COLUMN-Are you one of Britain's energy hogs? John Kemp

Wed Mar 12, 2014 5:15am EDT

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By John Kemp

LONDON, March 12 (Reuters) - Consumers who use large quantities of power during peak periods in the winter impose enormous costs on everyone else in Britain.

The result is that many extra power stations and transmission lines must be built and kept in readiness to serve their demand for just a few hours each year.

For the rest of the time, the extra capacity stands expensively idle. But it all has to be paid for.

During 2013, Britain's electricity demand varied from as little as 21,000 megawatts (MW) to as much as 56,500 MW, according to National Grid, the transmission operator (Chart 1).

Most of the time, total demand was between about 24,000 MW and 50,000 MW. On a relatively small number of occasions, however, power demand climbed to 52,000 MW or even 56,000 MW (Chart 2).

Power demand climbed above 50,000 MW on only 628 half-hourly periods in the course of the year, out of a total of 17,520, equivalent to just 3.5 percent of the time.

Nearly all those peaks occurred between 4 p.m. and 8 p.m. in the months between November and March, with most concentrated between 5 p.m. and 6 p.m.

Serving peak-time load is enormously expensive. The country needs to build and maintain enough power generating capacity to meet the peak, even though much of it will remain idle for the rest of the year.

National Grid must also keep extra power plants on stand-by in case demand proves higher than anticipated or one of the country's large power stations trips off line unexpectedly.

At any given point in time, National Grid keeps several thousand MW of spare generating capacity in various states of readiness to meet contingencies.

In addition the grid must build and maintain many transmission lines to bring power from surplus generation areas in the English midlands, Scotland and Wales to the major demand centres in London and southeast England at the peak.

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Chart 1:

Chart 2:

Chart 3:

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NETWORK PRICING

It all costs a lot of money. If demand could be reliably limited to 50,000 MW, a great deal of expensive investment could be avoided and customer bills would be significantly lower.

National Grid and the country's power market have sought to do this by charging more, in some cases much more, for power generated and transmitted at peak times during the winter months.

The aim is to encourage consumers to shift as much demand away from peak periods as possible to periods where it is easier and cheaper to meet the load (Chart 3).

So far only large electricity customers, such as factories, offices and retail stores, fitted with meters that record their consumption in half-hour segments, have been exposed to time-based electricity pricing.

But residential customers will almost certainly be subjected to some form of time-based pricing once smart meters are installed in homes across the country by 2020.

Shifting consumption away from peak periods to flatten the demand profile and use the grid more efficiently will become more pressing in future as the government tries to "decarbonise" Britain's energy demand by shifting many applications from using gas or liquid fuels to electricity.

In the coming decades, government policy implies most households will use electricity for cooking, heating and even charging plug-in electric vehicles.

ENERGY HOGS

Time-based pricing is likely to come as a shock to households used to paying a flat rate which does not vary by time of day or time of year.

Some large industrial energy users are already complaining bitterly about the high price of power during winter peak periods.

But the reality is that boiling a kettle or running a washing machine in late afternoon or early evening during the winter peak imposes enormous costs on the network.

Either those costs are recovered from the individuals that create them, through time-based pricing, or they must be borne by all customers, even those who do not use much power at the peak. It is only fair that customers who cause the problem should pay for the associated costs of dealing with it.

It is tempting to see the availability of unlimited electricity "at the flick of a switch" for a single price as some sort of consumer right or expression of freedom.

However, customers who run the washing machine or dishwasher in the early evening in winter, or continue running their factory despite the constraints on the network, are really energy hogs who push up bills for everybody.

In future, acting this way will come at a cost. Using appliances and running factories at peak periods will get much more expensive, ensuring energy hogs are charged for all the expensive power plants and high-voltage lines that must be built to serve them.

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