Totally_Baffled wrote:Aurora wrote:The Guardian - 10/01/10
UK power prepares for a cold wind of change
The government's new green initiatives are unlikely to come online fast enough to plug our growing energy gap.
Article continues ...
In time for our energy gap? Or will we just fill it with more coal and say up yours to the EU emissions limitis?
Not saying its right - but that will happen way before the lights go out?
Stupid article, in a number of ways.
Thursday had already brought an unwelcome reminder of the more mundane reality of Britain's energy policy today: almost 100 factories were ordered to shut off their gas supplies, to prevent the prolonged cold snap leaving households in the dark, in what energy experts said was the clearest evidence yet of a looming power crisis.
The dire winter weather may have been impossible to predict, but the fact that it forced the National Grid to trigger so-called "interruptible contracts" for scores of large firms, underlines just how short supplies already are.
If supplies were desperately short as is being suggested, the price would be higher. As previously noted, the (very short-lived) supply reductions were due to capacity constraints in the pipeline network which the demand side had indicated (by taking up interruptible contracts) that it was not prepared to pay to upgrade. Do we think that gas consumers should be forced to accept and pay for higher levels of supply security than they want?
Even with the interconnector pipeline now bringing gas directly from the continent, a lack of storage capacity means there is no guarantee that Britain's needs will be served, and prices can swing dramatically.
Storage capacity doesn't guarantee that needs can be served either - witness the Rough fire a few years ago. Of course prices move about, that is precisely what keeps the market in balance.
There is little indication of how the government hopes to fill the gap between the clunky old plants being mothballed, and the shiny new future of renewables in a decade's time.
"Everybody's blaming the Labour government, but the problem started with the Tories: no government has really grasped the nettle of an energy mix to make sure that we have got secure supplies," says Bainbridge.
Actually, the market has delivered a pretty good diversity of supply, and it (not the Government) is building new power plants right now.
Meanwhile, many analysts fear rationing, like that which took place last week, will become an increasingly common occurrence.
Who are these "many analysts" and do they have good reason for their apparent belief that the weather is going to deliver conditions like these more often in future?
Firms voluntarily sign up to interruptible contracts, which give them cheaper bills; but when a blackout is triggered, as it was last week, companies can suddenly be forced to look for supplies elsewhere at short notice, and often at painfully high cost.
Or they can pay the higher cost for non-interruptible supply contracts, or take up any of the wide range of tailored supply contracts to suit individual circumstances that is available, or invest in back-up capability, as many have done; or they can put new build in parts of the country where the gas pipeline capacity is not constrained, like the new gas fired power stations.
But Helm suggests it may be a forlorn hope to expect the government to take radical action upfront to secure supplies. He draws a parallel with financial regulation. For many years, he says, governments simply stood back and expected the market to provide — but collective problems such as making sure the lights don't go out will never be solved by individual firms, which have an incentive to keep prices high. "Security of supply is a public good: it's a system property; it will not be provided by the market left to its own devices," he says.
This is quite incredible from a professional economist. Individual firms may have an incentive to keep prices high, but they cannot in a competitive market. If they try to constrain supply, they simply open up an opportunity for their competitors. Helm might have done better to draw a parallel with the gas market, which has delivered huge investment in capacity and which is now meeting demand about 30% up on seasonal norms at very comfortable prices.
What a market will not do is provide massive redundancy such that the supply side can deliver under all circumstances and there is never any need for adjustment from the demand side. If that is your policy objective then you'll need to be prepared to pay for it big time, but consumers won't thank you for it
