An offer to start power plants to alleviate the energy crisis “strangled by bureaucracy”
In October, National Grid ESO, which balances electricity supply and demand, said Britain faces a greater risk of blackouts this winter than last year given the availability of supplies.
It provided for a capacity margin – the buffer for reserve electricity supply – of 6.6 pc, the lowest since 2016.
Donors of dormant power plants argue their restart could provide an additional source of electricity to help meet demand.
They claim they could also help cool prices: first, by mitigating the scarcity effect where suppliers capitalize on demand by raising their prices.
Second, they say the size of the plants means that Severn in particular could end up setting prices in the market instead of less efficient equivalents that currently do.
Directors argue the effect could help cut wholesale electricity prices by £ 2.1bn in the first three months of the year, which would likely lead to lower household bills. Sources in Whitehall said they did not recognize this figure.
In a report for administrators, energy market analysts Cornwall Insight forecast average wholesale prices of £ 209.99 per MWh in the first quarter of 2022 if the stations are on the market. The forecast is £ 10.35 per MWh lower than a baseline forecast of £ 220.33 per MWh without them.
Tom Edwards, senior modeler at Cornwall Insight, said: “If you buy out these factories, especially Severn because it’s more efficient, I think the [wholesale] the price would drop.
“The extent of its fall will depend on the behavior, the wind speed and what is happening on the continent.”
Cornwall estimates total notional profits – known as the Spark Spread – at £ 96.7million for factories in the first quarter of 2022.
Directors also argued that generators should be able to gain greater certainty over income from the electricity market and should face stiffer penalties if they fail to meet their commitments.
A Whitehall source insisted there was nothing stopping owners from restarting factories outside of the capacity market, adding that “if the stations are as competitive as they keep it going, they could enter the market without government support “.
The source added: “A tailor-made deal would undermine the existing legal and regulatory framework. In the future, we might expect market players to stop entering the capacity market and wait until the end of the market. winter, then try to keep the government on a barrel – jeopardizing the whole process we have to ensure security of supply.
A BEIS spokesperson said: “We have sufficient capacity to meet demand this winter. It is neither necessary nor appropriate for the government to enter into tailor-made contractual arrangements for the return of the Severn and Sutton Bridge, or any other generator, in order to provide electrical capacity this winter.