PROJECTED TIGHTENING OF ELECTRICITY SUPPLIES REINFORCES THE NEED FOR ENERGY REFORMS TO ENCOURAGE INVESTMENT
Analysis by Ofgem based on joint modelling with National Grid shows tightening margins for electricity generation over the next four years Margins are projected to fall from 14 per cent in 2012/13 to 4 per cent in 2015/16 Challenges identified in Ofgem’s Project Discovery remain, but coal/oil stations now set to close before end of 2015
Analysis by Ofgem published today for the Department of Energy and Climate Change as required by the Energy Act (2011) forecasts a reduction in electricity generation margins* over the next four years.
The report shows that electricity margins, the amount of spare generation capacity on the system, could fall from 14 per cent today to 4 per cent in 2015/16. Coal fired-generation is likely to close earlier than expected under EU environmental legislation and the risk of a shortfall in electricity is highest in 2015/16.
Ofgem’s Project Discovery report in 2009 identified the problems that Britain faced of an unprecedented combination of the global financial crisis, tough environmental targets and the closure of ageing power stations would increase the risk to consumers’ energy supplies and could lead to higher bills. Today’s report shows that these problems have not gone away.
The Government now has an Energy Bill to address these issues and to encourage the investment into Britain to build new generation capacity.
Edward Davey, Secretary of State for Energy and Climate Change said: “I am grateful to Ofgem for providing to Government their first annual Electricity Capacity Assessment. It provides a comprehensive analysis of the security outlook and Government will consider carefully the implications. We will respond formally before the end of the year.
“Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives. That is why the Government is reforming the electricity market to deliver secure, clean and affordable electricity.”
Ofgem’s Chief Executive, Alistair Buchanan said: “The unprecedented challenges facing Britain’s energy industry, identified in Ofgem’s Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain. Ofgem is working with Government on its plans to reform the electricity market to tackle these issues.
“Ofgem is playing its part by helping Britain to attract nearly £30 billion of network investment thorough its RIIO price controls.