Our remit is to support the interests of energy consumers. The legal framework in which we operate makes clear that the interests of consumers include the future security and sustainability of energy.
Consumers expect electricity to be available on demand at all times. While historically there has been a high level of spare electricity capacity, our latest analysis shows this amount has fallen rapidly and is expected to continue to fall over the next few years. This is mainly because many older coal and oil-fired power stations are being closed due to age and inefficiency, and the Large Combustion Plant Directive within the European Environmental Regulations.
We've approved new tools to help National Grid manage these lower margins from this winter. With these in place the risk of supply disruption this winter is below the maximum level of risk as defined by the government’s reliability standard for power supplies. It compares compares favourably with many countries around the world.
Energy efficiency and demand management measures will also potentially help the security of supply by lowering demand.
In addition, many facets of our work help to ensure security of supply. For example, we incentivise network companies to keep interruptions to a minimum. Generation and supply companies are incentivised to make sure that the energy put on to the system balances with the energy their customers consume.
Ongoing security needs ongoing investment. We recognise that investors need confidence that investments they make now will be appropriately remunerated over the life of the assets. Our work next year on security of supply will cover a range of measures including major reviews (Significant Code Reviews) for both Gas and Electricity and the RIIO network price controls.
Promoting cross-border trade in energy may also help to promote further security of supply. The European Third Energy Package created legally binding pan-European network codes, designed to remove barriers to cross-border trade, integrate national markets and ensure security of supply and secure system operation with high levels of renewable generation. Collectively these network codes will form the basis of the target model for Europe’s gas and electricity markets.
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