Britain faces tightest winter power supplies in decade -National Grid

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By Sarah McFarlane

LONDON, July 15 (Reuters) - Britain is facing the tightest winter power supplies in a decade mostly due to power plant closures, although measures have been taken to ensure electricity meets demand, National Grid (LSE: NG.L - news) said on Wednesday.

The average excess supply over peak demand from October to March could fall to 1.2 percent, from 4.1 percent in 2014/15, National Grid's winter review and consultation showed.

The last time supplies were this tight was in 2005/06, when the excess supply or so-called capacity margin was 0.9 percent.

The narrowing margin is mostly due to power plant closures, as demand has remained relatively flat, Cordi O'Hara, National Grid's director of market operations, said.

Plant closures are expected to reduce power generation by around 2 gigawatts (GW), O'Hara added.

Some coal power plants are closing due to EU pollution laws, while gas-fired plants have struggled to be profitable.

National Grid said it had tools to bolster its response to tighter margins, including a scheme to encourage utilities to make idle capacity available and paying offices and factories to cut power use during winter.

These schemes will provide an additional 2.6 GW of capacity and could increase the available margin to 5.1 percent, it said.

This compares with an additional 1.1 GW which boosted the available margin to 6.1 percent in 2014/15, although in the end the extra capacity was not needed in part due to a mild winter, the report said.

"We didn't need to use them over the winter due to lower than average demand at peak (times), high interconnector flows, high levels of wind output and availability of generation."

National Grid said it will launch a consultation before the end of the month on whether the schemes providing extra capacity, first introduced last year, should be extended beyond the 2015/16 winter.

Factors National Grid said it was monitoring which could change the outlook for the 2015/16 winter included restrictions on production from Europe's largest gas field Groningen and reduced storage capacity at Britain's biggest gas storage site Rough. (Reporting by Sarah McFarlane, Editing by David Evans)