Energy crisis: Plan for three-hour power blackouts to prioritise heating in event of gas shortages – as EU agrees to cut electricity use
The country has been put on notice that the chances of gas shortages this winter have risen markedly, prompting a contingency plan to prioritise heating.
National Grid’s Electricity System Operator (ESO) warned that planned three-hour power blackouts could be imposed in some areas, in the “unlikely” event supplies of gas fall short of demand.
It revealed the measure in an update on the UK’s state of energy readiness for the cold months ahead but it said that the risk of temporary power cuts could be avoided with help from the public.
The report showed, under a base case scenario, that margins between peak demand and power supply were expected to be sufficient and similar to recent years thanks to secure North Sea gas supplies, imports via Norway and by ship.
It comes as EU countries formally agreed to a voluntary 10% cut in gross electricity consumption and a mandatory reduction of 5% during peak hours – in what have been labelled “extraordinary measures”.
The European Council said: “Member states will identify 10% of their peak hours between 1 December 2022 and 31 March 2023 during which they will reduce the demand.
“Member states will be free to choose the appropriate measures to reduce consumption for both targets in this period.”
The ESO urged households to help manage that balance by signing up to an energy-saving scheme through their supplier, in a bid to help ease the risk of the lights going out.
The “demand flexibility service”, due to start next month, will see bill-payers be paid to save energy during peak hours.
Coal generators, that the operator said would have otherwise closed, will be used to maintain supply. In an effort to generate enough power to supply 600,000 homes the ESO is securing contracts with three generators to keep five coal units open and on standby.
A separate study by National Grid Gas Transmission, which is a separate business to the ESO, saw the potential for the shortfall in gas supplies within continental Europe – as a result of Russia’s war in Ukraine – to impact the UK’s usual ability to attract imports.
It suggested gas needed to power the UK’s electricity grid was expected to rise by nearly 22% – offsetting savings from lower household and business use – largely because of a need for power in France where many nuclear plants are offline.
It saw LNG (liquefied natural gas) from the US and Qatar acting as the new primary source of supply flexibility.
Gas accounts for over 40% of UK power generation – more if the wind fails to blow and other plants are offline for maintenance.
The ESO’s report marked a darkening in the prospect for disruption in the months ahead following a comparatively rosy early view report in July.
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Risk of emergency gas shortage
There was a clear sign of a shift in direction earlier this week when it emerged that the energy regulator Ofgem had warned of a “significant risk” of a gas supply emergency.
It blamed the international scramble for supplies because of the war, which has starved continental Europe of its main source of natural gas.
On Thursday, Prime Minister Liz Truss refused to reiterate a promise she made during the Tory leadership election that there will not be blackouts this winter.
Pushed to repeat that promise, she told reporters in Prague: “Well what we’re clear about is we do have a good supply of energy in the UK, we’re in a much better position than many other countries.
“But of course there’s always more we can do.”
A gas supply emergency can be declared when suppliers are unable to safely get gas to homes and businesses.
It could mean that some customers, starting with the largest industrial consumers, will be asked to stop using gas for a temporary period.
The aim would be to keep gas and gas-generated electricity supplies stable for households for as long as possible.
For the electricity market, coal-fired power stations can be brought back online under what is known as a system notice to help fill stopgaps. This has traditionally happened when nuclear plants go offline or the wind fails to blow.
The hope is that these sorts of measures will not be necessary because of the looming demand flexibility service.
It is expected to be implemented at least 12 times, whatever happens, from November to March to ensure a benefit for signatories.
The ESO’s director of corporate affairs, Jake Rigg, said: “If you put your washing machine or other electrical appliances on at night instead of the peak in the early evening, you can get some money back when we all need it.”
Energy bills have rocketed this year but now come under the protection of government caps on wholesale costs, shielding both households and businesses from the worst in the price surge ahead of winter.
It means the taxpayer will foot the bill for wholesale prices above the unit cap level.
The scheme does not cap your bill, which will continue to depend on the amount of energy used.
An Ofgem spokesperson said of the National Grid reports: “We have one of the most reliable energy systems in the world and we are in a favourable position.
“However, it is incumbent on a responsible and prudent energy sector to ensure the right contingency measures are in place, which is why we are working with the government, National Grid and key partners to protect consumers, so that Great Britain is fully prepared for any challenges this winter.”
As the latest reduction in the energy price cap takes effect, households are being warned of a big lift in bills ahead due to higher wholesale gas prices.
The cap, which limits what suppliers can charge per unit of energy, fell by 7% overnight in the wake of the latest three-month review by industry regulator Ofgem.
The reduction meant that typical 12-month bills will be around £500 cheaper than a year ago.
It left the average bill at £1,568 – a figure that will apply until the result of the next review takes effect in October.
However, a report by the Energy & Climate Intelligence Unit (ECIU) said on Monday that consumers should brace for an additional hit of up to £600 over the coming winter, largely due to higher wholesale prices.
It pointed to a possible £200 price cap hike from October on the back of some analyst calculations, suggesting it was plausible the total could remain around that level until June.
One calculation, by experts at Cornwall Insight and released on Friday, predicted a 10% – or £155 – increase from 1 October to £1,723 a year but said there remained uncertainty on the market path ahead.
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Party energy plans compared
Consumer groups say there is an alternative to the price cap, pointing to a growing number of fixed-rate deals on the market following a dearth of competition in recent years.
European wholesale costs are again elevated for the time of year based on pre-energy shock norms.
Recent pressures have included strong competition from Asia, particularly China, for liquefied natural gas (LNG).
That has replaced some of the Russian natural gas volumes that were stripped away in the wake of the invasion of Ukraine in February 2022.
A planned extension of the European Union’s sanctions regime against Russia will see its LNG exports targeted for the first time – potentially placing further pressure on supply across the continent.
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UK household costs for both gas and electricity stood at an average of just below £1,090 ahead of the Russia-Ukraine war.
The ECIU report said: “By September 2025, the average household could have paid an extra £2,600 on energy bills during the ongoing gas crisis.
“With the government also spending £1,400 per home earlier in the crisis, the total extra costs could be £4,000 per home, and counting.”
Energy has been among the big battlegrounds of the election.
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Much of the debate has centred on costs but the impact of gas use in particular has fuelled argument too on the UK’s climate commitments.
Dr Simon Cran-McGreehin, head of analysis at ECIU, said: “The UK’s high dependence on gas for electricity generation and heating has cost bill payers £2,000 so far during the gas crisis and the economy as a whole tens of billions of pounds.
“Common sense measures like investing in insulating the poorest homes, switching to electric heat pumps and fast-tracking British renewables will leave us less vulnerable to the whims of the international gas markets.
“North Sea gas output is declining so unless we make the switch we’ll be ever more dependent on foreign imports.
“The maths is clear, when it comes to energy independence, new drilling licences are a side show making a marginal difference compared to the immense quantity of homegrown energy that offshore wind and other renewables can generate.”
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Emily Seymour, the editor of Which? Energy, said: “Consumers will be relieved to hear that the price cap is dropping by around £122 for the typical household from 1st July.”
She added: “With the price cap predicted to rise again in October, many consumers will also be wondering whether to fix their energy deal.
“There’s no ‘one size fits all’ approach but the first step is to compare your monthly payments on the price cap to any fixed deals to see what the best option is for you.
“As a rule of thumb, if you want to fix, we’d recommend looking for deals as close to the July price cap as possible, not longer than 12 months and without significant exit fees.”
The chief executive of Boots, Britain’s biggest high street pharmacy chain, is quitting after its owner’s plans for a £5bn sale or stock market listing stalled.
Sky News has learnt that Sebastian James, who has run Boots since 2018, will leave the company in November.
City sources said this weekend that he had accepted a new role in the healthcare industry.
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His exit comes soon after it emerged that New York-listed Walgreens Boots Alliance (WBA), the British retailer’s owner, had decided for the second time in two years against pursuing a sale or stock market flotation of the chain.
An announcement about Mr James’s departure is expected in the coming days.
WBA is not yet thought to have lined up a successor.
Mr James, who previously ran the electricals retailer Dixons (now named Currys), recently endorsed Sir Keir Starmer – a notable move because of his long friendship with Lord Cameron, the foreign secretary.
His departure from Boots will come during the Nottingham-based company’s 175th year.
Boots employs about 52,000 people and trades from roughly 1,900 stores.
Boots has around 1,900 stores. Pic: iStock
Its recent trading performance has been strong, with WBA this week saying that like-for-like sales at Boots during the quarter to the end of May rose by 6% and 5.8% across its retail and pharmacy operations respectively.
An insider said Mr James had overseen a successful turnaround, with market share having grown for 13 successive quarters.
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It has been a rare bright spot for WBA, which has had a torrid time and has seen its shares slump.
A WBA spokesperson said this week: “As Walgreens Boots Alliance continues a strategic review of the Company’s assets, we took a critical look at Boots.
“While we believe there is significant interest in this business at the right time, Boots’ growth, strategic strength and cashflow remain key contributors to Walgreens Boots Alliance.
“We are committed to continuing to invest in Boots UK and to find innovative ways for this business to fulfill its potential.”
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During a previous auction in 2022, only one bidder – a consortium of Apollo Global Management and Reliance Industries – tabling a formal offer worth about £5.5bn.
However, growing concerns about the global economy had triggered severe doubts among large banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.
Among the other challenges facing prospective acquirers at the time was finding an adequate solution for Boots’ £8bn pension scheme – one of the largest private retirement funds in the UK.
This issue has now been resolved through an insurance deal struck with Legal & General.
Like many retailers, Boots had a turbulent pandemic, announcing 4,000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.
Shortly before the COVID pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.
Boots’ heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.
It opened its 1000th UK store in 1933.
In 2006, Boots merged with Alliance Unichem, a drug wholesaler, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.
In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.
Boots declined to comment on Mr James’s exit on Saturday.
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