Wholesale price of electricity surges amid fear of supply shortfall

Wholesale electricity prices surged higher yesterday amid mounting fears that the UK could face a supply shortfall next month.

The forward price of electricity for November hit highs of £133 per megawatt hour, up more than £10 since Friday, when the same contract was trading at about £122.75.

The price of power has risen sharply since National Grid published figures last week predicting an unusually thin margin between electricity supply and demand. For the week starting November 10, National Grid gave warning that the margin of spare capacity could be as slim as 0.8 gigawatts - the equivalent of one mid-sized coal-fired power station or the electricity consumed by a city the size of Nottingham.

“The market is very close to its safety limit,” Andrew Horstead, of the energy consultancy Utilyx, said. In an average week in March, the margin of spare capacity is more than 12 times higher - about 10GW - rising to more than 16GW in July or August.

The warning has compounded fears about the growing instability of the UK power network. Last month National Grid was forced to issue three coded requests for power suppliers to bring on extra capacity because of unexpected power shortages - the same number that was issued during the whole of last year. The notifications of insufficient system margin, or NISMs, were issued on September 4, 14 and 17.

In May two relatively minor technical glitches within two minutes of each other triggered the most serious disruption to Britain's energy supply network in more than 20 years, producing blackouts that affected hundreds of thousands of homes.

Peter Atherton, a Citigroup utilities analyst, said that the squeeze next month had arisen because a large number of ageing UK power stations were out of service for maintenance - a growing trend in the industry.

Three older nuclear plants operated by British Energy at Hartlepool, Dungeness, in Kent, and Heysham, in Lancashire, are undergoing repairs and are not scheduled to return to full service until the end of the year.

http://business.timesonline.co.uk/tol/business/industry_sectors/utilitie...