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Early Warning Signs of a Winter Energy Crunch

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The energy crisis has dominated headlines for most of 2022 so far, and there are now growing signs that, this coming winter, issues will arise not just around continued high energy costs but also in terms of security of supply. Seasonal spikes in demand driven by additional heating and lighting always makes winter a crunch period in terms of energy supply and demand, but there looks to be growing concern that this year, we could face severe shortages.

BEIS instructs National Grid to explore new options

On Tuesday (May 31st), Business and Energy Secretary, Kwasi Kwarteng, wrote to National Grid ESO asking them to explore options to bolster energy security for the coming winter. He stated that the ongoing Russian invasion of Ukraine presents a significant risk of disruption to European gas supplies. While the UK is not directly dependent on Russian gas, shortages in Europe would still trim imported supply and push up the price of LNG shipments. Mr Kwarteng has asked National Grid to significantly increase available capacity, with a particular focus on non-gas fired generation.

This likely means a number of coal plants being pressed into service to provide additional baseload. While it may help keep costs down, it is a significant step backwards in collective progress towards decarbonising the UK’s energy system. Drax, Ratcliffe and West Burton, all three of the UK’s remaining coal-fired power stations, are set to remain open throughout the winter despite initially planning to close in September. An attempt to convince Hinkley B operator EDF to continue operations there past a planned shutdown slated for July looks to have failed, removing nearly a gigawatt of power generation from the UK’s system, capacity for 1.5 million homes.

Questions Remain over the Energy Security Strategy

The UK’s Energy Security Strategy, unveiled in April, was criticised at the time by many within the energy industry, including Powerstar, as failing to address the pressing issues of the energy crisis. A mantra of more wind, more solar and more nuclear has resolved none of the capacity issues we will face this winter, leaving us just as reliant on either volatile gas imports or carbon-intensive coal generation as before.

The day before Mr Kwarteng’s intervention, the government refused to provide a guarantee, when pressed by the Times newspaper, that the UK would not experience power cuts this winter. As with much of the impact of the energy crisis, much of the focus was placed on households, with some six million homes at risk of power cuts due to shortage of supply. Even if widespread blackouts are averted, those households could face energy rationing for up to a month.

Risk of Disruption to Business

This overlooks the huge risk that the same scenario poses to businesses. Ahead of any rationing placed on households, energy-intensive industrial and manufacturing sectors would face either voluntary or imposed curbs on their energy use to try to balance supply with demand. For many manufacturers that are already facing growing energy cost pressures, supply chain issues and increased competition from foreign markets, disruption and a decline in productivity caused by limits to their available energy supply would be extremely damaging. Limits would also likely be placed on the industrial use of gas, a further blow to many manufacturers.

While energy-intensive sectors are the most likely to be impacted in the case of supply issues, wider disruption if there are major outages poses a threat to any business.

Next Steps

The Government and National Grid have stressed that energy rationing and widespread disruption represents a ‘worst case scenario’, hinging primarily on the continued flow of Russian gas into the EU. This model assumes no gas imports from our interconnectors from the Netherlands and Belgium.

Russian supplies remain a political lever, with Bulgaria, Finland and Poland all recently being cut off for refusing to pay gas contracts in Russian rubles. If the same happens elsewhere, this worst-case scenario begins to look increasingly likely.

For many businesses, that are already dealing with the issue of rapidly increasing energy costs, energy management will only become more difficult as we move into the peak demand period over the winter. There is still time to take proactive steps to protect your business from the risk of disruption or reduced capacity, while improving energy efficiency which can help to reduce overall energy costs at the same time.

Powerstar’s range of power management technologies represent a number of ways of reducing your energy consumption while protecting your site from disruption. In a scenario where electricity is rationed for business end-users, improved energy efficiency and security will be vital in ensuring that the electricity you are able to access is used as intelligently and efficiently as possible.

Contact our team now to find out how Powerstar can protect your business this winter

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