Power Warning: Higher Risk Of Shortages

The energy regulator has warned of a greater risk of power shortages in three years' time - although it says blackouts are unlikely.

Ofgem said electricity margins could tighten in 2015-16 to between around 2% to 5% and the generation industry must get a grip on the problem through greater investment and other initiatives.

But the study did admit it was difficult to anticipate rising demand because of various factors including uncertainty over the strength of the UK economy and the timing and scale of plant closures and mothballing.

Ofgem said the report illustrated the need for the timely implementation of the Department for Energy and Climate Change's capacity market reforms.

It said: "Electricity margins could tighten in 2015-2016 to between around 2% and 5% depending on demand.

"This means that the probability of a supply disruption increases from 1 in 47 years now to around 1 in 12 years for 2015/16 or lower.

"If the projected decline in demand does not materialise margins could fall to 2%."

Ofgem has been working with Government and National Grid to explore options that would provide consumers with additional safeguards against the increased risk to security of supply.

These include giving National Grid the option to buy extra reserve generation to balance the electricity network.

Andrew Wright, Ofgem's Chief Executive, said: "(Our) latest report on electricity security of supply highlights the need for reform to encourage investment in generation.

"This is why Ofgem welcomes DECC's (Department for Energy & Climate Change) commitment to introduce a capacity market that will provide a longer term solution to this problem at a time when Britain's energy industry is facing an unprecedented challenge to secure supplies."

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