UK householders have spent around £180 million in the last three years on spare power capacity that was never used.
That’s according to a new report from the Energy and Climate Intelligence Unit (ECIU), which refers to National Grid’s supplemental balancing reserve (SBR), under which power stations were put on standby during the winter since 2014. The scheme closed in February.
The report claims for the most recent winter, i.e. 2016/17, the grid operator did not need to call on any contingency measures to keep the electricity system stable.
The cost of the scheme rose to £122 million during that period, paid to a fleet of old power stations to enable them to remain on standby. That is expected to increase to £387 million for the Capacity Market in 2017/18.
The report also finds building electricity capacity margins towards 10%, as recommended by a recent House of Lords committee report, could come at considerable cost of up to £12 billion for additional nuclear capacity.
It adds although gas-fired power stations would be considerably cheaper, the cost of increasing margins to that level would still cost up to £2.1 billion.
The findings suggest warnings of blackouts in the UK have been overblown, “leading to potentially excessive spending on insurance policies to ensure energy security”.
The ECIU believes supply and demand can be managed “far more efficiently” with smarter technology and demand side balancing.
Energy Analyst Jonathan Marshall said: “The clear message from this report is that paying to boost spare capacity in Britain’s electricity system can be very expensive and potentially unnecessary.
“The drop in the number of calls by the grid for extra power last winter also suggests that in an era of smarter technology, balancing supply and demand is becoming easier and cheaper. This begs the question of whether calls to increase out capacity margins in the UK, for example by a new ‘dash for gas’, are sensible, given that doing so comes with a price tag in the billions of pounds.”
National Grid however believes the SBR was a “prudent and efficient use of money” to ensure the UK had extra power available.
A spokesperson added: “The last two winters have been exceptionally mild but it is important that we have the tools and plans in place to help us deal with even the toughest winter conditions.
“We are confident that the end result provides the best outcome for billpayers in terms of providing an effective insurance policy at an efficient cost. The cost to the average domestic consumer electricity bill was around £1.50 per year which we, the government and Ofgem deemed acceptable. As with other types of insurance, even if you don’t use it, it is still a sensible use of money.”