Yahoo Finance National Grid told to prepare for coal this winter
Kwasi Kwarteng has asked National Grid to bolster electricity supplies using coal this winter amid concerns Russia’s supply of gas to Europe will be cut off.
The Business Secretary has instructed National Grid’s electricity system operator (ESO) to work with the industry to make sure extra generating capacity not fuelled by gas is available.
Last month Mr Kwarteng wrote to the owners of the UK’s remaining coal-fired power stations to ask them to stay open longer than planned.
In a letter to Fintan Slye, executive director of the ESO, this week, Mr Kwarteng warned of “high levels of uncertainty and volatility expected in energy markets over the winter”.
He said: “While we are in no way dependent on gas from Russia, I am mindful that a shortage of gas in Europe could put considerable pressure on the European gas market and suppliers of liquefied natural gas, with the potential for additional, consequential impact on electricity markets.
“We must therefore consider all prudent steps to mitigate these risks and bolster our energy security this winter. These risks would be best mitigated by significantly increasing the amount of capacity that is available over the winter, particularly non-gas-fired capacity.
“To this end, I request that you work with industry to explore and seek to deliver frameworks to support the operations of additional non-gas-fired capacity over the coming winter that would otherwise not be available."
The letter is likely to add to concerns about prolonged high gas and electricity prices. On Thursday, the Government introduced a windfall tax on oil and gas producers to help provide support for households struggling with energy bills.
Rishi Sunak, the Chancellor, has raised the prospect that the tax could be widened to electricity generators profiting from high energy prices, although Mr Kwarteng is believed to be opposed to the idea.
Gas is currently used to meet more than 35pc of the nation's electricity demand. The UK has typically bought less than 4pc of its gas directly from Russia, but is connected to European markets which are heavily reliant on the Kremlin's fossil fuel.
The EU typically gets about 40pc of its gas from Russia but is trying to cut its reliance. Meanwhile, Russia has cut off supplies to Poland, Bulgaria and Finland since the start of the war and there are concerns it could go further.
On Friday Kadri Simson, the EU’s energy commissioner, told the Financial Times that any member state might be next to cut off, and the EU is preparing contingency plans.
Options to provide extra back-up on the UK system are relatively limited, particularly given the need for supply that can be relatively easily dialled up and down to respond to demand.
Under current market rules, power generators are paid to be on standby ready to provide back-up supply, funded by consumer bills. Mr Kwarteng has urged National Grid ESO to make sure any deals with generators deliver value for money.
Drax and EDF were both due to shut down their remaining coal-fired turbines this year, while Uniper was due to shut one of its four turbines running this year and keep the other three running to 2024. The plants are in Yorkshire and Nottinghamshire.
Mr Kwarteng said he remained committed to the government’s plan to phase out coal-fired power generation by September 2024, adding the country needs to cut its dependency on imported fossil fuels.
But he added: “This transition has to be orderly, recognising the critical role fossil fuels will play as we deploy low carbon alternatives.”
A government spokesman said: “In light of Russia’s illegal invasion of Ukraine, it is only right that we explore a wide range of options to further bolster our energy security and domestic supply.
“While there is no shortage of supply, we may need to make our remaining coal-fired power stations available to provide additional back up electricity this coming winter if needed.
“It remains our firm commitment to end the use of coal power by October 2024.”
