Power Engineering - National Grid, E.ON price dispute may have led to blackout

30 May 2008 - A rescue plan to avert blackouts that hit 500 000 homes this week was undermined by demands of E.ON, the German energy group, that National Grid pay double the usual price for an emergency electricity boost, reports The Times.

National Grid's decision not to use E.ON's oil-fired plant on the Isle of Grain in Kent, which was available, followed a dramatic rise in wholesale energy prices and may have contributed to the disruption on Tuesday, industry sources say.

National Grid is preparing a detailed report on the incident for Ofgem, the industry regulator, which has threatened to initiate a formal investigation.

Ofgem is expected to seek answers to a number of remaining questions about the shutdowns, which National Grid acknowledges represented the worst disruption to Britain's power grid since 1987.

The Times understands that National Grid contacted E.ON about midday on Tuesday, soon after technical glitches led to the unplanned loss of two of Britain's biggest power stations, Sizewell B in Suffolk and Longannet in Fife, resulting in a 1510 MW shortfall in supply.

It requested that the E.ON plant at the Isle of Grain be readied to help to plug the gap. The plant was ready for use in a little over half an hour and could have delivered 650 MW of power to the grid immediately.

Traders said that E.ON sought prices of £950 ($1900) per megawatt hour from National Grid for power from the Isle of Grain plant while other suppliers were offering prices at less than half this level.

However, prices from rival suppliers also quickly shot up and National Grid finally opted to buy power from RWE npower's plants at Fawley in Hampshire and Littlebrook in Kent for about £850 per megawatt hour.

The prices were still far above the usual market price of about £40 to £60 per megawatt hour. One source pointed out that prices even higher than this were not unheard of in the UK power market.

National Grid is understood to have bought power at prices of as high as £1500 per megawatt hour from the Grain plant in the past at moments of peak demand.
A hydropower plant at Dinorwig in Snowdonia, North Wales, known as Electric Mountain, was also brought into service on Tuesday, although it is not known at what price.

National Grid insisted yesterday that the steep increase in wholesale prices demanded by E.ON to use the plant was not a factor in its decision. It claimed that the Isle of Grain plant simply was not available in time to help to resolve the situation.

An E.ON spokesman said: "Grain is a very expensive plant to operate because it runs only occasionally." He pointed out that runaway oil prices, which reached more than $135 this month, had added to the cost.

Although it is normal for wholesale electricity prices to soar at moments of acute demand and the prices charged when power plants are brought into use at short notice generally reflect this, the hugely inflated prices have stoked accusations of profiteering.

Add RSS Feed