By Nina Chestney and Henning Gloystein
LONDON (Reuters) - Britain risks an electricity crisis this winter which has forced the grid operator to take precautionary measures and will mean greater reliance on imports from Europe where operators face their own supply constraints.
National Grid (L:NG) has announced a scheme to encourage utilities to make idle capacity available this winter, something the grid operator had not planned to do until next year.
It has also offered to pay offices and factories for reducing electricity use between November and February to safeguard household supplies.
National Grid says the measures would "only be used as a last resort... as a safety net to safeguard consumer interests," yet analysts warn of potentially very tight supplies during the winter.
"The UK power market is about to enter a period of historically low system capacity margins. As the system margin falls below 5 percent, the risk of system stress and disorderly market behaviour materially increases," said David Stokes, director at consultancy Timera Energy.
"The market becomes much more susceptible to a cold winter or major plant outages. It is easy to be complacent about this risk given the benign conditions across the very mild and windy winter we have just had," he said.
Regulatory data show that Britain's capacity margin - the spare capacity available for planned and emergency use - could fall below 5 percent by early 2015 and remain there until around 2017.
Behind the supply squeeze is the mothballing of unprofitable gas-fired power plants and the closure of ageing coal-fired units.
Britain's nuclear plants are also coming to the end of their operational lives.
A series of unexpected thermal power plant outages this summer, expected to continue into the winter, have also added to capacity fears.
"National Grid projects that the supply outlook will continue to deteriorate before improving after 2015/16," regulator Ofgem said in an assessment of electricity capacity earlier this year.
TIGHT SYSTEM
Britain has an installed power capacity of around 75 gigawatts (GW), down from more than 90 GW in 2010, reflecting the retirement of power stations.
As a result, the country was a net importer of electricity last year, government figures show, meeting 4 percent of demand by importing power via cables linked to continental Europe.
Peak winter power use in Britain can reach 60 GW, so the country's power stations would have to run at 80 percent or more of capacity in order to meet demand, Reuters calculations show. For the full year in 2013, they ran at 45 percent of capacity.
Should current outages at two nuclear plants due to safety inspections as well as reduced output at two coal plants following fires carry on into the winter, maximum output would only reach 57 GW, leaving a shortfall of 3 GW.
This means that during cold periods, Britain would have to rely on constant imports from continental Europe to meet demand, which would likely raise power prices and put Britain at risk of outages if Europe cannot maintain supplies due to high demand there.
It is also questionable whether Britain's power plants could operate at 80 percent of capacity since unplanned outages become more frequent as the fleet ages.
"The likelihood of a colder winter than last year and higher power sector gas requirements due to a reduction in nuclear power availability certainly holds some challenges," said Trevor Sikorski, analyst at consultancy Energy Aspects.
"Market balance requires greater reliance on continental gas supplies to get through the winter... (but there are) Russian supply risks arising from the Ukraine crisis....Disruptions to that supply would be felt in the UK," he added.
As the conflict in Ukraine heads towards winter, Europe's politicians are braced for supply disruptions from its biggest provider, Russia, yet some energy traders sense an opportunity if peace prevails and the gas keeps flowing.
MORE IMPORTS?
There is also only limited scope for expanding electricity imports.
Britain is already importing nearly its full available capacity of 2 gigawatts (GW) from France, the full 1 GW available from the Netherlands and half of the 1 GW it can get from Ireland.
France too is facing constraints, with grid operator RTE on Wednesday warning of an increasing risk of power failures due to the mothballing of plants and the country's ageing nuclear fleet.
Still, EDF Energy (PA:EDF), which operates eight nuclear power stations and three coal and gas plants in Britain, said it does not anticipate blackouts as a result of its Hartlepool and Heysham 1 nuclear plants potentially being offline into the winter.
"Other stations can step in to meet this demand...both within EDF Energy and elsewhere on the system," an EDF Energy spokeswoman said.
(Additional reporting by Susanna Twidale; editing by Jason Neely)