- Publication date
- 17th July 2015
- Information type
- Policy area
What is Ofgem’s analysis of electricity security of supply?
Power stations are not able to produce electricity if they break down, or sometimes if they need to undergo maintenance work. Demand for electricity can also increase unexpectedly. So that consumers are not affected if this happens, there is a ‘margin’. This is the extra capacity power stations can produce compared to the expected demand for electricity on the grid.
To analyse these margins, this year we have produced a commentary on the first three winters of National Grid’s Future Energy Scenarios for electricity security of supply. Our commentary assesses Britain’s supply outlook from 2015/16 to 2017/18.
View our commentary on Britain’s supply outlook from 2015/16 to 2017/18.
Why do we analyse electricity security of supply?
In each of the past three years, we have been obliged by the government to publish a capacity assessment assessing the risks to GB security of supply.
The government has now removed this obligation. However, we still have an important role to play in security of supply and continue to analyse the short to medium-term outlook.
It is important that we provide this analysis as an independent assessment of the risks to security of supply.
View our previous Electricity Capacity Assessment 2014.
What’s the outlook for the security of electricity supply in Ofgem’s latest analysis?
Capacity margins have been decreasing as many older coal and oil-fired power stations are closing due to age and European Environmental Regulations. Most coal and oil-fired plants have already closed, with remaining plants expected to close or be converted to more environmentally friendly generation types by 2018. Unprofitable gas fired power stations have also been closing or mothballing.
The margin is likely to be tighter than previously expected for winter 2015/16 due to a number of unexpected power station closures over the past year. To manage lower margins we have given National Grid tools that it can use to balance the electricity system if needed.
These tools allow National Grid to contract with generators and businesses to provide additional balancing services outside the normal operation of the market. You can find out more about how National Grid does this, and view an infographic guide, in Electricity Security of Supply.
Using these tools, National Grid has secured 2.53GW of additional balancing services for this winter. As a result, National Grid projects a manageable margin for this winter of 5.1%.
Britain has one of the most reliable electricity systems in the world and Ofgem, National Grid and the government have a process in place to ensure it remains so in future.
Ofgem is taking action to tackle the uncertainty over margins for 2016/17 by consulting on extending the new balancing services so they are available for use in 2016/17 and 2017/18.
This would give National Grid the tools to tender for more reserve capacity if it needs to. The final decision on if we allow the extension will be made in mid-November 2015.
Industry can play a significant role by returning mothballed plant to the market or improving availability of plant. Margins could also be boosted by higher imports from neighbouring countries. Margins are also expected to increase in 2017/18 as more plant returns to the system.
Will the lights stay on?
We are confident that National Grid has the tools it needs this winter to manage the risks arising from the recent power station closures.
How do we measure security of electricity supply?
Power stations don’t always run at full capacity because of either planned or unplanned maintenance, so we base our assessment on the Loss of Load Expectation (LOLE) and other measures including de-rated capacity margins. This gives a more realistic picture of power availability.
LOLE is the estimated number of hours each year that GB’s electricity system operator may need to take action outside the normal operation of the market to avoid supply disruptions. It does not mean the number of hours that consumers will be cut off from supplies each year.
View our video and infographic guide: Keeping Britain's lights on to find out more about how National Grid manages the electricity system.