The UK faces a “significant risk” of gas shortages this winter and could enter an emergency that would see power stations switched off, according to regulator Ofgem.
A second stage of a network gas supply emergency would enforce “load shedding” on the largest users such as gas-fired stations, Ofgem’s head of wholesale market management, Grendon Thompson, said in a letter accepting a request by generator SSE Plc that the regulator should urgently address the risk of possible insolvencies.
Russia has squeezed gas flows to Europe in retaliation for sanctions imposed by the West following Moscow’s invasion of Ukraine. That’s curbed global gas supply and increased competition for the fuel, raising the prospect of blackouts this winter as about 40% of the UK’s electricity comes from burning gas.
If generators are switched off, they would face “massive” imbalance charges and credit cover requirements that could drive them insolvent, SSE said in its request dated Sept. 28.
“Even if such an emergency does not occur, the risk that it could occur is likely to force generators to reduce their forward and day ahead trading, reducing liquidity in electricity markets, and raising costs for electricity consumers,” SSE added.
The Times first reported Ofgem’s letter.
©2022 Bloomberg L.P.