The National Grid will invite businesses to reduce their consumption or turn off gas and electricity completely between 4pm and 8pm on weekdays next winter, to guarantee enough energy to cope with growing demand.
Companies would be paid and a tendering process could start as early as next spring if energy markets show no sign of coping with the shortfall in supply, the industry regulator Ofgem has warned.
Business leaders have strongly criticised the proposal, which the National Grid itself called “an absolute last resort”.
Graeme Leach, chief economist at the Institute of Directors, said the government failed to address the energy supply shortage when concerns about reduced supply and power station closures were first raised years ago. He added that delays in extracting shale gas have put the market under increased strain. “It’s not the job of Ofgem to decide how much energy businesses use. Successive governments have failed to secure our energy future, leaving us in this dire situation. This is another example of a statist solution to a state-created problem. Business leaders don’t know whether to laugh or cry,” he said.
Tony Lodge, energy analyst at the Centre for Policy Studies, said the Ofgem announcement is an admission that the UK is facing “a full blown energy crisis.”
He added that if power stations destined for closure are not kept online, there will be a “real risk of blackouts and price spikes for hard pressed consumers and industry.”
A spokesperson for the National Grid confirmed proposals could come into effect in the spring if the margin between supply and demand dips below five per cent.
She added that new measures could add an extra 1.5 per cent to the reserve supply and would be “cheaper than building a new power station.”
In addition, National Grid will have the power to hand out contracts to power stations that are decommissioned to boost energy reserves, adding around £1 to every energy bill in 2014 if plans go ahead. Both Ofgem and the National Grid These old power stations would be required to act as reserve generators are referring to the plans as an “insurance policy”.
Ofgem chief executive, Andrew Wright, called on the energy industry to act now to increase supply, adding: “Britain has one of the most reliable power systems in the world, but with margins tightening there can be no room for industry complacency on security of supply. Therefore we have approved these new tools to act as an extra insurance policy that is available for National Grid to protect consumers’ power supplies.”