Britain's Ofgem warns of future energy shortages

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A report by the U.K.'s Office of Gas and Electricity Markets (Ofgem) that the country's aging power generation fleet, plant retirements and increasing demand for electric power could cause power outages in the next year and a half has prompted the U.K. energy minister to publicly state that the lights will stay on.

"I can assure you, the lights are not going to go out," Energy Minister Michael Fallon told the BBC. He went on to say that some industries could be asked to limit their power usage should the energy supply become too tight.

Ofgem reported in its Electricity Capacity Assessment Report 2013 that the risk of blackouts has doubled since 2012. In response to Ofgem's report, Ed Davey, head of the Department of Energy and Climate Change said the reliability of Britain's power supply depends upon timely action.

The risk of power outages could be even worse if the coming winter is colder than expected or if economic activity is more vigorous than anticipated. Adding to Britain's energy woes, the country has retired some 10 percent of its total generation capacity since 2008 to comply with European Union emissions-cutting schemes. In that time, about 8 GW of coal-fired generation has closed down in the U.K.

Grid operator National Grid, in turn, has said that while the role of addressing tightening energy margins falls outside of its typical role in the industry, it can propose solutions — including providing demand-side balancing reserve.

"National Grid has agreed with DECC and Ofgem to publish an informal consultation on the design of two measures to provide an ‘insurance policy’ that could be deployed in the unlikely event that there is a shortfall of electricity in the market," according to a statement on National Grid's website.

The demand-side solution would seek out large consumers of energy and shift their electricity use to lower-demand times of the week in exchange for a payment.

In addition, supplemental balancing reserve could be used, according to National Grid. This involves contracting with generators that would otherwise be closed or mothballed. This option would be a last resort before taking emergency action to balance the power system.

Other solutions suggested elsewhere include putting a temporary restriction on energy exports to Ireland and France in the interest of keeping the lights on in Britain.

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