Stand-by power prices set to reach premium levels

9 May 2001
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10 May 2001 | David Arminas

Electricity from idle stand-by generating equipment will increasingly fetch a premium price as suppliers seek to escape exposure to volatile prices on the spot market, according to industry experts.

"The New Electricity Trading Arrangements (Neta) will encourage large energy users to reconsider their standby generation that they traditionally kept for back-up supply," said Graham Oxley, special markets analyst at Yorkshire Electricity. "In the past, the income from selling power from them wasn't sufficient to offset the risk of increased usage of the set. This is changing," said Oxley, speaking at a Neta forum run by the Energy Information Centre in London.

At the moment Neta rules make it too complicated to sell stand-by power to anyone other than your own electricity suppliers, but the industry is working with regulator Ofgem to change this, Oxley added.

Yorkshire Electricity has so far been very interested in this flexible and idle capacity, said Bob Spears, an energy consultant. He agreed that the volatility of electricity prices since Neta's introduction are an indication that dusting off idle standby equipment is an increasingly good bet for lowering the overall electricity bill.

But Spears cautioned that suppliers' clients need to have both flexibility and predictability in their own demand if they are to sell not just stand-by electrical output, but power from their own on-site generation equipment used daily.

"I can see it being attractive to companies running less safety-sensitive stand-by sets," said Shaun McCarthy, head of group utilities at BAA which has been approached by several suppliers seeking stand-by contracts. For airports, the safety issue of having power on tap at all times would outweigh financial gains.

Neta will force buyers down the road of load management, explained Martin Rawlings, deputy chairman of CIPS energy committee. Companies with generating equipment used for "peak lopping" - turned on only when their own demand peaks, rather than buying power from the grid - is typically run for half a year.

SMmay2001

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