The UK’s energy regulator has warned of a “significant risk” of gas shortages this winter, which could also affect electricity supplies.
Ofgem’s head of wholesale market management, Grendon Thompson, said a gas supply emergency could impose “load shedding” on the largest consumers and force gas-fired power stations to close.
The rules of the energy industry stipulate that gas-fired power plants that have been shut down have to pay high fines if they do not supply electricity.
In a motion to amend existing rules, energy producer SSE highlighted the high balancing charges and credit coverage requirements producers face when forced to switch off. Thompson accepted SSE’s request to urgently investigate the risks associated with rules.
In the letter, first reported by The Times, Ofgem warned that “due to the war in Ukraine and gas shortages in Europe, there is a significant risk that there could be gas shortages in the UK during the winter of 2022/23. As a result, there is a possibility that the UK could face a gas supply emergency.”
A spokesman for SSE said its motion to change the rules “proposes capping potentially very high charges on generators caused by events beyond their control. This would protect security of supply by ensuring gas-fired power plants can provide vital flexible power generation during difficult times.”
They added: “There is broad industry consensus on the need to examine this issue, with the ultimate decision being one for Ofgem.”
The government has tried to secure backup power for this winter through agreements to keep coal-fired power plants on standby.
Separately, the International Energy Agency (IEA) warned on Monday that it expects gas markets to remain tight well into 2023 as Russia cuts supplies.
Keisuke Sadamori, IEA Director for Energy Markets and Security, said: “The outlook for gas markets remains gloomy, not least because of Russia’s reckless and unpredictable behavior which has shaken its reputation as a reliable supplier. But all indications are that markets will remain very tight well into 2023.”
Meanwhile, oil prices rose on signs that the Opec oil cartel and its allies were poised to make their biggest production cut since the start of the Covid pandemic.
Brent crude futures rose $3.37 — a 4% jump — to $88.51 a barrel on Monday after news that oil-producing countries are considering increasing production by more than 1 million barrels a day ( bpd) to ensure prices don’t fall any further.
Oil prices have fallen steadily since June as demand was dampened by lockdowns in China and fears of a global recession.
The Organization of Petroleum Exporting Countries and its allies, collectively known as Opec+, are scheduled to meet in person in Vienna on Wednesday to discuss the cut.
The price jump could prove costly for British drivers, who had to pay record prices at the pump earlier this year after Russia’s invasion of Ukraine pushed up oil prices. Pump prices have since fallen, but automakers say consumers are still getting a “raw deal.”
If Opec+ agrees to the cut, it will be the group’s second straight monthly cut after cutting output by 100,000 bpd last month.
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