Yahoo Finance ‘Significant risk’ of winter gas shortage threatens UK power supply, says Ofgem
The UK’s energy regulator, Ofgem, has warned there is a “significant risk” of gas shortages this winter, which could also hit electricity supplies.
Ofgem’s head of wholesale market management, Grendon Thompson, said a gas supply emergency could impose “load shedding” on the largest consumers, forcing gas-fired power stations to close.
Rules governing the energy industry mean that any gas-fired power plants that are cut off would then have to pay large penalties for failing to deliver electricity.
In a request to modify existing rules, the energy producer SSE highlighted the large imbalance charges and credit-cover requirements that generators face if they are forced to switch off. Thompson accepted SSE’s request to urgently examine the risks related to rules.
In the letter, first reported by the Times, Ofgem warned that “due to the war in Ukraine and gas shortages in Europe, there is a significant risk that gas shortages could occur during the winter 2022/23 in Great Britain. As a result it is a possibility that GB could enter into a gas supply emergency.”
A spokesperson for SSE said its request for the rules to be modified “proposes to limit potentially very high charges to generators caused by events outside their control. This would protect security of supply by ensuring gas-fired power stations are able to provide vital flexible generation through challenging periods.”
They added: “There is broad industry agreement on the need to examine this issue, with the decision ultimately one for Ofgem.”
The government has sought to secure backup power supplies for this winter through deals to keep coal-fired power stations on standby.
Separately on Monday, the International Energy Agency (IEA) warned that it expects gas markets to remain constricted well into 2023 as Russia restricts supplies.
Keisuke Sadamori, the IEA director of energy markets and security, said: “The outlook for gas markets remains clouded, not least because of Russia’s reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier. But all the signs point to markets remaining very tight well into 2023.”
Meanwhile, the price of oil jumped on signs that the Opec oil cartel and its allies were poised to make their biggest production cut since the start of the Covid pandemic.
Brent crude futures rose by $3.37 – a 4% leap – to $88.51 a barrel on Monday after it emerged that the oil producing nations were considering cutting output by more than 1m barrels a day (bpd) to ensure prices did not fall further.
Oil prices have been falling steadily since June as demand has been dented by lockdowns in China and fears of a global recession.
The Organization of the Petroleum Exporting Countries and its allies, known together as Opec+, are due to meet in person on Wednesday in Vienna to discuss the cut.
The price jump could prove costly for British drivers, who had to pay record prices at the pump earlier in the year after Russia’s invasion of Ukraine pushed up the price of oil. Pump prices have fallen back since, but motoring groups say consumers are still getting a “raw deal”.
If Opec+ agrees on the cut, it will be the group’s second consecutive monthly cut after reducing output by 100,000 bpd last month.
