£180m reserve power scheme ends never having been used

During its lifetime, the Supplemental Balancing Reserve (SBR), made up of power stations held on stand-by outside the regular power market, was not used once, concludes the report by the Energy and Climate Intelligence Unit (ECIU).

It also shows that last winter (2016/17), despite a prolonged spell of cold weather, a busy power station maintenance schedule and low import availability from France, National Grid did not need to call on any contingency measures to keep the electricity system stable.

The findings suggest that warnings of blackouts in the UK have been overblown, leading to potentially excessive spending on insurance policies to ensure energy security.

Commenting, ECIU energy analyst Jonathan Marshall said that the findings throw into question claims that UK capacity margins, the buffer of ‘spare’ capacity in the electricity system, are too tight.

“The clear message from this report is that paying to boost spare capacity in Britain’s electricity system can be very expensive, and potentially unnecessary,” he said.

“The drop in the number of calls by the Grid for extra power last winter also suggests that, in an era of smarter technology, balancing supply and demand is becoming easier and cheaper. This begs the question of whether calls to increase our capacity margins in the UK, for example by a new ‘dash for gas’, are sensible, given that doing so comes with a price tag in the billions of pounds.”

The report finds that building electricity capacity margins towards 10%, as recommended by a recent House of Lords committee report, could come at considerable cost, of up £12bn for additional nuclear capacity. Although gas-fired power stations would be considerably cheaper, the cost of increasing margins to this level would still cost up to £2.1bn.

The report also shows that the UK power system is among the most reliable in the world, even with the rapid growth in variable renewable sources of electricity. It finds that last winter, an individual was around ten times more likely to be struck by lightning than National Grid was to fail to deliver a unit of electricity to its intended destination.

James Heappey, Conservative MP for Wells and former member of the Energy & Climate Change Select Committee, who sits on ECIU’s Advisory Board, said that, in light of the findings, warnings of blackouts should be treated with caution.

“This report shows that the special temporary measure adopted in 2013 to cover us through the last three winters was completely unnecessary. Bill payers have spent £180 million on standby power stations that were not needed,” he said.

“On the surface, we did not need the SBR. And while it is valid to argue it was a prudent investment during a period of disruptive energy system change, we should also ask whether ministers of the time were spooked by claims of an imminent loss of power. Certainly, stories around at the time, with Ofgem, SSE and some analysts claiming there would be a serious blackout risk within three years, may have played a role into persuading ministers to spend consumers’ money unnecessarily.”

The report shows that the development of flexible, market-based demand-side measures would be a cheaper way to increase capacity margins should this be needed. It also notes that the Capacity Market will ensure there is sufficient capacity to meet demand for the next four winters, and can be extended if needed, although the development of a flexible ‘smart’ grid should reduce the need to it over time. According to the National Infrastructure Commission, introduction of a smart, flexible power gird could save UK consumers up to £8 billion a year by 2030.

The report, Overpowered: has the UK paid over the odds for energy security?, is available here.