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BEIS stresses need for more renewables to reduce volatile global gas price risk

Energy secretary Kwasi Kwarteng has held several meetings with senior executives from the energy industry. Image: BEIS

Energy secretary Kwasi Kwarteng has held several meetings with senior executives from the energy industry. Image: BEIS

Energy secretary Kwasi Kwarteng is today (20 September) convening a roundtable on the way forward for the energy industry following high gas prices and supplier exits.

It follows Kwarteng meeting with Ofgem yesterday, and last week holding a series of individual meetings with senior executives from the energy industry to discuss the impact of current high gas prices.

The Department for Business, Energy and Industrial Strategy (BEIS) said that while the largest single supply source of gas continues to be from domestic production, the UK’s exposure to volatile global gas prices underscores the importance of the government’s ambitions of building a “strong, home-grown renewable energy sector”.

Indeed, BEIS said that during calls with industry, Kwarteng was reassured that security of supply was not a cause for immediate concern within the industry. He also stressed that energy security is “an absolute priority for this government”, with Britain benefiting from a diverse range of gas supply sources and a diverse electricity mix.

Alongside this, the calls also saw Kwarteng discuss the pressures being faced by some energy suppliers. It comes off the back of four small suppliers ceasing to trade over the last few weeks.

BEIS said that Ofgem has robust measures in place to ensure customers’ gas and electricity supply will continue uninterrupted if a supplier fails, however, if the appointment of a Supplier of Last Resort is not possible, Ofgem and the government have agreed processes in place to appoint a special administrator to temporarily run the business until such time as a new supplier can be found.

More supplier failures are potentially on the horizon as a result of the high power prices seen both in the UK and across Europe. The day-ahead auction for 14 September cleared at new records across the board, with prices at the peak being £1,675.30/MWh for EPEX and £1,750/MWh for Nordpool. It follows the GB imbalance price hitting £4,000/MWh on 9 September, and the baseload imbalance price hitting £960/MWh.

This prompted energy market analyst EnAppSys to warn that any suppliers that haven’t properly covered their requirements for their customers could be paying over the odds for electricity, with the combination of some suppliers being late on their renewable payments and imbalance payments becoming due over the coming weeks potentially resulting in significant stresses.

Prices have stayed consistently high for a several weeks, compounded by a fire at a converter station for the the IFA1 interconnector, taking 1GW of its capacity offline until March 2022.

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