Power Prices Hit Record Highs as Britain Faces Shortage of Supply amid Severe Winter

Power Prices Hit Record Highs as Britain Faces Shortage of Supply amid Severe Winter

Electricity prices have surged to record highs across the country as severe cold weather is increasing demand for power. The national grid operator has asked Britons to be prepared for rolling blackouts in the coming months as the UK faces severe shortage in energy supply.

Power prices across the UK have reached record highs as snow and sub-zero temperatures sweep across the country. Day-ahead power prices jumped to an all-time high of £675 per megawatt-hour on Epex Spot Exchange on Sunday, as the cost of power during the peak hours between 5pm and 6pm surpassed a record of £2,586 per megawatt-hour.

The cold snap comes as wind speeds have reduced drastically across parts of east and south east England and Scotland, and looks to continue into this week. The harsh weather is forcing Britons to increase heating in their homes which is increasing the demand for more energy.

Data from the National Grid’s Electricity System Operator showed that 59% of the country’s electricity was being generated from gas-fueled power stations. While nuclear power and electricity imports accounted for a combined 15% of the grid, only 3% of Great Britain’s power was being supplied by renewable sources like wind and solar, which had been disrupted by the cold spell. Wind was generating only around 5pc of the country’s energy on Sunday, compared to 28.5pc this time last year. In order to meet rising demands, gas was being used to power up the wind turbines.

Power Prices Hit Record Highs as Britain Faces Shortage of Supply amid Severe Winter

In October, the National Grid had warned consumers that combining factors of an oncoming cold spell and a shortage of natural gas supplies in Europe due to the war in Ukraine could lead to power cuts in the UK heading into winter. The grid operator also touted that power supplies would tighten as the cold weather reduces the amount of energy that will be generated from wind and solar. The National Grid says that power consumption is set to peak at almost 46,700 megawatts on Monday at 5pm, compared to Sunday’s high of just under 43,000 megawatts.

The rise in demand for more power coincides with the National Grid’s demand flexibility service, a scheme that was introduced by the UK government to incentivise households and businesses for cutting their energy consumption during peak hours to reduce strain on the grid. The demand flexibility service has been tested by the government several times over the year and was supposed to be used during the winters as a result of electricity supply shortages, which it has opted not to. The National Grid is set to conduct another set of tests for the scheme between 5pm and 7pm on Monday. John Pettingrew, chief of the National Grid has asked Britons to be prepared for rolling blackouts in January and February if supply shortage continues.

According to a report by Bloomberg, energy prices in Germany rose by 33% on Sunday to hit £373 per megawatt-hour, while in France the prices went up by 40% to reach £398.20 per megawatt-hour, the highest rates since September.

Last Friday, Finance Minister Jeremy Hunt met with North Sea executives to discuss the UK government’s latest tax hike on fossil-fuel companies. In November, Prime Minister Rishi Sunak’s government announced plans to increase the Energy Profits Levy (EPL) on oil and gas producers by 10%, which brought the total capital gains tax on the industry to 75% – one of the highest rates in the world.

Producers argued that the UK’s windfall tax on fossil-fuel companies to limit their activities is at odds with the government’s promise to ensure energy security by increasing domestic production during a period of crisis.

Also Read UK Economy Faces Recession Fears as Manufacturing Sector Shrinks by 4%

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