“Significant risk” of gas shortage in winter in Great Britain, warns Ofgem | Energy industry

Britain’s energy regulator has warned there is a “significant risk” of a gas shortage this winter, which could also affect electricity supplies.

Ofgem’s head of wholesale market management, Grendon Thompson, said a gas supply emergency could force “load shedding” on the biggest consumers, forcing gas-fired power stations to close.

Rules governing the energy industry mean that any gas-fired power station that is cut off would then have to pay steep penalties for failing to supply electricity.

In a request to change the existing rules, energy producer SSE highlighted the significant imbalance charges and credit coverage requirements producers face if they are forced to shut down. Thompson agreed to SSE’s request to urgently review period risk.

In the letter, first reported by The Times, Ofgem warned that “due to the war in Ukraine and gas shortages in Europe, there is a significant risk that gas shortages will occur over the next winter 2022/23 in Great Britain. As a result, GB may enter into a gas supply emergency.

A spokesperson for SSE said its request for a rule change “proposes to limit potentially very high loads to generators caused by events beyond their control. This would protect security of supply by ensuring that gas-fired power plants are able to provide vital flexible generation during difficult times.

They added: ‘There is broad industry agreement that this matter needs to be considered, with the decision ultimately resting with Ofgem.’

The government has sought to secure emergency power supplies for this winter through agreements to keep coal-fired power stations on standby.

Separately, on Monday, the International Energy Agency (IEA) warned that it expects gas markets to remain tight through 2023 as Russia limits its supplies.

Keisuke Sadamori, Director of Energy Markets and Security at the IEA, said: “The outlook for gas markets remains clouded, not least because of Russia’s reckless and unpredictable conduct, which has shattered its reputation from a reliable supplier. But all signs point to markets remaining very tight through 2023.”

Meanwhile, the price of oil jumped on signs that the OPEC oil cartel and its allies were about to make their biggest production cut since the start of the Covid pandemic.

Brent crude futures rose $3.37 – a 4% jump – to $88.51 a barrel on Monday after it emerged oil-producing nations were planning to cut production by more than 1 million barrels per day (bpd) to ensure prices don’t fall further.

Oil prices have been falling steadily since June as demand has been rattled by lockdowns in China and fears of a global recession.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are due to meet in person in Vienna on Wednesday to discuss the cut.

The price hike could prove costly for British drivers, who had to pay record prices at the pump earlier in the year after Russia’s invasion of Ukraine drove up the price of oil. Prices at the pump have since fallen, but auto groups say consumers are still enjoying “raw supply”.

If OPEC+ accepts the cut, it will be the group’s second straight monthly cut after cutting production by 100,000 bpd last month.

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