Weekly News Review - 10th March 2023

National Grid puts backup coal plants into action for first time this winter

Two coal-fired power stations put on standby this winter have been called into action this week as temperatures across the UK fell to the lowest so far this year. The two plants at West Burton in Nottinghamshire were originally due to close last September but have been receiving payments from National Grid to remain on standby over the winter.

The plants began generating electricity on Tuesday afternoon due to concerns over tight generation margins. National Grid said that the tight margins have been caused by a combination of cold weather, low renewable generation and a lack of electricity available through French interconnectors due to strike action in the country.

Cold weather from the Arctic has seen the UK experience its lowest March temperatures since 2010. This has caused electricity demand to increase to the highest level since the cold spell in January. In normal circumstances this extra demand would be met via European interconnectors but the strikes at EDF’s nuclear power stations in France meant that the UK were instead exporting around 2GW.

The three remaining coal-fired power stations put on standby by National Grid were not needed to meet demand. The two units at Drax in Yorkshire and one at Ratcliffe-on-Soar in Nottinghamshire were asked to warm up on Tuesday but were later stood down. National Grid also decided against employing its demand flexibility service which pays homes and business to turn down their electricity use.

Coal generation has gradually been replaced by gas and renewables in recent years as the UK aims to reduce its carbon emissions. Over the last three years coal generation has made up only 2% of total demand, down from 10% in 2016 and 40% in 2013. However, a lack of investment in new generation capacity has meant that the last remaining coal plants have continued to operate past their planned closure date.

European gas storage levels at record highs

Analysis by energy consultancy Cornwall Insight suggests that European gas storage will end winter between 45% to 61% full, a record high for the time of year. Storage levels have remained higher than average due to a milder winter across Europe which has helped to lower energy prices over the last few months.

European storage levels had been below average for the 12 months prior to the Russian invasion of Ukraine. This was a result of strong withdrawals in winter 2020/21 followed by low LNG supply over summer 2021 limiting the ability to restock supplies. As a result European gas facilities were only 26% full at the end of March 2022.

The Russian invasion of Ukraine saw high energy prices increase further as many EU countries replaced Russian gas with alternative sources. Concerns over low storage levels going into winter led to many EU countries introducing laws to ensure gas storage was at least 90% full by the start of winter, which elevated prices further. However, mild and windy weather and healthy gas supplies over winter have seen gas and power prices fall to pre-invasion levels.

Lead research analyst at Cornwall Insight, Dr Matthew Chadwick, said: “Whatever the outlook for storage levels, the need to compensate for Russian pipeline volumes with expensive and volatile liquefied natural gas will keep gas bills higher. This, at least for now, is the “new normal”, and consumers and economies should prepare for energy costs to remain higher than before the pandemic, and the Ukraine war, for some time to come.”

“What may ease this year is the heightened level of understandable panic that led to hectic energy-buying practices during the autumn of 2022. As a result, we can probably expect prices to be much more muted than 2022, despite any uncertainties that may come into play.”

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