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National Grid agrees demand reduction contracts in readiness for winter shortages

national grid logoWith energy shortages on the agenda for Winter 2014/15 National Grid has acted to implement their Demand-Side Balancing Reserve (DBSR). The DBSR, designed to find willing partners to reduce their demand at pick times over the winter, was launched in June this year, when National Grid was still outwardly confident that black-outs were of no risk and that there was plenty of spare capacity in the system.

In the three months since the launch of the DBSR tender, that spare capacity has been ripped from the system with some of EDF Energy’s nuclear fleet off line as well as the critical Ferrybridge coal plant being unavailable and in doing so turning a one time guaranteed capacity into a now guaranteed shortage.

As a result the tender process for DBSR has taken on a more pressing role and National Grid will be happy to have been able to agree and award contracts totalling 319MW to large and intensive energy users who are willing and able to reduce their demand. The principle of the gas ‘interruptible’ comes to the electricity market.

Organisations such as Tata Steel have won the contracts to reduce demand under the DBSR between the energy peak of weekdays between 16:00 and 20:00 when shortages and power cuts are most likely.

But 319MW is nowhere near enough to cover the likely capacity shortfall on its own after a 3.5GW fall in available capacity, a figure higher than some of the original estimations of spare capacity this winter. Although the DBSR tender is to be increased to 800MW for 2015/16 that is far too late for this coming winter and even those levels would be insufficient to cover current shortfall levels.

National Grid’s focus is therefore now on Short Term Operating Reserve (STOR) options to shore up the supply side contribution to this winter’s supply and demand balance.

Sensibly or in a case of corporate blame avoidance, pick your choice, National Grid are awaiting the publication of their mid-October winter outlook report to officially comment on the market balance for 2014/15. Few expect it to be pretty reading.

The expected supply and demand balance challenges of 2015/16 being brought forward to this coming winter, the cost of securing the DBSR contracts, the increasingly small or potentially non-existent capacity margin and the predictions of reduced voltage management (brown-outs) to manage critical shortages in the system and avoid full scale blackouts do not auger well for the coming season.

All eyes will now be on the results of the STOR contracts tender and the weather forecast, that is if the Internet is still working.

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