Yahoo Finance Britain forced to beg Belgium for power to keep the lights on
National Grid was forced to issue an emergency appeal to Belgium to keep Britain's lights on as the market was roiled by surging prices ahead of a looming winter crisis.
The power network's electricity system operator (ESO) issued an emergency instruction to operators of the Nemo cable running between Belgium and the UK to make sure supplies were sent to Britain last week, after failing to secure enough in the normal market.
Experts said it cast doubt on the Grid's ability to cope during the "looming iceberg" of winter, when gas supplies are expected to be under far more severe pressure and Vladimir Putin, the president of Russia, may cut off shipments to Europe altogether.
The Grid's notice, issued at lunchtime on Wednesday, came as high demand in the UK and constraints moving power into the south-east of England coincided with high demand on the continent and outages in France’s nuclear fleet.
The supplies from Belgium were needed to prevent shortfalls in London.
The ESO at one point on Wednesday paid an all-time high of £9,724 per MWh to import power over the Nemo cable amid a scramble for electricity around Europe, data from market analyst EnAppSys shows.
Two days of record-breaking temperatures last Monday and Tuesday also put power supplies under strain. Heat reduced the efficiency of solar panels and other generators and disrupted transmission lines, just as demand rose and wind power fell.
The strain triggered two automatic warning notices to the market last Monday calling for more generation to come online, with analysts at Cornwall Insight warning that demand came “very close” to outstripping supply.
The ESO said automatic market signals did not take into account all of its data and tools, and it was confident that electricity margins were sufficient.
It comes as the ESO is this week set to publish its early forecast for power supply and demand this winter, amid heightened concern over energy security owing to Russia’s war on Ukraine.
While the heat created particular challenges last week, demand for energy is typically higher during winter. Cold snaps in particular can cause havoc with infrastructure.
Kathryn Porter, an energy consultant at Watt-Logic, said: "The warnings from National Grid this week during hot, still weather are a sign of worse to come in winter when cold, still weather will stress the system even further."
Britain gets most of its electricity from its own gas-fired power stations, nuclear plants, wind turbines, biomass and solar plants.
It also trades power with the Continent through a growing web of cables capable of supplying more than 10pc of UK demand.
Supply and demand need to be constantly matched across the network to avoid blackouts, with the ESO stepping in to smooth out imbalances left by the market.
The system across Europe is currently strained as half of France’s nuclear fleet is offline due to maintenance or corrosion issues, while hydro-power output is also low.
While some French nuclear stations will come back online by winter, output will still be lower than normal.
There are also concerns Russia will further choke off gas supplies to Europe as it hits back over sanctions, cutting off a key source of fuel for power generation.
Coal-fired power plants in the UK and on the Continent have been asked to stay operational for longer than previously planned for back-up.
Britain has typically imported power from France during winter to help meet its own demand.
However, forward prices currently indicate France will “need all the power it can get” from Britain during peak times in winter, according to Phil Hewitt, director at EnAppSys. He added: “Winter is the looming iceberg."
Matthew Grant, a power market specialist at Baringa Partners, said while last week posed some unique circumstances, they were “not unlike the type of supply and demand challenges we might see in the winter: weather-related events pushing up electricity demand and wholesale electricity prices”.
He said: "When it comes to power demand over the coming months, a lot will depend on the weather. The challenge we face is when western Europe faces the same conditions, whether hot or cold, it drives demand and high prices in a similar way across markets.”
Luke Ansell, analyst at Cornwall Insight, said the market was “incredibly tight” last week and needed to evolve to be better able to cope with high temperatures as they are likely to become more frequent.
Mr Ansell said that capacity last week was worsened by generators being offline for summer maintenance, most of which will be back by winter. But prolonged periods of cold weather and low wind output could still cause tightness.
Describing circumstances last Wednesday, the ESO said: “We were bidding in a tight market and market prices were high that day because Europe also wanted the energy. We managed the system and kept the electricity flowing to the South East.”
It added the notices calling for more generation on Monday were “due to a combination of factors including high exports, low wind, planned plant maintenance outages, higher than usual demand and a small reduction in gas generation.”
A spokesman said: “Capacity market notices are automated and do not take into account all the factors which our engineers are working on. Based on our control room’s assessments and submitted data, we were confident that electricity margins were sufficient.”
