Power shortages risk 'to increase'

ElectricityThe danger of power shortages in the UK by the middle of the decade has increased, regulator Ofgem has warned.

Electricity margins could tighten in 2015-16 to between around 2% to 5% depending on demand, according to the latest report.%VIRTUAL-SkimlinksPromo%Ofgem said the findings "illustrates the need for the timely implementation of the Department of Energy and Climate Change's capacity market".

It said: "The report shows that electricity supplies are set to tighten faster than previously expected in the middle of this decade.
"The risk to electricity supplies is projected to increase from the current near zero levels, although Ofgem does not consider disruption to supplies is imminent or likely, providing the industry manages the problem effectively."

Ofgem also highlighted uncertainty around supply and demand for electricity. It said National Grid's projections on power demand varied greatly depending on assumptions on economic activity and energy efficiency, and there was also uncertainty over the timing and scale of plant closures and mothballing.

The regulator said it has been working with Decc and National Grid to explore options that would provide consumers with additional safeguards against the increased risk to mid-decade security of supply.

All three organisations agreed that it was "prudent" to consider the case for extra measures to help National Grid balance the electricity network during the middle of the decade when capacity margins could be tight.

Ofgem chief executive Andrew Wright said: "Ofgem's latest report on electricity security of supply highlights the need for reform to encourage investment in generation. This is why Ofgem welcomes Decc's commitment to introduce a capacity market that will provide a longer term solution to this problem at a time when Britain's energy industry is facing an unprecedented challenge to secure supplies."

He added: "Ofgem, together with Decc and National Grid, think it is prudent to consider giving National Grid additional tools now to procure electricity supplies to protect consumers as the margin between available supply and demand tightens in the mid-decade."
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