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Coal generation has gradually been replaced by gas and renewables in recent years as the UK aims to reduce its carbon emissions.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.
Ørsted warns Hornsea 3 ‘at risk’ due to soaring costs
The developer behind the Hornsea 3 offshore wind farm has called on the UK government to provide more support as increasing costs are putting the project at risk. Danish company Ørsted is planning to build the 2,852 MW wind farm around 120km off the Norfolk coast. Once completed in 2026/27 it will be the largest offshore wind project in the world.
Hornsea 3 was awarded a Contract for Difference (CfD) in the fourth round of the UK government scheme last year. This will provide a guaranteed price of £37.35 for every megawatt hour of electricity generated by the wind farm, in 2012 prices, which is around £45/MWh today. However, since the CfD auction was held there has been a significant rise in energy prices and inflation which has pushed up project costs.
Duncan Clark, Head of Ørsted UK & Ireland, said: “Since the auction there has been an extraordinary combination of increased interest rates and supply chain prices. Industry is doing everything it can to manage costs on these projects but there is a real and growing risk of them being put on hold or even handing back their CfDs.”
Once completed the £8bn project will generate enough electricity to power 3.2 million homes and will play an important role in improving UK energy security and decarbonising the electricity network. To support their net zero ambitions the UK government has set a target of 50GW of offshore wind capacity by 2030, a significant increase from the 14GW currently installed.
Clark added: “The upcoming Spring Budget offers a unique opportunity for the UK to take decisive action to maintain its leadership position in renewable energy and maximise the economic benefits for the UK.”
“In the midst of intense global competition for investment, skills and supply chain resources, we are in a position where nationally significant projects like our proposed Hornsea 3 offshore wind farm are at risk unless the government takes significant action to maintain the attractiveness of the investment environment.”
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.”
Recent News
Want to talk about how this weeks news affects you?
Get in Touch Today
If you wanted to talk about any of the news items we have shared this week and how it could affect you and your organisation, then get in touch with our teams today.
