Financial News

  • 8 October 2012, 2:04

Watchdog Warns Of Power Shortages By 2015

A report by the energy regulator warns of the prospect of higher bills and the potential for power shortages because of falling spare capacity in electricity generation.

Ofgem's first Electricity Capacity Assessment for the Government forecasts a reduction in generation margins over the next four years, falling from 14% to 4% over the winter of 2015/16.

One reason for the deterioration is that coal-fired power stations are closing earlier than expected under EU environmental legislation, forcing the UK to import more gas to compensate and therefore risk costs rising.

The watchdog had already identified the major challenges in a previous report in 2009: that Britain faced an unprecedented combination of the global financial crisis, tough environmental targets and the closure of ageing power stations.

The latest study showed those risks, and the possibility of higher bills as a result of the constraints, had not gone away.

Ed Davey, Secretary of State for Energy and Climate Change, said he would respond to the report before the end of the year with the forthcoming Energy Bill aiming to secure supplies.

"Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives," he said.

Ofgem's Chief Executive, Alistair Buchanan said: "Ofgem is playing its part by helping Britain to attract nearly 30bn of network investment.

"Ofgem is also seeking sweeping reforms to the retail market to ensure a simpler, clearer and fairer energy market for consumers," he said.