National Grid to pay power plants to shut down this summer

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By Paul Homewood

From the Telegraph:

National Grid may be forced to pay higher prices to power plants to stop generating electricity this summer as demand for power continues falling to set new record lows.

The transmission system operator said power generators must be prepared to offer a fair price to turn down their electricity output if power flows threaten to flood the grid during periods of particularly low demand, such as weekend afternoons or overnight.

The expected glut of electricity flips the winter-time challenge of securing enough supply to meet demand. Instead, National Grid will face periods when demand falls and there is more wind and solar power than Britain needs due to record low demand for power through its network of transmission cables.

Grid demand has been steadily falling in recent years because more and more companies and households are able to generate their own on-site power through small-scale generators and solar panels.

Through its ‘balancing mechanism’ National Grid will allow generators to submit a price at which they would be willing to turn down production so that the grid can opt for the most economic solution to the imbalance. It is a step which National Grid is able to use year round, but the record low demand forecasts could mean paying out more often than usual.

In recent years the FTSE 100 energy operator has been investigating more cost-effective ways to balance the grid to avoid piling pressure on energy costs that in turn hike consumer bills.

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In fact, the article grossly overstates the effect of reduced demand. In Q3 last year, for instance, supply was 76.2TWh, only down slightly from 77.0TWh in 2014.

Closure of coal capacity has more then offset this.

The real problem, which the report fails to mention, is the amount of new renewable capacity coming on stream. Being highly unpredictable, it is difficult for the Grid to properly plan ahead.

Astonishingly, the National Grid will even pay companies to use more power!

This summer the operator is increasing its use of the so-called ‘demand turn-up’ scheme, which pays companies to use more power to make use of any excess electricity in the system.

The article continues:

A National Grid spokesman said its figures show that the scheme will save consumers £500,000 over the summer compared to using other balancing tools.

As one commenter puts it, “the savings the grid spokesperson mentions of £500,000 is a convoluted way of saying if we ask the wind farms to stop producing it will cost us even more , £500,000 more.”