The cold snap in March could lead to Britain’s gas supplies running out next month, forcing the nation to pay higher prices for fuel from elsewhere. Forecasts suggest that gas supplies in the UK could theoretically be exhausted by 8 April, requiring Britain to turn to imports from Norway and Russia.
The warning came on the day Scottish and Southern Energy, one of the UK’s biggest power suppliers, warned that there could be electricity blackouts in the country within three years.
A lack of gas storage facilities, and rapid depletion at the UK’s North Sea gas fields, has led to the UK having as little as two days’ supply of the fuel in reserve. Demand spiked during the coldest March in 50 years.
Though experts have warned of the problem for years, and the government has championed a “dash for gas” that would see a massive rise in demand for the fuel, little has been done to increase storage facilities.
Ian Marchant, chief executive of SSE, said there was a “very real risk of the lights going out” within the next three years. SSE intends shutting down power plants, enough to have supplied 2m homes, as the stations are either uneconomic or coming to the end of their lives.
Other firms are also planning to take power stations out of service, including the UK’s fleet of ageing nuclear reactors, increasing the risk that demand for electricity will exceed the available supply.
Marchant said: “It appears the government is significantly underestimating the scale of the capacity crunch facing the UK in the next three years and there is a very real risk of the lights going out as a result.”
His comments follow warnings by Alistair Buchanan, the departing chief of Ofgem, that power shortages will be many times more likely in the next five years. Government estimates suggest that energy bills could rise by £100 a year this winter.
Britain only ever holds about 15 days of gas in reserve because of lack of storage facilities and a failure to attract investment to build new ones. Britain is in fact unlikely to run out before 8 April but the estimate is based on trends that include current imports and consumption.
The warnings are a particular blow to George Osborne, the chancellor, who has championed a new “dash for gas” in the UK, that would see gas take over as the dominant fuel in the UK’s power generation market.
Much of the generating capacity that SSE plans to retire consists of gas-fired power stations, though the recent budget has given tax breaks for shale gas extraction in the UK and heralded what could be the biggest expansion of UK gas-fired power in a generation.
SSE said gas-fired power was uneconomic because of the fuel’s high price compared with coal.
The move by SSE highlights the disputes over energy policy and energy generation, following upheavals in the international markets for fossil fuels. It also brings into question whether targets to cut carbon dioxide can be met.
Andrew Pendleton, head of campaigns at Friends of the Earth, said energy firms were trying to hold the government to ransom by threatening power outages that would help them extract concessions to get financial benefits. The UK has only six big energy suppliers to households, which campaigners say reduces competition and raises prices.
Coal has become much cheaper because of the use of fossil fuel in the US in the past five years, where a massive increase in the supply of cheap gas is attributed to fracking, the controversial method of blasting dense rocks apart under high pressure.
The coal that would have been burned in the US is now available on international markets at cut-price, and has now become “the preferred fuel”, according to SSE.
That is the opposite of what the government, and the EU intended by their energy policies in the past decade. Coal was supposed to become more expensive than gas, because of the EU’s emissions trading scheme, which puts a price on carbon emissions.
That has not happened, because flaws within the system mean the price of carbon is near an all-time low, meaning coal-fired power stations are not penalised for their effect on the climate.
Marchant urged the government to bring forward reforms favouring gas. “The government can reduce this risk [of power cuts] very easily, by taking swift action to provide much greater clarity on its electricity market reforms.”
An energy bill is under discussion by parliament at the moment.
SSE’s warnings were dismissed by green campaigners as “an attempt to force the government’s hand”.
Pendleton said: “The risk is that these companies are holding us to ransom, in order to make the environment more favourable to their forms of generation. There is a lot at stake here. Basing our energy strategy on gas rather than clean forms of energy such as renewables means we could be held to ransom more and more in the future in this way. It could do a huge amount of harm.”
The government rebuffed the claims from SSE. John Hayes, minister for energy, said: “We’re alive to the challenge facing us. The bill before parliament will set the conditions for the investment needed to keep Britain’s lights on in the long-term. The amount of spare power available today is currently comfortable. As old infrastructure closes over the coming years we expect this margin to reduce but we will make sure it stays manageable.”
Most of the UK’s nuclear power plants are slated for closure by 2022, and many coal-fired stations must be closed or run at reduced capacity within the next few years because of EU rules on pollution.
Experts have warned for years of a looming “energy gap” between demand and supply. The building of wind farms and other forms of renewable energy, which were supposed to fill the gap, has been below expectations, in part due to planning laws.
Hayes said: “We are not complacent about this… We are confident in our approach and in the responsiveness of the market in providing secure power supplies.”
Joss Garman, political director of Greenpeace, said: “Not content with the profits they’re making from sky-high energy bills the gas industry now seems to be trying to hold everybody to ransom – ‘give us even more of your cash or we’ll turn out the lights’.
“Cheap coal and the collapse of the carbon price have made gas burning less profitable, but that’s a reason to ban unabated coal burning and reform the carbon market, not to give hand-outs to the big six energy companies.
“Gas-fired generation should only be a last-ditch backup for renewable energy sources, and [ministers] should prioritise support for interconnectors, storage, and combined heat and power stations that would compliment renewables and guarantee we have secure power.”
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