London, 7 October 2022 – The EIUG remains concerned about security of energy supply if gas demand is higher and take-up of flexible demand services is lower than expected
The EIUG recognises National Grid’s central view that there will be adequate supply margins through the winter if no negative factors outside Great Britain impact on energy supply. However, these are unprecedented times in which normal market circumstances and their forward assumptions may not hold. Furthermore, demand for gas may not be as low as its Winter Gas Outlook estimates and the gas supply margin may therefore be a lot tighter.
The EIUG appreciates the additional scenarios that National Grid has assessed and supports the mitigation strategies it has developed. Nevertheless, the design of the new electricity and gas demand flexibility services as proposed may not deliver the reduction in demand it has estimated. Additionally, licence conditions for back-up generation may prevent certain energy intensive industries from participating in its demand flexibility services.
Given the tightness of the energy markets, Great Britain is likely to experience even higher and more volatile energy prices in spot markets this winter relative to what we have seen in the past months.
To further mitigate the risk to security of energy supply over the winter, the EIUG calls on:
· Government to urgently launch a public information campaign to conserve energy, especially at times of low wind;
· Defra and the environmental regulators to be prepared to provide temporary easements of emission standards so energy intensive industries can participate in National Grid’s gas demand side response service;
· Ofgem to support National Grid to develop industrial demand side response products that work for energy intensive industries. The current proposals may not deliver the volumes that Ofgem and National Grid hope for.
Dave Dalton – chair of the EIUG – said “We welcome the assessments in National Grid’s Winter Electrity and Gas outlooks that energy margins are likely to be adequate this winter. Yet energy intensive industries remain concerned about Great Britain’s security of energy supply as demand for gas may be higher than estimated, the flexible demand services are untested and geopolitics may significantly impact European energy markets ”.