National Grid has confirmed it will provide a full winter outlook in the coming months to ensure its forecasts for power and energy supplies are as “robust as possible.”
The group’s electricity system operator published an early outlook this month, forecasting that the UK would be able to meet its electricity needs this winter.
However, its predictions priced in both increased power being available from Europe via its Dutch and Belgian interconnectors, alongside sustained trade with Norway.
Since then, there have been warnings from Norway’s oil and energy minister Terje Aasland that the country will prioritise meeting its own needs over selling to partners overseas.
A National Grid spokesperson said: “We have published an early view of winter outlook to help the industry prepare for this winter. In early autumn we will publish a full winter outlook based on verifiable market data as well as extensive engagement with stakeholders, including system operators in other countries, to ensure our analysis is as robust as possible.”
Norway is currently suffering from increasingly low water levels amid a continental heatwave, which is jeopardising production at its hydroelectric dams.
These dams generate power for both domestic use and to sell overseas, some of which is then transported to the UK via the 450 mile North Sea Link cable.
Currently, the subsea interconnector beneath the North Sea is able to channel up to 1.4GW of electricity between the two countries when demand is high in the UK and there is low domestic wind generation – enough to power around five per cent of UK homes.
However, Aasland revealed that refilling dams will be prioritised over power production when levels fall below the seasonal average.
He said: “This results in historically high electricity prices and a situation where, for the first time in many years, we cannot completely rule out a period of electricity rationing in the spring. But our professional authorities emphasise that the probability of this is low.”
Electricity production in southern Norway is currently down 18 per cent on last year and production in south-west Norway last week was the lowest seen this year so far.
Disruption to supplies from Norway could result in even higher bills for consumers and potential shortages in supply across the UK.
Household energy bills are already expected to climb above £4,000 per year this winter, during the coldest months of the year when demand will be at its peak.
Craig Erlam, senior markets analyst at OANDA, told City A.M. energy rationing could not be ruled out this winter, but expected any moves from Norway to stop selling supplies to be a “last resort.”
He said: “I think something like this will be a last resort as opposed to a likely outcome. And at that point, most countries will be looking at prioritising where energy needs are most essential. I don’t think energy rationing is something we can rule out at this point. Clearly, it’s going to be a long winter and if low temperatures could make it a very anxious one.”
Nathan Piper, Head of Oil and Gas Research at Investec, expected the UK to meet its energy needs this winter – but warned high commodity prices meant meeting demand would come at a painful premium.
He said: “Through a combination of domestic and gas import options, alongside coal fire power stations, the UK is in a position to meet its energy needs through winter.However it will come at a cost. Gas and coal prices are running at all-time highs for this time of year.”