Freezing temperatures are putting the squeeze on Britain’s gas infrastructure and could force industrial users to shut their operations to save fuel for offices and homes.
National Grid warned this week that the gas grid was close to running short of supplies.
Icis Heren, the gas consultancy, reckons that some industrial customers could be cut off within days if the cold weather continues.
“It is pretty tight. At one point on Monday, we were on a knife edge,” said Louise Boddy, managing director of Icis Heren.
The exceptional cold, about 6C below the seasonal norm, has pushed gas demand up and is exposing Britain’s new dependency on imports of fuel.
Shippers are bringing gas from storage to meet exceptional demand. National Grid yesterday removed a storage unit from its calculation of gas in storage because volumes had fallen to only two days’ reserve.
At the same time, power generators responded to the pressure on gas markets by switching from gas to coal as demand for gas increased the price of the cleaner fuel.
Demand for gas was running at 448 million cubic metres yesterday, 28 per cent higher than the seasonal norm.
According to Icis Heren, the system was within 2 million cubic metres from another alert, a device used by the National Grid to ensure the system is balanced.
Alerts are not a sign that the grid is about to collapse but a signal that, unless shippers supply more gas to the network, either from storage or pipeline imports, the grid will begin to cut off large industrial customers.
Energy-intensive businesses, such as cement, glass or chemical manufacturers, often opt for interruptible supply contracts that provide cheaper fuel in exchange for the risk of supply cuts.
Exceptional demand and a temporary loss of supplies from Norway because of a gasfield closure caused the alert on Monday. Shippers responded by releasing liquefied gas from storage on the Isle of Grain.
However, cold weather across Northern Europe is putting pressure on the Continent’s gas supplies.
This has prompted power generators to switch to coal as they seek to protect their margins from rising gas prices. The Clean Dark Spread, the margin earned by an electricity generator burning coal, including the cost of carbon emission permits, is close to £11 per megawatt hour, compared with £9.50 per megawatt hour for the Clean Spark Spread — the margin earned by burning gas.
Nonetheless, while gas prices had risen sharply, Ms Boddy said, the recession had kept a lid on the market.
At less than 50p per therm for day-ahead gas, the cost was comparatively cheap compared with previous years. “If this had happened in the 2005-06 winter, we would be at £2 per therm,” she said.
National Grid warned this week that the gas grid was close to running short of supplies.
Icis Heren, the gas consultancy, reckons that some industrial customers could be cut off within days if the cold weather continues.
“It is pretty tight. At one point on Monday, we were on a knife edge,” said Louise Boddy, managing director of Icis Heren.
The exceptional cold, about 6C below the seasonal norm, has pushed gas demand up and is exposing Britain’s new dependency on imports of fuel.
Shippers are bringing gas from storage to meet exceptional demand. National Grid yesterday removed a storage unit from its calculation of gas in storage because volumes had fallen to only two days’ reserve.
At the same time, power generators responded to the pressure on gas markets by switching from gas to coal as demand for gas increased the price of the cleaner fuel.
Demand for gas was running at 448 million cubic metres yesterday, 28 per cent higher than the seasonal norm.
According to Icis Heren, the system was within 2 million cubic metres from another alert, a device used by the National Grid to ensure the system is balanced.
Alerts are not a sign that the grid is about to collapse but a signal that, unless shippers supply more gas to the network, either from storage or pipeline imports, the grid will begin to cut off large industrial customers.
Energy-intensive businesses, such as cement, glass or chemical manufacturers, often opt for interruptible supply contracts that provide cheaper fuel in exchange for the risk of supply cuts.
Exceptional demand and a temporary loss of supplies from Norway because of a gasfield closure caused the alert on Monday. Shippers responded by releasing liquefied gas from storage on the Isle of Grain.
However, cold weather across Northern Europe is putting pressure on the Continent’s gas supplies.
This has prompted power generators to switch to coal as they seek to protect their margins from rising gas prices. The Clean Dark Spread, the margin earned by an electricity generator burning coal, including the cost of carbon emission permits, is close to £11 per megawatt hour, compared with £9.50 per megawatt hour for the Clean Spark Spread — the margin earned by burning gas.
Nonetheless, while gas prices had risen sharply, Ms Boddy said, the recession had kept a lid on the market.
At less than 50p per therm for day-ahead gas, the cost was comparatively cheap compared with previous years. “If this had happened in the 2005-06 winter, we would be at £2 per therm,” she said.
Source: The Times
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