutting the amount of generation capacity that we need. Demand side response is relatively cheap, flexible and can be brought on stream quickly, so it would make sense for the Government to allow it to compete on equal footing with supply-side measures.”

Hugo Chandler, Director at New Resource Partners, said: “Blackouts and supply crunches make good copy, but the boring truth is that we are not seeing them. And I think it’s about time that we recognised that things have changed.

“In the UK, as in other advanced economies, the old model of centralised electricity generation focused on building big power stations is rather outdated. We are moving towards a decentralised, flexible grid with a diverse mix of generation capacity, and increasingly smart methods of balancing supply and demand. One big feature of this - as in any other functioning market - will be consumers actually responding to supply prices.

“Understanding the barriers to this transition and ensuring we manage it in the most cost-effective way possible should be our focus now.”

A background briefing on the UK electricity system is available here.

A blog by Dr Marshall analysing the National Grid assessment is available here.