UK Businesses will be paid to switch off in order to prevent blackouts
Hundreds of businesses to be paid to switch off to prevent blackouts
Businesses could be paid to shut down from 4pm and 8pm on winter weekdays, under plans approved by regulator Ofgem
Emily Gosden By Emily Gosden3:07PM GMT 19 Dec 2013CommentsComments
Hundreds of businesses could be paid to switch off their power between 4pm and 8pm on winter weekdays as soon as next winter to prevent blackouts, under plans approved by regulator Ofgem.
Mothballed old gas-fired power stations will also be paid to come back to stand-by so they can be fired up to prevent the lights going out when demand is high.
The plans – which together could cost household energy bill-payers about £1 each – were drawn up in the summer after warnings that the risk of blackouts had dramatically increased because old power plants are being shut down and replacements not built.
Ofgem said at the time that the spare margin – the buffer between peak demand and available supply – could fall as low as 2pc by winter 2015-16 if demand is high.
Under the plans, a large commercial site such as a supermarket complex using two megawatts of power could receive an up-front payment of £20,000 just to guarantee it could switch off if needed – even if if was never actually asked to do so.
National Grid would hold a reverse auction next spring where companies will offer the lowest price at which they will agree to switch off when needed.
Grid said that 1,000 MW of capacity – equivalent to hundreds of industrial or commercial sites – could sign up. They could be paid in total about £10m up-front for taking part in the scheme.
A 2MW site could then potentially be paid between £2,000 and £120,000 to switch off four a four-hour period, depending on what price they bid in the auction. Grid estimates assume it would be more likely to agree to do so for about £40,000.
Grid expects that the measure could be needed for as little as four hours a year. In that scenario it estimates the payments for actually switching off could come to an extra £15m.
Under the measures for mothballed power plants, Grid estimates that up to 2,000 MW of plants could sign up – equivalent to a handful of plants.
They could be paid in total about £50m to come out of a mothballed state so that they could be fired up within hours if needed.
A spokesman for National Grid said: “These services are an insurance policy and will be used as a last resort if electricity margins tighten. We haven’t established whether we’ll definitely need them yet, we’ll need to make those assessments in the New Year based on information from the market.
“Our modelling assumes the demand side tool being used around four hours per year. This will not be a routine tool, but used a last resort if electricity supplies get tight.”