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Andrew Montford: An ill wind for hard-up electricity users

Andrew Montford, The Conservative Woman

Last Wednesday the wind died, and Britain’s fleet of thousands of wind turbines mostly stopped turning.

The engineers at National Grid had seen the problem coming: temperatures and wind speeds had been low all week, and were forecast to fall further. Their response was to issue a ‘margin notice’ – a warning to generators that extra capacity was going to be needed. Prices rocketed from their normal £40 per megawatt hour to over £100. Some held off taking this remarkable price, and when the grid still couldn’t balance supply and demand in the evening peak, were rewarded with even higher sums.

On Thursday, with wind speeds even lower, prices for balancing during the evening peak shot up again, reaching £1,400. By Friday’s peak, that figure had risen to a record-breaking £4,000.

Price spikes this high are a new phenomenon. They were never seen before 2016, but since then we have seen, on average, a spike to that level every couple of years. Now we have had two in a week and we came within a whisker of a third.

It is clear, as some have been warning, that the attempt to decarbonise is destabilising the UK’s electricity grid. For twenty years, governments have given renewables generous subsidies and preferential access to the grid. The economics of coal- and gas-fired power stations have been wrecked. It is hardly surprising then that these generators – the backbone of the UK’s grid – have simply left the market. We lost two gas-fired power stations just last summer.

Does this mean power cuts are inevitable? It’s possible, but it is more likely that money will talk. If the price paid is high enough, big power users can probably be persuaded to switch off for long enough to see us through any crisis. The result is likely to be a surge in electricity prices. Early adopters of ‘time of use’ contracts are already feeling the pain. With low wind again this week, customers on Octopus Energy’s ‘Agile’ tariff have seen prices per kilowatt hour rise from 14p overnight to 35p. For the rest of us, the pain will be delayed until contracts come up for renewal.

The middle classes will probably be happy enough to pay extra for power in the winter. They can cope with the hit to their cashflow for a few weeks, or even fork out £6,000 for a battery pack allowing them to take advantage of lower prices in times of surplus power. But, as always, the poor are left high and dry. For them, there is only the prospect of tightening belts still further.

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